Episode 65: Stephan Gerwert on Family Wealth, Succession Planning, and the German Family Enterprise Ecosystem

R. Adam Smith: Welcome to the Family Business Audiocast on LinkedIn. I am R. Adam Smith, creator of this audiocast series.

As an entrepreneur, investor, founder, investment banker, and board leader the last twenty-five years, I'm fortunate for my many experiences within the family firm industry. A brief comment on why I created this broadcast. Private companies are a passion of mine, having grown up in a family of entrepreneurs and having engaged for two decades in deals, strategic transformations, investments, and boards with an array of fascinating family enterprises, family firms, and family offices.

I founded this series to offer a useful platform for listeners to hear from veterans, academics, and leaders in the fast family firm ecosystem. Whether you're a family business owner building, running, or advising a family office, or just expanding your family office activities, I hope these conversations are useful and enlightening. And now it's time to turn our attention to our accomplished guest on today's episode. This is the Family Business Audiocast.

A warm thank you to our live audience today and those listening it later in the future. I'm here today joined with Stephan Gerwert of PWC, head of the family office services at PWC Deutschland in Germany, and also a seasoned advisor to many ultra-high-net-worth individuals and entrepreneurial families. Stephan, it's great to have you here today, my friend. Stephan Gerwert: Yeah.

Thank you so much for having me. I'm really looking forward to the conversation. R. Adam Smith: Thank you.

Absolutely. We'll talk about you first, and then we'll dig in. So Stephan has several decades of experience in the space, working closely with families navigating the complexities of wealth, governance, of course, long-term financial positioning, and legacy. His approach is grounded in a simple but powerful idea for his practice that significant wealth brings not only opportunity but also responsibility, which we talk about on this podcast often, and that clarity, structure, and pragmatic decision-making are essential to preserving both of them.

At the firm, Stephan leads advisory efforts across the full spectrum of family office design and operation, from governance to next-gen planning, to strategic asset allocation, reporting, and direct investments. He often finds himself in the role of a navigator, helping families move confidently through complex financial and interpersonal dynamics. Prior to PWC, Stephan co-founded Skyland Wealth, which is a digital platform focused on real estate investments with alternate worth investors and family offices, giving him firsthand experience in alternatives and also building, scaling, operating investment platforms.

In this complex environment we face today in the family office enterprise spectrum, where capital structures and global exposure and risk and family dynamics intersect, it's really wonderful to have Stephan here who brings a holistic perspective on what it takes to build and sustain a modern family office, particularly from the European point of view. So it's great to have you today. Let's talk a bit about PWC Deutschland in particular. Maybe talk about that first, and then we'll jump right in.

Stephan Gerwert: Sure. I would say PWC Germany is not any different to PWC in the US and other jurisdictions. Obviously, you have different territories that have a bigger practice than others, and so you have a broader spectrum of services that you as a client can, benefit from. But, overall, PWC Germany positions itself as a holistic advisor that can really bring the whole spectrum of family wealth and governance to the table.

It's easier to say what we don't do than what we do, and that is we don't do investments, so to say. We're not an asset manager, not a bank, not a wealth manager. We're really the holistic, completely independent guide or you used the term navigator next to our clients that helps them see what their wealth basically is and how they're positioned to which partners to select which tools to use, which governance to build. So really build the operational side of a family office, and then others come in and take care of the investments.

R. Adam Smith: Thank you. PWC is such an incredible firm. We've had some very large elite organizations on the podcast as your colleagues and competitors from Ernst & Young and RSM and, upcoming from J.

P. Morgan, UBS. It's very important to talk to large firms, I think, and also smaller firms to really understand the family office and family enterprise space. Let's just focus on your journey first twenty, twenty-five years with alternate worth families and what it's like to be a navigator for these families.

Obviously is, important, to have experience, but also to have credibility. Talk about that journey you've had and how it's led you to where you are today. Stephan Gerwert: Yeah, so compared to many others in the space, I have a feeling that I've had a very heterogeneous career and journey, starting out very typically at a big bank in the wealth management department, and then later moved on to lead a single family office in Switzerland. From that, joined the fintech catering to that clientele becoming an entrepreneur because I was so interested in the whole startup space back then, building, as you alluded to, Skyland Wealth.

And when a typical startup pivot was necessary and I learned what entrepreneurship really means in terms of full-on decision responsibility and making and a co-founder and I didn't see where to go next, so to say. Then joining PWC, I really have basically seen and advised that clientele from, I would say, all sides of the table. I don't even know which side is left that I haven't seen. And that really gives me a very good holistic view of the challenges families face, and that it is not just investment challenges, but also what it means to be growing up and living in a complex, oftentimes multi-generational family.

