One of the biggest challenges in wealthy families is when/how to talk about the family wealth to children. There are a number of factors to consider:

1. Being aware of other ways children will learn about it themselves, e.g. from the media, direct research, and from friends (it’s a bit like sex education). Would you rather your children find out about the family wealth from reports and rumours that are laden with assumptions? It’s better to tell them more than have them fill in the gaps in what you do tell with misinformation.

2. Children will also make assumptions about family wealth based on the lifestyle you live. This is the “indirect” way you tell them about the family’s wealth, status and influence. Be aware of what messages you are sending about the family wealth by your actions (aside from your words).

3. Age-appropriateness is essential at all time, as well as taking the children on a controlled journey as they grow older. It takes some balance and nuance to ensure children know as much as they should as teenagers, young adults, and as they mature. Taking a step-by-step approach works well to avoid any “shock” that can have negative consequences.
See a number of good articles linked below for additional insights.

Consider This: When did you tell your children about the family wealth? How much do you think they already knew by then? Have you considered the risks of not telling them (i.e., not giving them authoritative information straight from the horse’s mouth)?

Original articles: https://www.ft.com/content/4d9ebbdc-03a1-11e9-9d01-cd4d49afbbe3, https://www.fa-mag.com/news/advisors-can-help-aid-generational-wealth-transfers-by-starting-conversations-about-values-44782.html, https://www.ft.com/content/b39c1ea8-4009-11e9-9499-290979c9807a, https://www.forbes.com/sites/dennisjaffe/2019/05/29/what-do-we-tell-the-children-intergenerational-talks-about-the-family-business-and-wealth/#36fb7baf78e0, https://www.kiplinger.com/article/retirement/T021-C032-S014-to-prepare-heirs-for-wealth-don-t-hide-the-truth.html, https://citywire.co.uk/wealth-manager/news/wisdom-of-wealth-when-is-the-right-time-to-talk-about-money/a1221573?ref=author/emahmoud

Actionable Generational Wealth Succession

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Can you have the best of both worlds? Family businesses have to tread a fine line: they must compete like any business, while also maintaining harmony amongst the family – both those who are involved in the family business and those who are not. There are a few common themes that help families maintain this balance:

1. Trust is essential, and what builds trust are good communication and transparency. Anywhere information is not provided, people make up answers to their questions instead, which can lead to the spread of incorrect information, and the erosion of trust. A good governance structure can help avoid this and preempt the potential loss of trust.

2. Disagreements and disputes within businesses always arise, and in family businesses, they can spill over into personal and family life. Families need to learn how to “disagree well” – to raise issues about the business and about the family in a structured way rather than ad hoc over the dinner table, and to agree on how disputes will be resolved – that usually translates to internal processes.

3. Because family members have multiple roles, setting boundaries is especially important. This means boundaries between work life and home life, and treating family space as ‘sacred’. Short breaks from work to indulge fully in family time can be very healthy. The issue of roles becomes especially important as family members transition from doing many different things within the business to bringing in professionals/externals – this is a time to narrow and define their roles within the family enterprise.

Consider This: If it was “family vs business” in your family, which one wins? How often do you mix family & business? Do you have agreed processes for tabling issues and resolving them?

Original articles: https://brandequity.economictimes.indiatimes.com/news/business-of-brands/top-biz-family-mantra-company-first-kin-second/67682903, https://www.smartcompany.com.au/partner-content/articles/family-feud-how-to-stop-family-business-disputes-from-following-you-home/, https://www.valuewalk.com/2019/01/successful-balance-between-business-and-family/

Actionable Generational Wealth Succession

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The term ‘retirement’ evokes a certain scenario: someone spends their working life in employment, accumulating savings along the way, then ceases work (perhaps in their 60s or beyond), lives off their savings and enjoys a life of leisure instead of work.

While that scenario may fit for a large proportion of people, there are many for whom it is completely meaningless and foreign.

Plenty of entrepreneurs ‘retire’ after a business sale, quickly get bored, and look for a new challenge. For many younger people, the notion of full-time employment is being challenged: the ‘gig’ economy allows people to choose what they do, when, and for whom, without the traditional constraints of a boss, or a career path. Where there is a family enterprise, or family wealth, the role of ’employment’ within that system may again be something entirely different.

The term ‘retirement’ is very loaded, and in certain contexts even the mention can lead a family into a challenging situation. In family business, the longer an incumbent waits to consider ‘it’, the harder ‘it’ gets.

