12/01/2006
Dear Editor:
Please allow me to offer a differing perspective regarding your "Advisors’ Forum: Emergency Exit" (August 2006). The letter stated, "I would like to retire but, I don’t want to lose my connection. What ideas do you have for keeping a hand in?"
This is a very typical dilemma. Whether a business is founded
in the current generation or developed from an inherited foundation, it assumes
a life of its own within the family. It carries an identity and demands the
attention as if it were a child. A family business must be nurtured, can create
havoc and may require special attention; it most definitely necessitates time
commitments. Yet it also adds a qualitative dimension that may be likened to
that of a parent-child relationship.As a person contemplates the progression to retirement, some considerations must be made during the transition. Just as a child does not pass adolescence and immediately leave the home, an owner may be reticent to pack his desk and move out upon the close of escrow. I suggest a transitional role for the retiring owner/manager. A parent will stay involved in the life of an adult child by offering advice, lending a hand, remaining a rock of stability and maintaining a reassuring relationship. So, too, a family business owner feels the pangs of responsibility.
I recommend that the caring business owner leverage his cultural capital, leadership experience and business acumen in a role of leadership development or coach as new managers are groomed. Cultural capital is difficult to acquire and even harder to transfer. Leadership is a skill that is taught over time, not granted by dictate. And business success is predicated on a person’s ability to juggle the duties and responsibilities of a menagerie of demands.
The expertise of an experienced owner will be a welcome asset to new leaders. Leadership development and coaching allows the retiring owner the opportunity to maintain a level of involvement that is integral to the business, yet removed from the day-to-day duties of management. This new role carries the responsibilities of development, the opportunities to influence direction and the personal challenge of new duties. The transition from owner/manager to leadership development specifically addresses the needs of this owner; it also gives the owner the opportunity to fulfill his unstated emotional needs.
Kevin Spafford, Chico, Calif.
Volatility’s Compensations
Dear Editor:
The advice given to your reader ("Advisors’ Forum," September
2006) regarding emerging market volatility demonstrates how out of
touch most advisors are. It is interesting how buyers of U.S. stocks are
routinely urged to hold on through corrections for the long term, but with
emerging market volatility, those stocks should be dumped immediately.
The pabulum "put 5 to 10 percent of your portfolio into
emerging markets" is outdated. Investors need the active part of their portfolio
to be 100 percent committed to opportunity-rich markets—wherever that may be.
Today, there are more opportunities located in the faster-growing parts of the
world, and any company worth investing in does business globally. Global
capital, labor and information flows make the location of a company’s head
office or stock listing largely irrelevant, while logic dictates that there are
parts of the world where labor and other costs are simply less expensive.
In the "bad" month of May, the China index was up 13 percent;
Venezuela is up over 70 percent this year. Today, almost all those markets badly
hit in May have recovered. Countries like India, Russia and Brazil are all doing
fine. Had your reader followed the given advice or rebalanced his portfolio, he
would have missed the recovery, and he would have sold at the low.
Yes, there is volatility, and there are good and bad stocks
listed everywhere. That is why a hedged approach without any geographic
limitation is the safest way to capitalize on world markets, both in developed
and developing areas. The returns from newer markets have more than compensated
for their historical volatility.
Veryan Allen, Allen Investment Advisors, Honolulu.
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