Advisor succession: family perspective

April 26, 2022 caracolemanauLeave a comment

I’ve written several times about the challenges of advisor succession, and now want to look at this from a family risk perspective. If your advisor is suddenly unable to work, is it the advisory firm’s problem, or yours?

While the personal connection between a family of significant wealth and its advisors is important, succession arrangements on the advisor side can have a huge impact on the family. From a risk perspective, it’s important to avoid any “single points of failure”. Each advisor needs a back-up in case of emergency. This applies to wealth managers, lawyers, accountants and other family advisors.

A recent survey in Canada showed that 69% of advisors are nearing retirement or have started creating a succession plan, but only 11% said they have a formal succession plan. Advisors seem to be ageing, and this is also a concern for families who need advisors to be able to connect with rising generation family members.

Consider This: Have you included advisors as part of your family’s risk register? Does each of your advisors have a back up? Do you consider succession as a factor in your choice of advisors?

Original articles: https://www.wealthprofessional.ca/investments/wealth-technology/why-advisor-succession-isnt-just-an-exit-event/363194, https://www.investmentexecutive.com/newspaper_/building-your-business-retirement/the-advisors-retirement-making-a-smooth-transition/, https://www.wealthprofessional.ca/news/industry-news/nearly-nine-tenths-of-advisors-have-no-formal-succession-plan/356350, https://www.theglobeandmail.com/investing/globe-advisor/advisor-news/article-succession-planning-still-a-big-issue-in-financial-advice-industry/

Actionable Generational Wealth Succession

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The New Matriarchs

April 24, 2022 caracolemanauLeave a comment

Change is in the winds. Women control more than 60% of personal wealth in the USA. While older generations hold a patriarchal view of wealth, only a third of their children held such views. Women family leaders, regardless of age, are challenging traditional gender roles.

The ecosystem is adapting to these changes, recognising that within the family office, there was a need to approach women differently than men. We are seeing initiatives to help women find their voices and become more active participants in their family’s wealth.

Women want to work with advisors who will empower them to make their own decisions, and the more valued advisors were the ones who proactively worked in terms of shared understanding and decision-making for both spouses.

The advantages of having women involved in decision making are well established – a diversity of opinions and perspectives leads to better decision making. In particular, when it comes to family wealth, women often focus on the big picture and the whole family’s end goal instead of just the numbers.

Consider This: Are the women in your family involved in family wealth decision making? Do your advisors actively seek to include them? Are there cultural barriers to involving women?

Further reading: https://www.fa-mag.com/news/what-does-a-family-office-mean-for-ultra-wealthy-women–pitcairn-s-amy-hart-clyne-on-her-work-with-female-family-leaders-65535.html, https://www.thinkadvisor.com/2021/12/15/why-women-must-be-part-of-planning-meetings/, https://www.femina.in/life/careers-and-money/gender-diversity-in-estate-planning-212626.html, https://www.forbes.com/sites/forbesbooksauthors/2021/08/30/the-power-of-diverse-perspectives-why-we-need-more-women-in-finance/?sh=23293f1e6945, https://www.monaco-tribune.com/en/2020/12/what-role-do-women-play-in-high-net-worth-families-and-how-is-it-changing/

Actionable Generational Wealth Succession

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

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Business Family Succession

April 23, 2022 caracolemanauLeave a comment

What proportion of your family wealth is tied up in the operating family business? According to Camden Research’s recent report, succession is a greater priority for families than wealth preservation. Of the two, succession is surely the harder to achieve.

While we all push cliches and statistics about the survival of family businesses over three generations, perhaps we should be broadening our perspective? A family operating business is one store of wealth for a family, and one which is capable of employing multiple family members.

Another phrase currently doing the rounds is “business family” – a family whose wealth is well diversified and includes a number of operating assets. Such a family must focus on establishing strong governance for their assets, including rules by which family members can be involved in the operating assets, or draw on the family wealth to start new ventures of their own.

