A recent Wall Street Journal article described younger adults’ profound mistrust of the traditional institutions of financial life, such as banks and financial advisors. That doesn’t mean young adults don’t have questions about money, it just means they are more likely to turn to their peers for answers.
What does this mean for enterprising families?
We’ve written about the need for family business directors and leaders to be transparent when communicating financial results to family shareholders. Ignoring that responsibility will, over time, breed distrust and resentment, undermining efforts to promote positive shareholder engagement. However, we have not addressed how generational differences may play a role in your financial communication strategy.
The WSJ article highlights three important themes for family business directors to keep in mind when communicating financial results to next-generation family members.
Prioritize Clarity
According to the article, “Millennials and members of Gen Z… don’t like overwhelming spreadsheets and marketing material written in seemingly foreign languages.” Who can blame them? For most (normal) people, accounting is a foreign language. This is not, however, a good excuse simply to avoid communicating financial results to shareholders; instead, it should be read as a mandate to prioritize clarity when communicating.
Mark Twain reminds us that it takes more time to write a short letter than a long one. This applies well to financial communication: the easiest way to communicate financial results would be to download your general ledger for distribution to family members, but for 99% of them, that data wouldn’t actually tell them anything. The challenge family business leaders should set for themselves is to work to turn that data into a clear and concise narrative that tells their next-gen shareholders in plain, non-technical language what matters about the financial results of the business. Doing so requires an investment of time and effort, but it is an investment offering handsome returns over the long run.
Be Realistic
Younger family members came of age financially during the Great Recession and a global pandemic. As a result, they value a realistic outlook on the future. Financial reports highlighting positive outcomes while ignoring or downplaying adverse events will erode credibility with Millennial and Gen Z family members.
Younger family members have a finely-honed sense of when they are being talked down to or shielded from unpleasant news. Being clear is not the same as being condescending. Financial reports must be balanced and objective to resonate with next-gen family members. Fears that they can’t handle an objective view of the business are overblown and misplaced. When you are consistent, clear, and realistic when communicating, your shareholders will grow to be engaged, informed, and objective when the time comes for them to make significant decisions regarding the family business.
Be Accommodating
Younger family members are sophisticated and experienced content consumers. Family business leaders need to acknowledge the differences between how next gens and older family members are accustomed to receiving content. Whereas older shareholders may be much more comfortable with a “top-down” communication style (i.e., sit and listen to senior management report on the business), younger family members may benefit from other delivery mechanisms. Successful, enterprising families will seek creative ways to acknowledge and accommodate these preferences.
For example, the WSJ article highlighted the value of peer-to-peer sharing for younger adults. Your family council may want to recruit trusted next-gen family members to be financial education champions within the family, leading efforts to create peer-to-peer learning opportunities for younger family members. Other businesses may want to share communication responsibilities among younger members of their finance teams, which can also be a great professional development tool for them. Regardless of the technique used, don’t underestimate the benefits of tailoring your message to your audience.
Communicating financial results to family shareholders is not optional, and one-size-fits-all solutions may not work for your family. Being intentional and taking the duty to communicate well with your next-gen family members today can save everyone a lot of grief tomorrow.
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