Q. How much extra financial support should we give our children?

A. This is one of the great balancing acts parents need to perform. Too much and kids might end up spoiled or entitled. Too little and the wealth is not there for them when they actually need it (and if it’s not, then what’s the point of it?)

We all have a particular psychology of money, and these attitudes are formed in our early years and deeply ingrained, sometimes on a subconscious level. Children who see parents always fighting about money might end up feeling money is a source of conflict, and find themselves unable to hold on to it. Some wealth creators feel their children should struggle financially like they did because it made them tough and resilient. I’ve used the word “feel” deliberately as these views are more based on emotion than logic.

Warren Buffet famously said “enough that they can do anything, but not so much that they can do nothing”. Given this discussion is about additional support (rather than wealth transition), the bigger risk is around “doing nothing”.

My view is that children in wealthy families ought to learn an important life skill: making financial trade-offs. While at some point in the future, they may not have to, it’s a good thing to know as it’s healthier to treat money as a finite resource.

A financial trade-off means sacrificing some of X to get more of Y. That could mean a better vacation at the expense of a nicer car, or a restaurant dinner at the expense of an outing. Note that you may want policies to ensure your children do not make certain financial trade offs, such as for medical expenses.

It’s also important not to set policies in stone, and continue to monitor (while respecting our children’s autonomy) and adjust as needed.

Consider This: Does your family have formal policies on distributions to family members? How flexible are these policies? Do you have open discussions with children about money and spending? 

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
#entrepreneurship

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The recent Vanity Fair expose of the Ritossa FO conferences gives us pause to reflect on one of the most important sources of value for families: our networks.

Our networks are a source of deal flow – families like to co-invest and always look to what others are doing. They also are an important step-up for our children – helping them with education, employment and more.

Membership organisations and the event/conference circuit play an important role in helping us curate and extend out networks. While the companies that run these purport to filter who is allowed to join/attend, their due diligence may not be sufficient for family members who attend. Those who are “sell-side” will do whatever they can to gain access to “buy-side” families. And sadly, there are no shortage of crooks and predators in the world.

There is a principle in the security industry: always assume the first line of defence will be breached. And this one from the investment world: don’t rely on someone else’s due diligence (unless your criteria are fully aligned).

I was invited to speak at a Ritossa conference some years ago, and something about it felt a bit funny. I asked a couple of trusted friends (who are mentioned in the article) and they confirmed my suspicions. Phew!

Developing a ‘sense of smell’ takes years. Taking people into our trusted network should be done very carefully, and always considering the risks against the potential gains.

Consider This: What protocols and due diligence processes does your family have for new business and personal relationships? Are rising gen family members educated as to the value of their networks and the risks of networks and relationships being compromised?

Further reading: https://www.vanityfair.com/style/2022/10/inside-wealth-conference-con-man-anthony-ritossas-wild-web-of-lies, https://tfoatx.com/publication/family-office-networks/

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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How we deal with conflict in family business is totally different to a regular workplace. Why? In family business, we wear multiple hats: family member, co-worker, owner, and those roles can lead to conflicts of interests. The work hierarchy is overlaid by the family hierarchy, and that can lead to … conflicts of interests. And unlike a regular workplace, it’s not quite so easy to just quit for another job. By their nature, families and their businesses are deeply interdependent systems.

Understanding these key differences helps us work out how better to manage those conflicts.

A lot of conflict mitigation revolves around the principle of establishing boundaries. That helps provide clarity over the various roles we play, so that we have spaces where we are co-workers, and other spaces where we are relatives. Of course, we can’t instantly switch from one identity to the other. However, having codes of conduct, sacred spaces, formal meetings, and independent advisors make it less difficult.

The hardest part is learning how to debate tough issues, and criticise. This requires well-considered communication so that the message gets across in as positive a way as possible, with minimum spill-over to other aspects of the relationship.

Consider This: What tools or policies does your family use to reduce conflict in the family business? Is there a strong awareness of them? How often do you break your own rules or codes of conduct?