Such a structure, done well, is far more robust from a succession perspective, as it allows children who may not want to join the family business (and this is an increasingly common phenomenon) to do their own thing and still be part of the family asset base.

Consider This: Do your children want to follow in your footsteps? Have you ever asked them? Are your parents pressuring you to follow in their footsteps?

Original articles: http://www.campdenfb.com/article/succession-beats-wealth-preservation-top-priority-families, https://www.inkstonenews.com/business/chinas-big-family-businesses-lack-succession-plan/article/3000444, https://www.sunstar.com.ph/article/1782733/Cebu/Business/Soriano-Is-it-a-family-business-or-a-business-family

[reprinted with permission]

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Equity and Fairness 7 Deadly Principles

April 14, 2022 caracolemanauLeave a comment

Consider This: Are members of your family more driven by greed or envy? While neither are good attributes, what can you do to mitigate their risks?

Greed and Envy are two of the ‘seven deadly sins’ and are relevant to material wealth. Economists adopt the fundamental principle that people seek wealth maximisation (a form of greed), but is this really the case?

Because we live in communities and families, it can be argued that the more significant driver of behaviour is envy, because we invariably compare and benchmark ourselves to those around us.

For the economists among you, the analysis is in the link below, but more broadly interesting is the implications for family wealth.

If envy is a greater driver of behaviour than greed, then the principles of equity and fairness become all the more important when transitioning wealth within a family. Within families, envy can be a far more destructive attribute. Any gift (in the broadest sense, so including a role that is ‘given’ to a family member) should be considered in the context of how other family members may react and respond.

Original article: http://falkenblog.blogspot.com.au/2010/03/why-envy-dominates-greed.html (very dry)

Actionable Generational Wealth Succession

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The Fear Concerning Wealth Transfer

April 13, 2022 caracolemanauLeave a comment

Q: How do we protect the next generation from blowing our money?

A: Stop right there. Whether you have created or inherited the wealth, the language of the question reeks of a power, control and mistrust dynamic.

Many families either hang on to their wealth or setup structures to prevent their children from “blowing it” (which is often controlling from the grave). Yes, it’s awkward having discussions about estate planning and family wealth, and who wants to talk about their own death?

A friend once said: “Procrastination is caused by fear. Don’t try to ‘learn’ how to stop procrastinating, find out what you’re really afraid of“. It might be fear of death, fear of losing control, fear that children will not do what you expect of them, fear that divorce might lead to a loss of the wealth, or something else (or all of the above). Understanding those fears is an important barrier to overcome.

Successful families have had a willingness to be open with each other about the wealth that they’ve created, and not wait until death to leave everything to their heirs. Legacy is about passing on values and life skills to the next generation. If that is done well, the money (while it may be significant) becomes secondary.

Consider This: What are you waiting for? What are you afraid of?

Original articles: https://naples.floridaweekly.com/articles/tips-to-prevent-your-kids-from-squandering-their-inheritance/, http://www.williamsonherald.com/features/business/commentary-consider-training-your-family-to-handle-inheritance-properly/article_1b04fd32-66ad-11eb-bdef-a3dab823138b.html, https://www.bloomberg.com/news/articles/2021-02-17/how-to-talk-to-your-family-about-money-inheritance-and-wealth-to-avoid-fights, https://www.kiplinger.com/retirement/estate-planning/601269/how-do-we-protect-the-next-generation-from-blowing-our-money, https://www.thisismoney.co.uk/money/pensions/article-8494985/Parents-hoarding-wealth-avoid-children-losing-divorce.html

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Rising Generation Views on Established Culture

April 6, 2022 caracolemanauLeave a comment

If you couldn’t bear to watch Megan Markle bare her soul to Oprah (or if you couldn’t look away from it, and from the endless commentary that followed), here are two practical things you can actually take from the latest episode of this saga:

1. There are serious challenges to growing up in a wealthy family with a public profile. The weight of expectations is heavy, and finding identity and meaning can be difficult. Marrying into such a family has similar but slightly different challenges.

