The rising generation stands to inherit significant wealth, and families are spending much effort and expense to ensure that they are well prepared to become effective custodians of that wealth. However, it’s important for families to also consider the services required to help manage that wealth: advisors.

In any family, at some point in time, the wealth will shift from one generation to another. When someone inherits wealth, it becomes ‘theirs’. This contrasts with advisor relationships which ‘belonged’ to their parents, and can be much harder to fully transition. Many advisors are older and cannot connect to younger heirs. On the other side of that equation, some wealth inheritors are uncomfortable dealing with someone who was their parents’ advisor for many years, and want a fresh start to help them individuate and put their stamp on things.

The advisor community is well aware of this impending wealth transition, and are developing their own strategies to deal with it. Some have developed their own succession plans, or are selling out to larger firms. Like their clients, they too need education in shifting generational trends and how to build deeper and multigenerational connections to their client families to reduce the risk of losing the family’s business when the wealth transitions.

Consider This: Have you reviewed the relationships between your family and its trusted advisors (lawyers, accountants, wealth managers, family advisors)? Have you had 3-way discussions (two gens of family + advisors) to consider the impact of wealth transition in the advisor relationship context?

Original articles: 

https://www.ftadviser.com/investments/2019/09/26/advisers-risk-becoming-out-of-touch-with-next-generation/, 

https://www.forbes.com/sites/forbesfinancecouncil/2019/10/16/five-reasons-advisor-succession-plans-fail/#736cad5866a9, 

https://www.nytimes.com/2019/09/13/your-money/wealth-advisers-mergers-clients.html, 

https://www.wealthprofessional.ca/the-frontline/should-succession-planning-be-regulated-305962.aspx

[Reprinted with permission]

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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We’ve previously discussed the effect of increasing life expectancy on wealth transition – the ‘problem’ of the ageing family member who refuses to step aside is more prevalent than ever (the popular TV series Succession makes for great watching on this topic).

Traditionally, roles within families have very long tenure, For someone who has been managing the family wealth for many years, the thought of leaving a job they have become very good at can leave a huge void in their lives. The easy option is to leave things as they are. What can help is for older family members to have something to look forward to beyond their lives in the family’s operating businesses or family office.

This might be a shift to the family foundation (such as Bill Gates), a move into politics (Amo Houghton from Corning), or a more structured ‘statesman’ role working with the next generations (in their own or other families).

Having new roles they can look forward to is good for both the current and rising generation, and can avoid the fear associated with starting a ‘new career’ in middle age.

Consider This: What is your family’s history and attitude to how (or if) elder members step aside? Is retirement considered taboo? Have family members in their 50s and 60s thought about possible second careers?

Original article: https://www.forbes.com/sites/dennisjaffe/2018/11/15/stepping-up-what-family-business-leaders-can-do-after-they-step-down/

Actionable Generational Wealth Succession

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Money is one of the few remaining taboo topics for discussion, but in wealthy families, it’s something that eventually does need to be discussed. The challenge is to develop a greater comfort in discussing it.

The first step towards this is to understand the reason for discomfort, and it is usually because discussions about money bring on fear: fear that there isn’t or won’t be enough, that the next generation might be spoilt by excess, that money might be used to play out family roles from childhood. There are so many things that can go wrong, the easy route is simple to avoid conversations (and therefore the risk of confrontation).

While the fear of the unknown is a barrier to conversation, that same lack of communication can cause serious problems in the future.

One approach is to frame wealth in a different context – one of legacy. To do this, start thinking about the positive things wealth has achieved and can achieve in your family. Topics like how the family have used and can use the wealth for purpose (philanthropic or impact), and stories about those who made loyal and enduring commitments to the family (such as in the family business) can put a more positive spin on family wealth.

Consider This: Does your family have (official or unofficial) discussion taboos? Have you discussed the family wealth with the next generation? If you keep procrastinating, have you asked yourself why?

