A systematic approach to auto dealership family wealth management

Auto dealer ownership is rarely just about running the business. It means serving as a leader in the community, giving back through philanthropy, and managing wealth across multiple generations. That complexity demands more than generic transition and succession planning; it calls for strategies built specifically for the auto retailing industry and for the families behind dealerships. Characteristics that make this planning distinct include:

Community identification and engagement

Auto dealers hold a special place in their community. These leaders are the go-to sponsors for local activities of every kind, often leading boards and participating in events like parades, festivals, and other celebrations. 

Dealer leaders are highly visible. A longstanding dealership owner’s name, often seen in commercials and on buildings, is linked to cultural events and can, over the years, become strongly identified with the community itself. A dealer’s family members, too, are recognized as important civic figures. 

Philanthropic leadership

Dealers tend to be among the most philanthropic business owners and are often associated with specific causes. Beyond providing financial support, dealers are counted on to lead civic and community service initiatives and support religious and educational organizations.

Complex business relationships and structures

Successful auto dealerships hinge on a host of different relationships, many of which are built over decades and generations:

• OEM relationships and the unique nature of auto retailing franchise agreements 
• Peer connections with other dealers, both locally and nationally
• Long-time managers who are dedicated to the business and invested in its success
• Loyal employees and family ties within the business, which commonly span multiple generations

The complexity extends to the business structure and the various entities underpinning the dealership enterprise. While the structure offers options when considering transition, succession, and wealth plans, it also calls for a high level of sophistication in planning and designing business and wealth strategies. Among factors contributing to the complicated structure of dealerships are:

• Multiple locations and business components that may handle new and used vehicle sales, used vehicle auctions, credit services, collision centers, service and parts departments, insurance, and many more
• Numerous legal tax IDs and legal structures to maintain and manage
• Multiple partnerships and partnership agreements per location—each store can easily have two to three underlying entities
• Separate bank accounts for each business entity along with fund transfers and regular reconciliations

Family legacy and ownership spread across generations

When it comes to multigenerational wealth, auto retailers make up a class unto themselves:

• The Texas Automobile Dealers Association estimates that roughly 85% of franchised dealerships are family-owned.^{Disclosure 1}
• Dealerships are typically long-established businesses; many go back to the early days of the auto industry. 
• Multigenerational dealerships are the norm. Most dealerships represent two to three generations of ownership, while some have been in the family for as many as six generations.
• Many family members are also employed by the dealerships in various capacities, adding yet another layer of complexity to the design.