One of the hardest issues is: who can one talk to about this? Who can genuinely understand the experience, show empathy, and be a helpful sounding board? I don’t think this can come from a televised interview and the opinions of the social media masses. As my good friend says: “the poor want to be rich, and the rich want to be happy”. People without wealth or fame see them as a panacea that will solve all their problems. People with them understand that they come with their own problems.

However … 2. There is an intergenerational narrative here that has struck a chord with some younger people. A stodgy old institution deeply rooted in colonialism and vestiges of racist culture being exposed publicly (by a whistleblower) and forced by external pressure to change and adapt to the times. That is a similar script to the #MeToo movement and other such exposures of established cultures.

This is not the forum to discuss how a royal family stays relevant in a changing world. However, this same narrative plays out in many families, where the rising generation challenges established cultures. Those families need to build their own intergenerational bridges, and work out how to adapt and remain relevant to their own emerging stakeholders, both born and married in..

Consider This: Do the members of your family have a support network that provides empathy and a safe space to vent? Are they comfortable with their “privilege” and able to see both the positives and negatives? Is your family able to openly discuss and challenge family cultural norms?

Original articles & further reading: https://www.telegraph.co.uk/women/life/meghan-millennial-hero/, https://www.psychologytoday.com/us/blog/your-brain-work/201203/has-coddling-entire-generation-children-set-them-fo, https://www.npr.org/2016/09/13/493615864/when-it-comes-to-our-politics-family-matters, https://www.nestegg.com.au/retirement/11590-intergenerational-imbalance-the-central-problem-of-our-time, https://www.thenational.ae/opinion/comment/everyone-suffers-when-younger-and-older-people-don-t-mix-1.811571

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Proof or Privilege in the Family Business

March 31, 2022 caracolemanauLeave a comment

Consider this from two perspectives: the family and the individual. Do families demand that younger generations prove themselves in some way, perhaps before being allowed to join the family business or take some other role with respect to the family assets?

The other side is the view of the younger family member. Being born into wealth can be a lodestone, especially the way ‘privilege’ is a dirty word in some circles. The world loves a rags-to-riches story, but subsequent generations that don’t start with ‘rags’ are automatically ineligible.

That makes the story of Tamir Triguboff – great-nephew of the second richest man in Australia – an interesting one. Without a cent of family money, he developed an app, which he sold for AUD 85K. He’s using half of the proceeds from the sale to fund his next venture – “a social platform that enables young people to voice their opinions on social issues”.

Consider This: How do you (or would you) handle a request from a family member for funding their business idea? To what extent should family members need to prove themselves? Would you want to see their story on the front page of the local newspaper? Is this even newsworthy – while they may not have relied on family money for the venture, have they overly relied on surname for publicity?

Original article: http://www.smh.com.au/technology/smartphone-apps/my-parents-haven-t-given-me-a-single-cent-grandson-of-australia-s-second-richest-person-out-to-prove-himself-20171217-p4yxsl.html

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Does Money Buy Happiness?

March 30, 2022 caracolemanauLeave a comment

And does being ‘happy’ mean something different to those who have wealth and those who don’t? These are the questions considered in a recent research study.

Most anyone who has wealth would find it obvious that the answer to the first question is a resounding ‘no’, but it takes the rigour of an academic to first define happiness (life satisfaction and a set of distinct positive emotions), and then examine the correlation between them and wealth or social class.

So the answer to the second question is ‘yes’. But how are they different? For those of higher social class, happiness is reflected in self-oriented feelings like pride and contentment, which may reflect their desire for independence and self-sufficiency.

On the other hand, lower classes exhibit other-oriented feelings of compassion and love as their expression of happiness, which could help them cope with their more threatening environments.

Consider This: What makes you happy? How much of your happiness derives from wealth or consumption?

Original articles: from the LA Times http://www.latimes.com/science/sciencenow/la-sci-sn-happiness-rich-poor-20171219-story.html which is based on a research publication from the magazine Emotion http://www.apa.org/pubs/journals/releases/emo-emo0000387.pdf (a very dry read for those academically inclined).

