Maintaining Wealth Momentum THE 3 HUMAN DIMENSIONS OF FAMILY WEALTH

Transcription

1 Maintaining Wealth Momentum THE 3 HUMAN DIMENSIONS OF FAMILY WEALTH

2 TABLE OF CONTENTS INTRODUCTION INDIVIDUAL DIMENSION INTERPERSONAL DIMENSION INSTITUTIONAL DIMENSION CONCLUSION

3 INTRODUCTION Research from The Williams Group says that 85% of family wealth evaporates because of trust and communication issues. While there s agreement about these issues as a main cause of wealth depletion, they re multi-generational families is low. The families that pass wealth successfully from one generation to the next are the rare ones that can create family structures, rituals, and systems to overcome them. But intra-family issues can be hard for families to see for themselves and even harder to manage by themselves. Families often need an independent, neutral voice to help them work through these challenges. 01

4 position to provide this type of guidance, success, the lack of resources dedicated to helping clients deal with family and 02

5 be aiming for wealth momentum the positive interplay between both but also as human challenges. The human elements of successful transitions have three distinct dimensions: THE INDIVIDUAL THE INTERPERSONAL THE INSTITUTIONAL Families need to understand how each of these dimensions can impact their wealth and what tools they can use to make sure they receive the appropriate time and attention. Families also need a team of advisors around them that can support every aspect of their wealth and recognize when help is needed to navigate the human issues. And if their needs change, it may require the team to change as well. 03

6 01 INDIVIDUAL DIMENSION While families are connected by genetics, ancestry, history, and traditions, they are still made up of 04

7 As families grow from one generation to the next, it is easier for Personal dissatisfaction can quickly become the source of family disagreement and tension. One area where a lack of understanding about individual well-being can derail family wealth is in the transition of a family business. Too often, passing a business on to the next generation is done without carefully considering the skillsets of the individuals involved. Next-generation family members are not all equally equipped to run a business. In fact, some may have no real interest in running a and development opportunities designed to set the next generation up for success. This will establish a foundation of trust when communicating and collaborating with key family stakeholders. 05

8 Individual preferences and needs can also impact decisions related Wealthy families should focus on to family philanthropy, trusts, and the general management of the means leaving the family wealth structure altogether. One way to do this is through education and mentoring. In this context, education is not about formal schooling, although that is also necessary. It s about educating individuals on family values, beliefs, and rituals. If there s a family business involved, it s about helping them understand how that business works and what potential role they might play in it. Through these types of programs, families can learn valuable insights about individuals skills and desires. Family leaders can use structured education and mentoring programs to ensure that individuals are receiving the support they need and are put in the best position to help the family. Ultimately, if individuals are happy, the family will be more prosperous. 06

9 02 INTERPERSONAL DIMENSION Everyone has family disagreements. Siblings don t get along. Spouses get divorced. Children become estranged from their parents. These issues aren t exclusive to wealthy families. 07

10 The stakes are higher for wealthy families, so managing interpersonal relationships is even more important. The key is to set-up a system for making decisions that relies on a heavy dose of open and honest communication. The goal is not to eliminate family arguments. That s impossible. Instead, families should create ways for dealing with family disputes that do not lead to long-term animosity, their position known, they will be less likely to harbor negative emotions. Even if the outcome is not what they want. Regularly scheduled family meetings are a good outlet for this. Often the source of family squabbles is simply a lack of communication or understanding. The more communication channels families can develop, the better their chances are at solving problems before they threaten the family s well-being. Having an independent third party that has experience dealing with uations. It can be hard to be honest with the people that are most close to us. But families may be more open to talking to a third party about 08

11 03 INSTITUTIONAL DIMENSION connected by genetics. The reality is that families with multi-generational wealth are complex enterprises, not unlike a business. 09

12 Families must put structures in place to manage family wealth in the same way they would manage a business. Strong governance at an institutional level is critical. For many wealthy families, the original wealth creator or a singular family leader serves as the only decision maker. While this makes sense in the early stages of wealth creation and growth, it can create a problem if families don t eventually develop a succession plan and have a clear leadership structure once that wealth creator passes on. Some families establish family councils, while others have a formal board with elected positions. They may also choose to have independent board members to provide a trusted outside the family as an organized unit that must make collective decisions, not as a group run by one individual. 10

13 CONCLUSION Understanding the three human dimensions of family wealth provides families with a better way to think about managing their wealth and need to give careful consideration to their investment decisions and partners. the ones that prosper for multiple generations. 11

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