So family dynamics, investment dynamics. But what many don't really look at that closely is the governance perspective. So really having very clear rules and guidelines, so that you stay clear of any big mistakes. And that, yeah, was a, was a very fortunate journey that I've had so far and I, I still enjoy it.

R. Adam Smith: Great. So just briefly, for those that wanna reach out to you, obviously they can reach you on LinkedIn? Okay.

Talking about the family office advisory structure, philosophy, the role of responsibility, of being responsible, advising the family office, but also the family office and the family being responsible to themselves is important. On the podcast we talk about governance often as both, enabling decision-making through that governance lens, but also reducing conflict through the ongoing communication, coordination, transparency and, constant dialogue, let's say. So if you could just talk a bit about your philosophy of advising a family office and what are those key principles in serving them?

Stephan Gerwert: Yeah. It's great that you put that topic to the forefront of people's minds, so to say. So when PWC and I myself think about governance, we really try to start at the very beginning, so to say, and we don't start and jump in with defining governance, but really take a step back and ask the family, "All right who are you as a family? What is your legacy, so to say?

What is the vision that you have for your family? What is the vision and mission you would want your family office to have? What is the purpose your family office has?" And once you have defined that, then almost intuitively when you have set basically the big picture and the long-term viewpoints with the family you can very quickly, basically, then take the next step and go down and define the service levels that are needed to fulfill that purpose and vision.

And then quite naturally, you come down and you are able to define the governance structure. So what kind of, basically committees, do they need? What does a team structure look like? What should be done in-house?

What should be outsourced? All of it really falls naturally into place once you take the big picture view to begin with and then the governance in the end is really a outcome of that. R. Adam Smith: Right, we've talked a lot on the podcast about the structuring of this governance with elite veterans in the space, as you know, Alfredo Damasus, who's really one of the kings in the industry talking about governance, all the way over to James Grubman.

Upcoming, Dennis Jaffe, both from the Ultra Net Worth Institute. We've talked with Christina Wing, we've talked to Richard Wolkowitz. Everybody has, as you say, prioritizing governance, but also a different view on it. Maybe just what we don't talk about often is really the effort and sweat equity and the, complexities of creating the governance.

A lot of the conversation is presuming the governance is in place or tweaking it. Maybe just talk briefly about creating governance from scratch. Stephan Gerwert: Creating governance from scratch. So once you have set out basically the big picture, then it really comes down to deciding, all right, first of all who are the committees that are necessary?

Do we need a family council from a family side? Then do we need a family office board, an investment board? What are the different committees we need to run the family office and fulfill its mission? And then really go down step by step through every person both inside and outside of the family office and define very clearly who has what role.

Oftentimes I see family offices where there is not a clear role definition in place, and then questions come up. Really who decides what, when, and who needs to be informed when you have not basically defined that, right? And especially then when it comes to a potential succession topic and it is not defined, then the issues pop up. As long as you have a strong patriarch at the helm, things might not be as obvious that they're not working.

So what I really like to work with, it's this RACI matrix. It's when you have to define who's responsible, who's accountable, who needs to be consulted, and who needs to be informed. And when you build that matrix with the people both inside and outside of your office, then I think you have a very good overview of and starting point of your governance. R.

Adam Smith: That's great. So on the designing of, of the governance it really depends on the size, it depends on the preparation, it depends on also the complexity of the family. We often talk about the family office, but really it's a family of businesses. It's the business of the family, but it's also the family of businesses around the business.

So, we talk about that as an enterprise terminology here. I like to use the word enterprise. And I think that's important to look at it more broadly. For example, the Ultra Net Worth Institute uses the terminology family capital as the basis for their content.

And then of course, I mentioned Alfredo. I like his term about the galaxy. He talks about the galaxy of the family. I'd like to hear from you, just the broader perspective of the infrastructure, and what is going on in the industry with the scaling?

And especially In Europe, there's some very large families, but now it's a global sensation essentially. Talking about the enterprise, let's say the ecosystem, love to hear your views on that, especially from the European perspective. What's going on in the scaling and how does that, how does it impact complexity? Stephan Gerwert: Very thoughtful, big question here, Adam.

Very interesting that you mentioned the term family capital because we also use that terminology now when we describe the ecosystem of family business, and family office, like this triangle basically. We also use the word family capital and you will see that also in the near future, that we take that on. When it comes to the ecosystem here in, in Europe, like I'm mostly focused on Germany, so I can only speak for German families. Obviously, I would say that the ecosystem of a complex family enterprise, or the family capital ecosystem is pretty similar most likely all around the world.

