The wealth management of family businesses and the family business act

Abstract

Purpose: This study analyses the implications of the proposed Family Business Act on Maltese family businesses, with special attention being given to the ways in which the proposed legislation intends on supporting family businesses in safeguarding their continuity and preserving family wealth. It identifies the wealth management practices of local family businesses and assesses the accountant’s role in family wealth management. Design: A mixed methodology approach is adopted to address the said objectives. A total of twenty-one interviewees were held with professionals and family business owners. The qualitative data gathered from this research phase facilitated the formulation of a questionnaire which was later distributed amongst family business owners. Findings: The proposed legislation is expected to promote preservation of family wealth by encouraging enhanced business organisation and early planning for business transfer. Results show that micro family businesses are more likely to have all their wealth locked in one business and that family businesses grow in size as they advance from one generation to the next. Although the use of family office services is limited, family businesses are willing to use such structures for wealth management in the future. Furthermore, the study indicates that accountants can contribute towards family wealth management by combining their accounting knowledge with people management skills. Conclusions: Although most family businesses have diversified investments and seek professional advice for wealth management, there are still several which fail to do so. Additionally, the use of formal governance structures, family trusts and family offices is very limited, jeopardising the businesses’ long term survival. Nonetheless, the proposed legislation is expected to promote better practices. Value: This study identifies the initial comments of potential users and professional advisors on the proposed Family Business Act, whilst highlighting ways in which family wealth can be preserved and how accountants can contribute to this process.