Original articles: https://www.forbes.com/sites/forbesbusinesscouncil/2021/09/21/keep-it-in-the-family-6-cs-of-managing-family-business-conflicts/, https://www.ibtimes.com/how-run-family-business-without-straining-relationships-3276000, https://www.forbes.com/sites/dennisjaffe/2021/07/29/how-to-prevent-family-dynamics-from-undermining-your-family-business-a-code-of-conduct/, https://www.entrepreneur.com/article/370008, https://www.franchising.com/articles/the_petty_crap_of_a_family_business.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
#entrepreneurship

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The headlines are everywhere – a high percentage of family businesses have no formal succession plan – and then the story launches in to the usual tropes about estate planning, life insurance, choosing a successor, etc.

But maybe we should be turning this upside down? After all, by necessity, a family business succession involves two generations – the incumbent and the rising – and so much of the thinking about succession focusses on (a) the perspective of the incumbent generation, and (b) the legal, structural and procedural.

What does succession look like from the rising generation? Are they plagued with self-doubt or burdened with high expectations? What of their own personal dreams and needs to individuate? While they may be chosen/groomed from a young age to do the job, it’s very important that they are taking it on for the right reasons, and have the space to make the role truly ‘theirs’.

And just like company mergers most commonly fail on culture, family business successions are seriously put at risk if there are family “elephants in the room” that are not dealt with. Issues that might seem petty (especially to parents) can fester over many years, and explode once the incumbent generation have stepped aside or passed away.

Consider This: Is the rising generation in your family business interested in taking over? What are their dreams and aspirations (both about the family business, and in general)? Have you discussed this with them early in your own succession planning process?

Further reading: https://www.kiplinger.com/business/small-business/603023/what-role-should-your-children-play-in-your-business-succession-plan, https://www.campdenfb.com/article/how-next-generation-can-conquer-their-fear-and-anxiety-family-business-succession, https://ifamagazine.com/article/psychology-of-family-governance-appreciating-the-importance-of-family-dynamics-in-succession-planning/, https://www.saltwire.com/nova-scotia/business/exit-planning-family-matters-have-to-be-ironed-out-before-business-succession-273087/

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
#entrepreneurship

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Most wealth is created through entrepreneurship: taking a risk to start a business, and growing that business. Some families with generationally “old” money (i.e. more than 3-4 generations removed from the wealth creator) may have their family wealth in passive assets, and the entrepreneurial spirit that created it is long gone from memory, sometimes irretrievably lost.

For families that hold (or acquire) operating assets, it’s important to maintain that entrepreneurial spirit in subsequent generations, but that has its challenges. Rising gen family members born with spoons in their mouths often don’t share the hunger (or need) of wealth creators.

To do this, families need to tell stories of the bad times as well as the good, and create space for rising gen family members to become entrepreneurs of their own, rather than being in the shadow of others (external mentors can often help). Operating assets, especially those held by the family for a long time, need the governance that can facilitate regular strategic renewal (which may need entrepreneurial thinking) to ensure their long-term survival.

Consider This: Do family members know the story of how the family wealth was created? When was the last time an operating business you own did some serious strategic planning? Has anyone assessed whether there is “stale thinking” in the family business leadership?

Original articles: https://hbr.org/2020/05/is-the-next-generation-of-your-family-business-entrepreneurial-enough, https://www.stamfordadvocate.com/business/article/5-Factors-for-Planning-Your-Entrepreneurial-Legacy-15204834.php, http://entrepreneurship.babson.edu/barber-family-entrepreneurship-journey/, http://entrepreneurship.babson.edu/the-power-of-the-entrepreneurial-family/

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
#entrepreneurship

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When it comes to advisors, I have two simple rules:

1. Get good advisors
2. Listen to them

Family advisors need additional skills because they must work with the various members or governance structures of a family, and key people & structures may change with time. They need to know about communication, in order to help the family members themselves communicate well.

They need to understand family dynamics, and get to know the ins and outs of the families they deal with. They may need to act as facilitators of family discussions and formal meetings, to help the family develop the ability to have open discussions and make collective decisions. To do this effectively, they need to be independent, and have the ability to say things that the family needs to hear (even though they may be difficult or confronting).