So when we look at at least sizable German families that work with PWC, and you look at this family capital or family enterprise system, you definitely see a continued trend, that they are in the business of basically forming future businesses. So most of them are not the typical capital allocators when it comes to capital market investments or private equity or venture. They really built a hub of a diversified business platform, so to say. The best example recently that was a couple of years back and in the news, so I'm not saying anything confidential, is that Wiessmann, a very substantial family business was sold.

And their family office is really active now in just acquiring a diversified portfolio of other substantial businesses. So they didn't go and basically gave the money to UBS to allocate it. They really stayed in the business of being an entrepreneurial family just in a very different context. And that's what many do.

Like the trend towards private markets in general is true here in Germany as well, but even more so really staying close to what it is that you're good at, and that is just being entrepreneurial and business-minded. R. Adam Smith: Yeah. I had previously worked with the part of the BMW family office Quandt family, which later had a division called Auda and then that became a alternate investment manager of, let's say, 15, 20 billion called HQ Capital in the US.

It was very interesting. We see a similar dynamic with Benetton and also with Kilvest from France and Argentina. So I've seen this dynamic. I think it's really fascinating, and they are some of my clients and friends, and very powerful, very dynamic organizations that build alternate investment or let's say direct investing activities outside of the core business.

So in Germany, you see Wiessmann, like you're saying. You also see the Moray holdings. You see the Klatten and Atlana holdings, Hagenmeyer, Kaufland, lots of interesting companies. Of course, Porsche, the Porsche legacy leaks into the defense and security sector.

Germany is a very large country. What are some of the things that distinguish Germany or let's say Germany, Austria, Switzerland zone? Stephan Gerwert: Especially comparing to the US as far as I can see, and I've spoken to numerous single family offices in the US as well over the course of the years. Germany is a very, still very secretive type of a family office ecosystem, so to say.

So there's not many that really go out, so to say, to the public. So it's a very closed type system. Most of the very sizable ones that you mentioned the family names they are oftentimes so secretive that you don't even have basically current pictures of even the heads of the families, right? Because they don't want people to know what they look like.

They're not gonna have a LinkedIn, lucky them, you could say. That's certainly one aspect. The other one and in that aspect, I think there is some value to it compared to the US system or culture that is probably more open and outgoing. And that then brings in maybe a certain level of risk that some families in Germany do not have.

But on the other hand, what I think the German families and family offices could do better, at least from the perspective that I have, is that they could collaborate more amongst themselves. Network even better than they currently do to really use, basically, this humongous opportunity that they have to maybe work in club deals, do co-investments together, build things together. And there I have a feeling that in Germany we're really, the families really stick to themselves mostly and that oftentimes is maybe not beneficial.

Those are just two things that come to mind apart from us being maybe more stingy than other countries when it comes to finding the right partners to work with. R. Adam Smith: I understand. Yeah, there is a tricky balance of transparency, openness, and collaboration.

But also the benefit of protecting the fragile family dynamics, the brand, the privacy which it's also psychological and societal. It's not just, not just a PR element. Stephan Gerwert: What I would recommend though is especially if you're a family that is known in the public sphere anyhow, that you should always invest in good PR for the simple reason that a story about you will basically be in the market anyhow, so better be in charge of it than having others build or create a story.

And I see too many that are holding back and not basically trying to be, get ahead of it, right? And position themselves and their own family and brand in the market. And then, yeah, you have more rumors that are false and that, that are not beneficial compared to if they would take ownership and really go out with it themselves R. Adam Smith: Yeah, certainly there's a certain skepticism of press and hesitation which can come from that legacy of privacy and quietness that hides behind the pride of the wealth.

I wanna continue this conversation here. And keep talking about this concept of legacy and scale building which is really important, I think, to, to me, to the podcast, to the world, to Germany. We've talked about this concept of scaling and collaborating very often, and we're seeing it very actively in the statistics from PWC, J.P.

Morgan, Northern Trust, Bank of America, Goldman Sachs all the reports, Camden, coming out about this scaling of large families and also working together especially in a private context. And then further, have talked about this importance of collaborating and joining forces. Recently on the podcast, we've talked with Philip Marcovici on episode 61, and also talked about this as well with Jeremy Chang, episode 58 and also with Dr. Jan-Philipp Ahrens on episode 56 and so on, going way back to earlier episodes with Ron Diamond and Martin Roll, et cetera.

