Anthony R. Contrucci leads the family office for the Schrage family, owners of First Bancshares, Inc. and Centier Bank, headquartered in Merrillville, Indiana. Contrucci, a married-in member of the fifth generation of the family, describes how the family approaches education for all generations:
What education do you offer for the whole family?
We have subject matter experts who join us throughout the year at our monthly family council meetings. These often include third-party experts on topics the family is interested in, like philanthropy, or executives from our businesses. For example, our director of private investments has presented, and we have had our CFO and corporate and family historian present multiple times at both our monthly family council meetings and our annual family assembly.
We also try to go to one family business or family office-related conference together each year — all of us getting away and learning together and having some fun together outside of our normal geography and work dynamics.
What are the goals of your next-generation program?
We base our NextGen education on the four components of cohesion dynamics: family emotional, family financial, business emotional and business financial.
In addition, we strive to create a curriculum and develop our family and family strategy in a manner that addresses our family’s holistic balance sheet. It is important to note that there are five forms of capital that comprise the assets on a family’s balance sheet: financial capital, spiritual capital, social capital, intellectual capital and human capital. Far too often I have observed that families outweigh their focus on financial capital. Furthermore, they tend to focus on their liabilities, which leads to tactical behavior including estate planning, etc. I feel for families to thrive in perpetuity, it is important to build a family strategy that addresses the family’s balance sheet, both their assets and liabilities, and all of their forms of capital.
Our primary goal is to continue to drive family cohesion and unity, which includes remaining dedicated and loyal shareholders in First Bancshares, Inc., the parent company that owns, among other things, our legacy operating business, Centier Bank, and our private investment arm, 119th Street Capital. We are focused on what we need to be doing to make sure everyone feels heard and engaged — that we are meeting family members where they are and providing meaningful engagement in a manner that is authentic to them. We always look to G4 as our generation’s inspiration: to my in-laws, Mike and Jill Schrage, and to my father-in-law’s sister, who has inspired us all through her unwavering support, loyalty, and commitment for more than half a century. That kind of commitment is rare in the best of times; however, when you are in a capital-intensive and cyclical business and have experienced major ups and downs across multiple market cycles, having almost lost the family bank in the 1980s, that degree of loyalty is just so humbling and inspiring.
For the next generation (G6), and even the current generation (G5), some of them aren’t day-to-day operators of the businesses. Therefore, we always focus on how to make sure they have the knowledge to be good and confident stewards and owners. We meet them where they are on their learning journey, at their age and stage of life.
Of course, we are intentional about how we educate people financially and the financial tools and knowledge that they will need to be good owners and stewards — financial cohesion dynamics of the family and business. However, we are equally focused on how we complement that with emotional cohesion dynamics across the family and the business. I believe that in order to survive and thrive in perpetuity, a family’s next-generation education program must include a comprehensive curriculum that addresses family cohesion dynamics holistically and that is created in a manner that acknowledges its unique family and its members across all of its generations.
Why is it so important to create that emotional connection?
Candidly, family business is rewarding but can be extremely difficult in the best of times. Business in a vacuum is difficult, and adding multiple family members across generations as well as married ins only complicates the relationship between ownership, family, and business. Here is one example that I find particularly interesting if your goal is long-term sustainability through family cohesion and creating a dedicated and durable capital partner: This example incorporates the concept of risk tolerance profiles.
We’ve all learned in behavioral finance that one of the biggest drivers of behavior is loss aversion. For this example, let’s say a family member is innately risk-averse and that this risk-averse family member is a wealth steward. They are an engaged and knowledgeable steward; however, they are not an operator and they do not know how to create wealth. Often this profile can become disproportionally more conservative due to loss aversion. Their fear of losing their wealth without the ability to generate more can, at times, create a scenario which creates conflict in the family due to their desire to be overly conservative if others in the family construct are innately more comfortable with risk and have aspirations for the wealth or business that require taking on risk.
In this same example of the risk-averse family member, if they were an operator and knew how to create wealth, they might be willing to take on more risk, because they know that if they lose it, they know how to make it back.
You can run through this scenario with someone who is innately more of a risk taker and how being a steward vs. an operator may impact their comfort with risk. It is a meaningful exercise to plot these various profiles in your family on a risk tolerance continuum and hypothesize how they may show up and how their profiles may impact decision making in a vacuum and among the broader family. Having open conversations with the family about one another and how they are wired creates a foundation of understanding and can drive a durable emotional connection to one another.
Despite all these theories about risk tolerance, behavioral finance and financial cohesion dynamics across the business and the family, if you’re just focused on numbers and the financial aspect of family business, my fear is that a future generation or individuals in a generation may get to a point where they want to monetize or sell the asset. There is likely going to be a person or a generation that says, ‘This has been a really good run, but we’re losing steam here, or we are too concentrated, or we are taking on too much risk, etc. Why don’t we sell?’ If it is just a financial decision that is devoid of emotion, then the decision dynamics are relatively straightforward.
That’s why we intentionally include emotional cohesion dynamics in our next-gen education. We always ask ourselves, How do we connect current and future generations emotionally to the business and family? Another benefit is that through this side of the next-gen education coin, you can often generate appreciation and gratitude. It’s often difficult to appreciate something that you didn’t earn directly. That is why I believe that codifying in the family knowledge construct the stories about the family’s journey is so important. Stories about the struggles, the failures, the trials and tribulations, the sacrifices. Humanizing the wealth and painting it with emotion is paramount.
In addition, with wealth that is not directly earned, it can be a crippling force. I myself have dealt with the successor’s curse and imposter syndrome on my journey. And as we study other families of means, there are far too many cautionary tales to count. That is why we also teach our future generations that whether you are an operator or a steward, regardless of how you want to participate in the family enterprise, there is a pathway to feeling like you have earned what you have. That pathway is not easy; however, the road to fulfillment and self-actualization never is.
How do you deliver these family education programs?
We have financial education delivered to the collective family through our multifamily office partner — in addition, every family branch does their own financial education with their own children. We also work with our family and corporate historian to aid us in delivering the emotional content within our broader curriculum. For example, he has created a six-year curriculum for G6. They’ll spend 2 hours with him each year in our family and corporate museum in Whiting, Indiana, and there are other touchpoints throughout the year as well. The curriculum covers not just history but our corporate and family values, which I think is important.