Certainly within the family enterprise space, it’s time to stop using the r-word entirely. Rather, we can think of stages of life, roles, and the transitions between them. That framing should start as early as possible for everyone.

Consider This: Have members of your family found the thought of retiring confronting? Do you know of any family members who never actually moved forward from the role they held for many years? What was the impact on them and on the wider family?

Original articles: https://www.thinkadvisor.com/2021/12/15/what-to-do-when-your-married-clients-cant-agree/?slreturn=20220005230529, https://www.fa-mag.com/news/russ-prince–framing-your-expertise-using-high-net-worth-psychology-53351.html, https://www.thestreet.com/retirement/just-how-differently-millennials-feel-about-retirement-compared-to-baby-boomers-14564624, https://www.goodhousekeeping.com/uk/consumer-advice/money/a575763/baby-boomers-retire-early/

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Sudden change of any type is risky. When someone’s personal wealth circumstances change quickly, it can lead to all sorts of adverse and unintended consequences.

Here are some examples:

* after being drafted, sportsperson gets a huge contract

* winning the lottery – research shows most lose it

* entrepreneur sells business for huge gain

* ‘sudden’ inheritance

Specialist wealth managers have emerged to support people through such transitions. Once the shock subsides, recipients sometimes feel pangs of guilt. For entrepreneurs, a realised exit is often affirmation of their success, but inheritance can sometimes lead to feelings of unworthiness – “the inheritors dilemma”. 

Younger people who advocate against inequality and then find themselves on the wrong side of that equation can feel shame and guilt.

Of all the examples, ‘sudden’ inheritance is the most easily avoided. After all, the only certain thing is death, and there is usually ample opportunity for parents to discuss family finances with future inheritors.

The lack of willingness of parents to discuss family finances and succession planning with the children usually comes from the politeness of not discussing money, or the fear of spoiling children. But the risks of not preparing heirs is just as bad or worse.

Consider This: Incumbent generation – what (if anything) have you done to prepare your children to be responsible heirs? Rising generation – do you feel sufficiently informed (to the extent this is possible) about the intergenerational wealth transition within your family? Both generations – talk more, not less!!

Further reading: https://spearswms.com/how-to-manage-sudden-wealth/, https://www.wealthmanagement.com/high-net-worth/ten-ways-talk-about-family-wealth, https://425magazine.com/qa-with-stacy-allred/, https://www.forbes.com/sites/forbes-shook/2022/03/01/when-and-how-to-tell-your-children-about-wealth/

Actionable Generational Wealth Succession 

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#suddenwealth

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A ‘family business’ is more than just a business owned and operated by a family. In addition to being a vehicle of wealth creation and entrepreneurship for the family, these businesses can bring other non-financial benefits – known as “socioemotional wealth” or “social capital” – to family members.

Being part of the family enterprises brings feelings of pride, personal reward and satisfaction, and can constitute a part of family members’ identity.
These additional intangibles are very important when it comes to succession planning, from bringing in new family members to handing over the reins at the appropriate time.

It’s worth noting that this additional emotional bond between family members and the business can be a double-edged sword: it can also drive poor decision-making and conflict. The key is to be aware of these additional non-financial dimensions in a family business, and to manage them proactively.

Consider This: Do you talk about your family business? I don’t mean “business talk” – I’m talking about how family members feel about the business, what it does, its history, and importantly its future.

Original articles: https://www.forbes.com/sites/robclarfeld/2019/03/19/family-businesses-social-capital-is-key-to-successful-succession-planning/#5a97d8b05713, https://www.crainsdetroit.com/special-report/beyond-profits-family-businesses-can-create-socioemotional-wealth

Reprinted with permission.

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While I abhor the “generation wars” narrative that pops up regularly, the article below is about a novel – Boomer1 by Daniel Torday – that captures this generation wars zeitgeist, and tells the story of a frustrated millenial who takes his fight to the internet, complaining about boomers who refuse to retire and make jobs available to those of his generation.

The article makes some great points about this ongoing debate, and postulates as to what is at the core of this generational divide. It also examines the political shifts that may be emerging as Gen Xers and Millenials mature and start to vote (although the Boomers are still hanging around).

One one hand, generational politics seem to be just another manifestation of identity politics. But Gabriel Winant argues against this, suggesting that generation is not an identity – “it’s a relationship: no children without parents, and no millennials without boomers”. I think this is deeply insightful as it opens a new way to look at the collective familial relationship, and view generations as something that can bring us together rather than divide us.