So this concept of scaling is really important, especially for Germany, because of that tendency to be more conservative. But if you look at Germany as an economy along with a good amount of OECD Europe, there is a dichotomy issue, I think, where the social and tax and economic fabric of the countries are struggling from a population growth, immigration, taxes, infrastructure, being competitive in the world especially with Germany leaning towards manufacturing. Manufacturing is getting compromised especially the last 10 years by China and other emerging markets, Mexico, et cetera.

So where tax and labor and policies are more inflexible, which is typically in Germany I think there is a problem there. And I would imagine that if some of the larger private family offices, family billionaires could work together more creatively like we're seeing in China and let's say Singapore and South Korea, the US, maybe there's something to do there to benefit the economy. What are your thoughts on that? Stephan Gerwert: Yeah.

Sadly enough, Adam, all of the topics that you mentioned are true. Germany is struggling and you see it obviously in the news. I think we are a nation that is stagnant in terms of GDP growth. I think we're at zero pretty much, or 0.

5, something like that. So not really noteworthy. And it's all sadly enough issues that we have brought on ourselves. And many have, many realize that by now.

So as you said, strong manufacturing base. What do we need? We need cheap energy. Cheap energy we had from Russia.

Ever since the war against Ukraine started that is gone. And now we have very high energy costs because we decided to get rid of all of our nuclear energy capacity years back. And now the industry is paying the price and in the end the consumer and the population. And the German families and family business owners that I know, they are still, they're still proud, so to say.

They still know about their, their legacy and their, basically responsibility towards their employee base. And oftentimes they stay in Germany. Oftentimes, you alluded to the tax topic, they also can't leave because in Germany we have a certain tax code that would make it that you are being taxed on certain corporate assets when you were to leave Germany without you even selling those corporate assets. So you're basically being taxed on something that you can't pay because you will not have the liquidity for it if you don't sell it.

And so many are basically in some kind of like a prison in some sense, and they can't leave Germany, and behind closed doors they tell you, "You know what? Right now I stay, but oftentimes I just don't have an opportunity to leave. And if I could, I probably would." R.

Adam Smith: Again, Germany is a fascinating country because it has been the engine of growth of Europe and of the world as, as well. And of course, France gives you a run for your money, but France is also not a high-growth state. I am looking at some of the statistics that are interesting for Germany, just which are estimates and not exact, but it looks like Germany is doing okay with 2% inflation, 2% GDP, 4% employment, debt to GDP is 60%. Those are fairly okay numbers.

And the import/export budget is looking pretty good. But then again the tax structure, the innovation pace, the immigration issue, these are problems. On the family business front, some stats I see that are fascinating, which are much higher than normal in Germany. For example 90%, it's been said, of all German companies are family-run.

Germany hosts 78 of the world's 500 largest family businesses, which is actually second in the world to the US. It's actually higher than China, higher than Japan, higher than France, higher than UK. That's fascinating. There's, 500 single-family offices, 100 multi-family offices.

These are large numbers. And they say that 50% of family-controlled companies control all of the turnover in Germany, like 50% of the GDP. That's quite high and much, much higher than many European countries. At the same time, Germany is fairly conservative and tends to hold more cash.

I'm reading a stat that American companies hold 5% of cash. But German family offices hold 14% of cash. This is a lot of money. Again, it seems like people like you, and PWC and leaders in the country or in any country really should step up and find ways to catalyze and bring families into a more impactful position in an economy.

Stephan Gerwert: Yeah, I completely agree. I do know a gentleman that also is a business owner, and I was shocked to, to hear at some point how much liquidity he has in his business for basically some maybe acquisitions. But most likely for, as like a worst case piggy bank. But yes it definitely is the case that there is a lot of cash sitting on the sidelines in Germany.

Another statistic is that I think the average... I actually would have to read that up again. The average allocation that the German population has towards stocks is super low, right? Don't count me on that, but not even 10% or so, whereas compared to in the US because of your 401K and everything that is incentivized, I think you have 40 to 50% in equities as a population.

And that's why the German state and all the numbers that you quoted still on paper is doing well. But the average German population has oftentimes, I think, a lower net worth than I think other European countries that you would not expect, like Greece or Italy and others. And that is because we are so defensive especially when it comes to investments and taking risks. That's also why especially in the US why you are so fortunate to have all these huge and very successful tech and now AI companies, and you hardly see any of that in Germany.

So I have the fear that yes, all of the numbers you quoted that are on paper are still good and still highly relevant. I would fear that if we meet again in 20 years' time, maybe 30 years' time, those numbers will look drastically different. R. Adam Smith: I understand.