They, or their firms, need to be able to talk to multiple generations within the family, so as to maintain a parallel transition – as generational control passes within the family, the advisor relationships may also change. As part of that transition, it may be helpful to bring younger family members into advisor discussions.

In addition, they may want to be across emerging trends like impact investment, cybersecurity, and online reputation management.

A family advisor is so much more than a wealth manager, or the family lawyer or accountant. It can be rare to find all the skills needed in a single individual.

Consider This: Do you have an independent family advisor? Are you able to discuss anything the family needs with that person? Does that person have a relationship with multiple family members or across multiple generations? When did you last do an audit of your advisor relationships to ensure they are meeting the family’s needs now and in the future?

Original articles: https://www.forbes.com/sites/francoisbotha/2019/10/18/the-top-5-new-generation-advisors-every-family-office-needs/#586314691369, https://www.investmentnews.com/article/20191118/FREE/191119941/ria-consolidation-could-put-2-4-trillion-in-play-over-next-decade, https://www.ftadviser.com/your-industry/2019/11/29/advisers-urged-to-include-clients-families-in-meetings/, https://www.fa-mag.com/news/the-ultra-wealthy-prefer-multi-family-offices-to-wealth-managers-53825.html, https://www.forbes.com/sites/dennisjaffe/2020/03/18/family-wealth-advisors-need-skills-in-family-dynamics/#34154180ecb2

If you are a business owner, lawyer or accountant to them, my advisory services may be the perfect match to navigate the tough decisions in strategizing #intergenerational relationships.

There are a number of use cases where I have worked with families that may be adjacent to your practice. Let me help you:

· help family develop shared vision, charter etc
· mediate family conflict management
· mentor rising generation
· coach family through the emotional side of business sale – before, during, after
· help family businesses with ‘soft’ aspects of succession planning

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There is more to maintaining family wealth through generations than getting the best financial advisors and managers for operating assets.

Families of wealth must learn how to work together in the sharing of assets. A key part of that is to integrate their wealth management with their values. That means the values need to be articulated within the family. Then, the family needs clear and open dialogue discussing values as well as financial assets, and why preserving wealth matters to the family and the world around us. That is the foundation upon which successful transition is built.

To raise the next generation responsibly with wealth may require adapting the family’s middle-class orientation to add new strategies where solid values are taught and demonstrated. Large sums of money can have damage on children’s ability to craft their own lives and break out of their parents’ shadow.

When people base their self-worth on financial success, they experience feelings of pressure and a lack of autonomy.

Few families who come to wealth have been prepared for these tasks. They often don’t know these new strategies are even necessary. That is where external advisors can be helpful.

Consider This: Has your family articulated its values? Does that include the values of the rising generation? What is your family’s approach to educating the rising generation with the appropriate values so they can be comfortable in their own skin and good custodians in the future?

Original articles: https://www.coastalbreezenews.com/articles/the-value-of-your-values/, https://bigthink.com/politics-current-affairs/great-wealth-transfer, https://www.valuewalk.com/2020/02/family-wealth-planning/, https://www.scmp.com/presented/business/topics/defining-family-office-landscape/article/3076183/what-chinese-family, https://nypost.com/2020/04/10/investing-life-in-money-leads-to-lack-of-community-study/

[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 #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment
#entrepreneurship

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Family businesses aren’t just businesses that happen to be owned and/or managed by a family. Factors like a long-term perspective, and the multiple/overlapping roles of owners, employees and family members are both strengths and weaknesses. These factors mean that family businesses need another set of principles to help them stay strong.

Because many stakeholders have multiple hats, separation of powers is very important. Everyone needs to understand what their roles are (employee, manager, owner, etc) and the scope of each role.

Because family business transitions fail most often because of poor communication, a governance structure that includes independent director(s) is essential for mature family businesses. This helps the business and family stay true to its values, put policies in place to manage conflict, and maintain open communication and accountability. Good governance ensures that issues are dealt with in the appropriate forum at all times.

Another reason for failure is lack of strategic renewal. External voices on a board can ensure regular strategic planning happens, established ideas are challenged, and all stakeholders’ voices are heard.