Original articles: https://www.wealthmanagement.com/client-relations/money-talks-family-gatherings, https://www.financial-planning.com/news/why-financial-advisors-should-be-looking-toward-gen-xers-not-millennials

[reposted with permission]

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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You might think conflict in family business is predominately around business performance. Wrong. At the core, it’s most commonly about the ‘people’ side of things: ineffective communication, and not recognising the different needs, interests & capability of family members.

Evolutionary psychology tells us that we behave more altruistically toward the relatives with whom we share the greatest genetic overlap, and more with our maternal than paternal relatives. This means as the family group grows deeper generationally, relatives are less likely to let an issue go because it’s a family member.

In this framework, blended families pose a challenge because of the lack of genetic overlap. This is even more difficult because legislation has failed to keep pace with the times, leading to increasing conflict and litigation.

Conflict can be mitigated by focusing on principles rather than people, and staying away from making decisions (or setting policy) with particular people in mind. It’s best to develop the principles before you need them – that way family members can agree on them without the bias of a specific situation.

Change is hard for most families, so framing ideas as extensions of existing ones rather than new ones can reduce push back. They are easier to accept when perceived as evolutionary rather than revolutionary.

Consider This: What are the most common sources of conflict in your family business? Do you notice any patterns around these conflicts? Do you have forums where conflict can be aired and dealt with?

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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As a tree grows, it is often helpful to prune some branches to make space for other branches to grow. As families grow generationally, “pruning” – allowing some family branches to exit – can be beneficial both to the main family group and to the group that chooses to exit.

As families grow, so does the diversity of family members. Managing the diverse needs and expectations becomes much harder. Unless the family business is always growing, it can be hard to support a growing number of owners. There can be ripples of discontent that can lead its members to seek escape. Also, you are never alone when it comes to engaging in conflict with other family members. Other family members are inevitably part of the mix.

Many large business families have a mechanism whereby a family member can leave the business and remain part of the family. Where such a mechanism doesn’t exist, an exit may require something as dramatic as selling the business. Because family businesses have emotional as well as financial value to the family, this can lead to regret and further discontent.

Simply having a mechanism for exit is of paramount importance. If not, family members can feel trapped.

A case in point was Megxit, where membership of the royal family is based on performance as a family member, so they could not just step back. There were no structures to internally manage change, adversity and conflict. Sadly, their only option was to leave completely.

Consider This: Does your family have an exit mechanism for family members? Are any family members involved out of a sense of obligation rather than because they choose to?

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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[reprinted with permission]

There’s a fascinating story currently on Bloomberg about the Singh brothers – heirs to an Indian health-care empire – and their relationship with guru Gurinder Singh Dhillon. What makes this interesting is the financial relationship between them, and the dramatic fall in their fortune over the last few months.

It brings to mind another story with plenty more still to happen – that of Clare Bronfman’s involvement with a New York self-help group called Nxivm, which appears to display cult-like behaviour. In addition to Bronfman sisters using their substantial fortunes to underwrite Nxivm in a variety of ways, most recently there have been accusations of criminal behaviour including conspiracy and criminal racketeering, and Ms Bronfman herself has been arrested and is out on USD 100M bail.

Stories like this are a warning bell to wealthy families of their vulnerability to people of all kinds with ulterior and sometimes nefarious motives. Many families employ gatekeepers to protect them, but this is a never-ending game of cat and mouse. Social media and techniques like social engineering can readily be used by protagonists to worm their way in. When it comes to trust, families should observe a healthy (but not obsessive) measure of vigilance.

Consider This: Does your family have policies about the use of social media, and acceptance of ‘friendship’. Do family members have an awareness of spotting ‘hangers on’, and maintaining the right degree of scepticism and vigilance when meeting new people?