So moving back to the family enterprise and let's say the decision-making process, let's come back to this importance of holistic reporting within the family office, within the family enterprise, and gathering all the information for PWC as an advisor. Talk about how extensive that information is, and also talk about how you gather that from a technological perspective. Stephan Gerwert: At PWC, we have certain technology providers that we work with, let's say more than with others.

But in general, we are technologically, Like indifferent, right? So whatever technology the client basically wants to use, be it Adafar in the US, or Mastro or in Germany, competitors like Qplex or others. For PWC, we're basically indifferent since we are this independent advisor. But yes we do not have our own, let's say, reporting tool or system.

We're not a SaaS tech company. But we need good partners in the ecosystem that have those technologies. And yes, it is very important if you want to advise holistically, that you do see the full picture when it comes to wealth, when it comes to jurisdictions that then again has big tax, oftentimes implications, legal questions that come up. It helps us in the inheritance planning, in the tax structuring, so to say that nothing gets forgotten, nothing is forgotten.

And yeah, so holistic wealth reporting, super important for us as advisors as well. R. Adam Smith: There is obviously a awareness of cybersecurity and the, like the technological resources and protocols used within the elite family office space. Maybe just talk a bit about that, from PWC's perspective.

Like, how do you use technology to not only gather, but use AI in assembling and create security protocols for the family offices. But also, what's going on in terms of advising them for internal cybersecurity? Stephan Gerwert: Yeah, the question could not be more relevant. I recently was at an event and our cybersecurity leader spoke, and he again highlighted the fact that he needs, I don't remember the numbers exactly, but like 30 seconds of spoken basically content from you and just two or three pictures of you, and he can create a completely virtual avatar looks and sounds like you.

If that is the world we're living in, then yes, cyber threats and you being extorted for some Bitcoin, so let's say after you have been hacked, its a real threat to every family out there with a substantial net worth. Because those hackers know about you, and they know where to look and, find you. So cybersecurity, yes, huge topic. Surprisingly enough, I've been with PWC now for four years.

I would say that it has only started to pick up in the past half year, I would say. So, at least from what I can see, and obviously I don't see all the, the work that PWC is doing. So it has been a fairly new development, at least from my point of view. I've long talked about it and said that people should look into it.

And we then, from what I see the colleagues doing, treat a family office just like we treat any business, right? There's no difference between a family office and a manufacturing business in that sense. It's obviously different possibilities that you can, hack into and then get attacked. But overall, the approach is the same.

You do a full audit of everything That is there, so to say, when it comes to people, tech, software, hardware, everything that can be hacked and can be a risk. Plus people. We all know that's the biggest risk. We first start with basically, the easy solutions and the easy topics and go on from there depending on how complicated and complex the family wants to take a look at that topic.

R. Adam Smith: Got it. We'll come back to that more in the future, I think. We'll wrap it up here and, just enjoyed the wide range of conversations today, obviously covering more core topics of governance and structure, discipline within the family office and its operational complexity and thinking about long-term stewardship and wealth power, wealth creation within Germany, within Western Europe.

Maybe we just wrap up on your thoughts on, the relative impact of large billionaires and family offices within the world and within Germany. Especially within Germany, we're talking about very large, part of society of commerce and capitalism. So just imparting thoughts on, the relative importance of that and their impact on a broader legacy. Stephan Gerwert: Yeah.

I truly think that the successful entrepreneurial families in Germany that do have a brand name and build a brand, have a tremendous responsibility to use everything that they have built. You can call it a legacy, both in terms of the wealth, but also in terms of the corporations and the, businesses and then being able to, provide jobs, have a tremendous, I would say, lighthouse function when it comes to pretty much everything that they do. As you alluded to in the beginning that you talk a lot about impact, like when it comes to everything that, has a potentially positive connotation influence, they should be more outspoken about it than they maybe are currently.

Because there's so much for everyone to be learned, and to be inspired by. R. Adam Smith: you, Stephan. Stephan Gerbert of PWC today on our podcast.

His work demonstrates that these successful family offices are obviously built, beyond the investment decisions alone, into, building, on their discipline, their operating companies. And hopefully a greater sense of commercial collaboration, for the country of Germany and Western Europe as a whole. Stephan, thank you so much for sharing your thoughts today. Stephan Gerwert: Adam, it was a pleasure being here.

Thank you for the invitation. It's truly appreciated. R. Adam Smith: This is R.

Adam Smith signing off. Please stay tuned for our next episode of the Family Business Audiocast.