Consider This: Does your family operating business have a board? Does your family have a council (or similar), separate from the governance of any operating businesses? At family meetings, who is the chair? Does everyone who attends genuinely have a voice?

Original articles: https://www.forbes.com/sites/forbescoachescouncil/2020/01/17/15-tips-for-navigating-family-business-challenges/#462bab2b8a92, https://www.smartcompany.com.au/business-advice/family-business-constitution/, https://hbr.org/2020/01/managing-the-trickiest-parts-of-a-family-businesses, https://hbr.org/2020/01/every-family-business-needs-an-independent-director, https://hbr.org/2020/02/should-your-family-business-have-a-no-in-laws-policy, https://hbr.org/2020/02/what-makes-a-family-business-last, https://www.forbes.com/sites/rochellemclarke/2020/02/29/6-tips-for-working-with-family-and-friends/#4de7af5612f9

[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 #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment
#entrepreneurship

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Family and business makes for a complex mix, essentially because of conflict of interest. At any time, those involved wear a mix of ‘hats’: family, owner and employee. This sometimes makes decision making very difficult: what comes first – family or business? Do we give family members a job even if they don’t deserve it?  What if they aren’t performing? How much do we pay them? At the appropriate time, do we gift the business to them, sell it to them, or just sell it for cash?

Depending on which ‘hat’ you are wearing, you may have very different answers to these and many other questions relating to the family business.

While it’s very hard to separate these parts of ourselves – for example it’s hard to just be the the boss and fire a family member who isn’t performing – we can maintain an awareness of the spill over effects to the others hats we wear, and to the family at large.

When approaching these complex decisions, it can be helpful to consider what they would be wearing each separate hat, and then weigh up which hat is most relevant, and the wider implications of the decision. Having externals at the decision table can help clarify which hat are influencing decisions, as family members are highly subjective.

Consider This: Does your family have policies regarding family members and any operating assets? Do family members have to pass a bar to gain employment? Are they paid market salaries? Do you account for the increase in value created by some family members working in the business?

Original articles: https://www.entrepreneur.com/growing-a-business/how-to-fire-a-family-member-in-a-family-run-business/248308, https://hbr.org/2022/09/merit-or-inherit-how-to-approach-succession-in-a-family-business, https://www.thomasnet.com/insights/10-reasons-why-your-kids-don-t-want-to-take-over-the-family-business/, https://www.businessdailyafrica.com/bd/opinion-analysis/ideas-debate/why-it-s-a-good-idea-for-family-businesses-to-form-boards-3719342, https://www.entrepreneur.com/en-in/leadership/12-family-business-heirs-on-navigating-their-way/387203, https://www.forbes.com/sites/theyec/2020/10/08/four-considerations-when-passing-the-family-business-to-the-next-generation/?sh=7a79932b4213

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
#entrepreneurship

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Family wealth can be a double-edged sword. With few financial burdens or limitations, one can live a very comfortable life, use the family wealth and connections to create almost any career of life path, and make the world a better place through philanthropy and impact.

But there is a dark side, particularly to inherited wealth: guilt and shame at ‘unearned privilege’ (I don’t like the term, but it works for this), how the wealth was created which may not sit comfortably with contemporary environmental thinking, and the challenges of finding purpose. Wealth can also be an amplifier and source of family conflict.

Most often, family members deal with a mix of these feelings.

In the Tale of the Two Wolves, the grandfather uses a metaphor of two wolves fighting within him to explain inner conflict to his grandson. When his grandson asks which wolf wins, the grandfather answers that whichever wolf he chooses to feed is the one that wins.

To paraphrase Henry Ford, whether you think family wealth is a positive for you or a negative, you are right.

Consider This: What are your family’s narratives about wealth? Have these ever been discussed or articulated? How are they different across generations?

Further reading: https://www.shreveporttimes.com/story/money/2022/08/05/your-wealth-culture-why-matters/10239286002/, https://www.ft.com/content/26806bc4-ff1b-4c7c-b4b0-168486c64ab8

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
#entrepreneurship

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