Consider This: In your family, are generational labels used often as stereotypical pseudo-insults? Have you ever considered the extent to which generational attitudes of children came “from” parents?

Original article: https://www.theringer.com/2018/9/18/17873612/millennials-baby-boomers-boomer1-novel-daniel-torday

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A common challenge for family businesses is when the rising generation have no interest in taking over. This can be especially common in sectors like manufacturing or farming which may be considered an attractive or exciting career path for younger family members to join.

There are two concerns for the family members currently in control: (a) who will look after the business? (b) who will look after the customers? Both of these are important, because family businesses don’t just want their wealth creation vehicle to continue, they also want to perpetuate their own unique relationship with their customers, which is often far deeper than ‘transactional’ and are an expression of the family’s values.

Two of the articles below tell stories of family businesses facing this very challenge. The third one asks some hard questions: do family businesses need to be perpetuated for their own sake? Is their purpose purely economic or also social? These are good questions for any family to ask itself (with at least 2 generations part of the discussion).

Consider This: If your children don’t want to take over the family business, what will become of it? What is your legacy, aside from the business?

Original articles: https://www.chicagotribune.com/business/ct-biz-manufacturing-succession-planning-20190103-story.html, https://www.biztimes.com/2019/industries/human-resources-management/what-happens-when-theres-no-one-to-take-over-the-family-business/, https://www.businesstoday.in/opinion/columns/hera-are-some-guidelines-for-perpetuity-in-family-business/story/306242.html

Actionable Generational Wealth Succession

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As a wealthy family, what is the most valuable thing you can give your children? One sure way to find out the answer is to ask (too often parents don’t bother).

According to a Wells-Fargo survey of Millennials, more than 90% of children say they want to inherit their parents’ values, not their wealth. Some 84% want top sustain and build on their family’s legacy. This should be very heartening news for parents.

In a previous newsletter, I mentioned the relative importance of education and networks which families can provide to their children. Clearly, it’s not all about money!

Regarding philanthropy, 80% of children surveyed say the family’s giving aligns with their own values, but 40% want more of a say.

The survey shows the importance of talking about wealth and legacy within a family, and how learning between generations can go both directions.

Consider This: Have you asked your children what the family wealth means to them? What is most important to them about their lives? Conversations like that aren’t always easy. It’s important to make ‘space’ for them where all voices can be heard.

Original article: https://www.businesswire.com/news/home/20190109005028/en/Children-Millionaires-Inherit-Parents%E2%80%99-Values-Wealth-Wells

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Philanthropy can be a great way to engage different generations in a wealthy family, and for family members to find purpose where there is no imperative for paid employment. It’s worth keeping in mind the intergenerational differences and trends in giving so that the family giving experience can be as positive as possible.

The Blackbaud Institute’s report on the next generation of American giving has some useful insights. Giving priorities differ by generations, but health, religion and local social services are still high priorities. Gen X and Gen Z are disproportionately committed to animal-related causes.

Older donors consider monetary gifts are their greatest form of impact, while younger donors value the importance of volunteering time and advocacy, and have embraced peer-to-peer fundraising such as through running and cycling events.

There are a number of mindsets that drive giving (responsibility, financial stewardship, planning, spontaneity, activism and recognition), and these carry different importance with different generations. That in turn will drive their choices for whom to support and how to support them.

The full report has plenty of charts and is an easy read, and I recommend it for anyone who is active in the philanthropic world.

Consider This: Who makes philanthropic decisions on behalf of your family? Are these communicated to the family? Have you considered the ways philanthropy can be used to drive closer connections between the generations and convey the family legacy?

Original article: https://institute.blackbaud.com/asset/the-next-generation-of-american-giving-2018/

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The essential problem family businesses must deal with is conflict of interest, which arises when people have multiple roles – in the business, as an owner, and as a family member – that can potentially conflict. Thinking about the issues of a family business in this way is a good path to mitigating the challenges they can bring.

Establishing explicit rules is a good start, and this article covers several good ones: only put family members on the payroll if they have an active role in the business, communicate clearly and honestly with employees, separate family decisions and business decisions, and create boundaries between family and business each with their own decision-making process (and group).

This is something I cover in the mini-course “Culture of Acceptance”

Consider This: Does your family have explicit rules regarding how the family business operates and is governed? How do family members view the family business (or family operating assets)? Think back to a recent issue within the family and consider whether or not it relates to a conflict of interest between the multiple roles that family members occupied.

Original article: https://www.inc.com/guides/201102/7-rules-of-conduct-for-family-businesses.html

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