[reposted with permission]

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Board Succession Strategy

March 24, 2022 caracolemanauLeave a comment

Q: We have three non-family board members in their 70s on our family board. How should we handle moving them on?

A: The composition of the family board is a careful balance between family members & independent voices, and maintaining regular turnover is very important. Often, families will establish a board with some family members, the family lawyer & accountant, and perhaps some other trusted advisors. But without due attention to the board composition, the group can remain static for a period of time, until they suddenly realise it’s time to bring in some fresh people and energy. What is required is a board succession strategy.

This involves analysing the mix of skills, ages, tenures and backgrounds that the board needs now and in the next few years (bearing in mind any anticipated major events the family expects to be dealing with during that period). That should be compared with the current composition, which can help identify any gaps. Open discussions with each board member individually as well as collectively are essential so everyone understands their role on the board, and how long they would like to continue there. People generally find it easy to join boards and committees, but hard to leave them.

While in the corporate and non-profit worlds, a common limit to board tenure is 6-10 years, families are different and terms can and should be longer. Family and ‘corporate’ memory are more important on family boards, and provide essential value and context, especially in times of crisis. That said, a board stacked with a bloc that has been there for 20+ years can be a barrier to necessary strategic renewal.

Usually, board composition falls to the chair. But in family boards, the chair may not have those skills, and it can therefore be helpful to bring in a specialist to assist with a regular review process.

Consider This: Do you track board tenure and skills for your family boards? Have you ever openly discussed board member’s plans to leave the board?

Further reading: https://www.forbes.com/sites/forbescoachescouncil/2019/05/29/the-second-commandment-of-family-business-succession-create-a-board/#594c014529ea, https://insight.kellogg.northwestern.edu/article/family-businesses-adapt-next-generation, https://www.bizjournals.com/bizjournals/news/2019/07/18/being-fair-but-not-equal-divvying-family-business.html, https://www.forbes.com/sites/matthewerskine/2020/06/29/succession-planning-and-the-professional-management-of-family-owned-companies/#1e19236e4272

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Q&A: Charitable Children

March 22, 2022 caracolemanauLeave a comment

Q: We’re just approaching a liquidity event. How do I get my twentysomething children involved in our plans for philanthropy?

A: Stop right there. You might be 10-20 years late.

Many families do things in the following order: create wealth, extract liquidity, then give charity in a big way. Now, that makes plenty of sense. You can’t give charity in a big way until you have the liquidity. And creating a foundation as a vehicle to perpetuate giving is usually most tax effective when done in conjunction with a liquidity event. But this process leaves out the most important step: the “why”.

If you want children to be involved in family philanthropy, it needs to be aligned with the family’s collective values and purpose. And the philanthropic behaviour should be modelled by parents as early as possible in the lives of their children. That can happen even if the family wealth or circumstances are not yet at the level for the giving you’d ultimately like to do.

Our children are smart and super perceptive. They look at what we do as an indicator of what is important to us. They are quick to spot inconsistencies (which to them might mean making money from oil and then donating to save the planet). By the time they reach their early teens, these attitudes are largely well entrenched.

Note that I’ve evaded the original question. It’s never too late. It’s just a lot harder to start doing philanthropy and engage your children when they are already young adults.

Consider This: Does your family have a consensus regarding its philanthropic activities? How was that consensus reached? Do you discuss your philanthropy with your young children? How passive (writing cheques) or active (time and talent) are you in philanthropy?

Original articles: https://www.tapinto.net/towns/east-hanover-slash-florham-park/sections/business-and-finance/articles/raising-charitable-children, https://www.worth.com/how-to-find-your-voice-as-a-next-gen-philanthropist/, https://www.forbes.com/sites/francoisbotha/2019/07/28/three-ways-to-embrace-the-next-generation-of-family-office-leaders/#79c0cd6f6d90, https://www.forbes.com/sites/oliverwilliams1/2019/04/24/what-happens-when-billionaires-children-inherit/#107bf42f4e92

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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