Original articles: https://www.bloomberg.com/news/features/2018-08-16/billionaires-and-the-guru-how-an-indian-family-lost-2-billion and https://www.cnbc.com/2018/08/12/new-york-times-digital-from-heiress-to-sex-cult-defendant.html

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement
#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Whether you choose to spend your kids inheritance, gift assets, or you prefer to hold money back for the kids, managing what you leave behind can be done a few different ways. There is no right way, and there should be no pressure to choose one direction or another. Your life, your money!

Mass media will always jump on stories that seek to challenge and debunk commonly accepted narratives. CNBC is running a story suggesting that the huge intergenerational wealth, estimated at $30 trillion, is a myth, because the actual transfers will be “small, fragmented and drained”. Why? Because baby boomers will spend on themselves as they age (what’s known as SKIing – Spending your Kids’ Inheritance), and because they will choose to gift their wealth to charitable causes.

This is where some nuance is needed, particularly in light of the US Fed report cited above. We can split the boomer wealth into two categories: “mid-range”, where big spending by parents can actually have an impact, and “high-end”, where even that is a drop in the ocean. While certainly the mid-range will be affected by SKIing, the bulk of the wealth by value will certainly be transmitted.

Consider This: Don’t get jumpy when you read sensationalist stories like this one. Every family is different, and therefore their approach to transmitting family wealth should be uniquely considered.

Original articles: https://discover.rbcroyalbank.com/skiing-spending-the-kids-inheritance-and-other-ways-to-manage-what-you-leave-behind/, https://www.cnbc.com/2018/05/22/that-30-trillion-great-wealth-transfer-is-a-myth.html, 

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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With all the talk about intergenerational wealth transition, another very important topic doesn’t get the attention it deserves: transition of trusted adviser relationships.

The baby boomer generation of advisers manage a third of all client assets, and they too have retirement plans. Firms need to manage the succession planning of these advisers, and this means both advisers and families need to manage the transition of the relationships.

In my family, we’ve had relationships with banks, accounting and legal firms that have spanned 60+ years and 2-3 generations. In large banks, people move around all the time, but with accounting, legal, and investment advisers (depending on the size of the firms), the key account managers tend to stay around for longer. In those situations, the relationship transition needs to be actively managed.

Younger generations want to talk to advisers who understand them, and who are able to view them as the owners, not the children-of. It therefore stands to reason that advisers need to lead the way on transitioning.

Consider This: How long have key trusted adviser relationships been in place in your family? Are the firms you deal with family businesses themselves? What are you and they doing about laying the foundation for the next set of relationships between the family and its advisers?

Original article: http://www.wealthmanagement.com/industry/baby-boomer-advisors-near-retirement-many-have-no-game-plan

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement

#successionplanning #workfromhome #governance #leadershipdevelopment

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Consider This: How do you explain your family wealth to young children? At what do you start this process? How do you say ‘no’ to them and place limits on their spending when they reply “but we can afford it”?

Affluenza and entitle-itis are some of the newest ‘diseases’ that afflict the wealthy, and of course there is always the ubiquitous ‘privilege’ that almost everyone is now obliged to check.

In her book Uneasy Street: The Anxieties of Affluence, Rachel Sherman, associate professor of sociology, has interviewed 50 affluent parents in and around NYC to understand the challenges they face raising children with wealth.

They are somewhat torn between stigma of wealth and the competitive environment in which they live. Attitudes to wealth have changed, and while parents want to give their children the opportunities that come with wealth, they still want to keep them ‘normal’ and able to mix comfortably in (and be accepted by) broad social circles.

As much as ‘tough love’ is needed to limit spoiling, it’s also essential to teach children to be comfortable with wealth, and to appreciate what it brings to their lives. Take it, but don’t take it for granted.

Original article: https://aeon.co/ideas/how-new-yorks-wealthy-parents-try-to-raise-unentitled-kids, http://press.princeton.edu/titles/11096.html (the book)

[Reposted with permission]

Actionable Generational Wealth Succession

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement
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