Have you considered what your relationship with money tells your family? Everyone has a different inner connection with what money can bring. Savers may need to feel security. Spenders may need to experience living in the moment. Some people find displays of wealth shameful.
Most wealth conversations focus on accumulation. However, once you are in a position to transition wealth, it is important to understand how each member of your family connects money with their actions and identity. This the foundation of wealth succession.
Intergenerational Wealth Strategy
“Intergenerational wealth strategy includes investing with the consideration of family dynamics, skills or interests. Some investments or assets are consciously embedded into the overall wealth plan which are most likely to maximize their value beyond traditional time frames.”
We live in a world built on instant responses and immediate gratification. Wealth strategy is the long-term approach to holistic asset allocation, which takes shape over decades and impacts multiple generations. Family wealth decisions can be made with the wisdom of thinking beyond quarterly returns and past traditional investment cycles, while incorporating the interests of family members.
Understanding the personalities, relationships and dynamics of your next generation gives you the advantage of building wealth with family, for family. How can the family deploy capital to diversify into projects or businesses that advance both the bottom line and the purpose of a family member?
Understanding the differences among financial planning, investment management, and wealth strategy can be a pivotal learning curve in your family’s financial advancement. Be careful not to confuse investment management with wealth strategy. Equity or debt investments are used as tactics to advance the family’s objectives.
Intuition to Intentional
In the past, family business and money decisions were likely often made by just one or two people. Rising generations may not have honed the instincts of wealth founders. Part of your wealth strategy may be to help them learn your decision-making processes in a deliberate way.
Considerations for Intergenerational Wealth Strategy
- Are returns your only priority?
- Is hardship required to develop character?
- Do financial challenges create or foster entrepreneurship?
- Does money change people or simply amplify who they are already?
- What is your family’s relationship with wealth?
- How do you match your values with investments?
- When do you include your children in these discussions?
Build wealth by design and with your family in mind.
Succession or Continuity
There are important distinctions between succession planning and continuity planning.
Succession focuses on legal documents that take effect at a point in time. These documents include items such as your Last Will and Testament, Powers of Attorney, and Trust Indentures. Decisions about roles and responsibilities relating to these documents, as well as ownership transition, are addressed.
Continuity planning is a process that prepares a family before a succession point and supports them thereafter. It is about understanding individuals and relationships while trying to identify where conflicts may arise or where teaching may be required. Continuity is about keeping families together through the decisions that are made in the succession documents. It focuses on educating and guiding the next generation for their future roles and responsibilities in the context of succession.
Both succession documents and continuity planning are important if you intend to stay together as an enterprising family. Succession points have the tendency to be exceptionally stressful, and they don’t always bring out the best in people. Succession and continuity planning are both critical for the longevity of family unity.
Advanced clarity on intentions can assist in maintaining family harmony especially if there are enterprises involved.
Nepotism as and Advantage
Can aspects of nepotism be an advantage to an enterprising family? The human race has flourished for thousands of years by teaching skills to offspring. The techniques of farming, herding, weaving and wine making were mastered and carefully passed down from generation to generation. Was this nepotism or learning through exposure and example?
Hiring family into your business can have many positives as well as negatives. How can your family members become part of your business in a constructive way? What impact could this decision have on your employees and your bottom line? This is a delicate equilibrium and there are best practices to apply. Is it wrong to want your children to have an advantage based on the years of blood, sweat and tears you have put into their future?
Finding Qualified Resources
How do you find qualified professionals to work and support the unique circumstances and dynamics of your family and its enterprises. Delivering family offices services takes a team and their efficiency becomes your efficiency.
The words “family office” are suddenly arriving on websites for investment firms, accounting firms and insurance providers. Can you differentiate the real experts from the “pop-up experts”? Let’s discuss who is already on your team, what your needs will be and how to source additional qualified professionals to help accomplish your objectives.
Before you begin searching for qualified experts, pause to understand what your requirements are and what types of professionals can satisfy those needs.