1st Generation Clients
often display resistance, receptiveness, hesitancy – but not apathy
Immigrants to Wealth
newly wealthy, lead generation, 80% of wealthy Americans; receptive or resistant but not apathetic
Natives to Wealth
grew up wealthy, next generation, 20% of wealth Americans, 90% change advisors w/i 2-3 years of wealth transfer
Keys to Successful Families
- Engagement
- Transparency
- Learning
- Developing
Family Education Plan
Financial Capital = financial/economic resources; assets and cash-flow
Intellectual Capital = intelligence, knowledge, creativity, ingenuity
Social Capital = opportunity to bring other elements together for greater good
Human Capital = skills, health, motivation, endurance, traits, experience
Children Financial Education
- prime learning ages 7-13 years old
- most money skills established before 30 years old
- children must learn primary uses of money; earn, save, spend, invest, share
Family Wealth Sustainability
most family wealth does not survive 3 generations
70% lost by 2nd generation
90% lost by 3rd generation
<10% survive 4th generation
60% lost due to communication and trust issues
25% lost due to heirs not being adequately prepared
15% lost due to other factors such as taxes, legal issues, etc.
Family Governanace
- strategic goals are set
- key relationships are maintained
- health of family is safeguarded
- accountability is maintained
- achievement and performance recognized
Steps for Effective Family Meetings
- obtain agreement
- establish purpose and goals
- design collaboratively and create expectations
- clarify expectations and format
- obtain information and invite participants
- create safe environment
Family Mission Statement
combined expression from all members of what family is, wants to do/be, governing principles
• contains family goals, values, principles, and purpose
• often helps define priorities, strengths, and weaknesses
• helps describe qualities/characteristics it will encourage and help develop in family member
Family Values Statement
less comprehensive, one set of principles/beliefs of family unit; all members contribute
Family Charter/Constitution
formal family structure, roles/responsibilities, how to resolve disputes, operating procedures
Wealth Purpose Statement
alignment of shares intention and core principles
Family Office Core Services
- Advisory
- Financial Planning
- Strategy
- Governance
Benefits of Establishing a Family Office
- centralized services
- performance
- privacy
- risk management
- governance
Four Pillars of Legacy Planning
- Values and Life Lessons
- End of Life Instructions & Wishes
- Distribution of Personal Possessions
- General Discussion about Real/Financial Assets
Communication Frames
High Control, Low Support – 38% communicating “to” = authoritarian; “dad tells us we’re to do this”
Low Control, Low Support – 24% “not” communicating = neglectful or irresponsive; “don’t talk about it”
High Control, High Support – 22% communicating “with” each other = restorative, curious, open, collaborative
Low Control, High Support – 14% communicating “for” = “we took care of it for you”
Six Factors of Family Complexity
- Level of Conflict
- Communication Style
- Level of Fairness
- Governance & Decision Making
- Presence of Addictions
- Situational Factors
Family Roles & Responsibility
immigrants to wealth; integration, avoidance, assimilation, marginalization
- Integration – adopt to new world, open mind, keep family heritage
- Avoidance – keep/cling on to gamily origin, don’t adopt at all
- Assimilation – ditch old world/heritage all together, tough to blend in, identity issues
- Marginalization – neither keeping old ways or adopting new ways
Three Pathways of Estate Design
- Division – set amount to kids, set amount to charity
- Preservation – set up through structures, cared for by advisors = family gets benefits/distributions
- Growth – assets managed actively by advisors and family; reinvested for growth
Family Systems Theory
family viewed as one unit with rules/guidelines members operate within
• know which system family operates in and remain objective
• overlap of family, ownership, and business
Family Education Planning
- Financial – how to understand/manage finances (earn, save, spend, invest, share)
- Wealth – how to plan for and structure wealth (four separate wallets)
- Governance – how to make decisions (common visions, resolving conflict, process/policies)
- Business – how to manage/own enterprise (management, successions, performance focus)
- Philanthropic – how to give thoughtfully (developing mission, engagement, grant making)
First & Second-Generation Dynamics
- Children often suffer from low self-esteem
- Parents often neglect family relationships
- 70% of parents expressed desire to meet and work with children’s advisors
- 60% of children expressed desire to meet and work with parent’s advisors
- 2/3 of wealthy individuals express desire to engage more regarding financial matters with their children
- only 1/3 actually engage in consistent and meaningful communication with their children regarding financial matters
- effective measurement of outcomes is performed <20% of all formal wealth education plans
- 90% of all students say they learn everything about money from parents
- 87% of parents believe their children learn everything about money from school (disconnect)
