Family Office by Marriage

October 20, 2022 caracolemanauLeave a comment

How to deal with family members by marriage poses significant challenges to wealthy families. Should they be allowed to work in the family business? If so, should there be a ceiling on their authority (stock, voting rights, etc)? Do they have a seat/voice at family meetings? What if the only person in the rising generation with the skills to be involved in the family business is a child-in-law? What to do when a marriage is on the rocks (and the child-in-law has a role)?

There are no clean-cut answers to these questions and not even best practice, because each family is different. It comes down to a few general guiding principles, together with the family’s own culture and beliefs regarding the role of children-in-law (some families have blood line rules that have existed for generations and challenging them is near impossible).

Here are some of my favourite aphorisms:

You enter a family by birth or marriage, and leave by death or divorce (and divorce is not as final as death).
If a child-in-law doesn’t have an actual voice at the table, their partner may be their proxy voice.
Don’t hire whom you can’t fire (applies to any business, and any person)
What works or doesn’t work in another family is no guide to what will work or not work in your family.

Rather than be reactive, develop and articulate your own family’s guiding principles and then setup governance to ensure they are applied as equally and fairly as possible.

Consider This: Does your family have a culture regarding how in-law children are treated? Have you ever had to fire a family member? How do you deal with pillow talk about family business/wealth? Do you have any (formal or informal) induction process for in-laws?

Original articles: https://www.forbes.com/sites/francoisbotha/2019/11/30/when-families-welcome-new-family-members–cultures-what-to-consider/#766fa5ca3f1e, https://www.jdsupra.com/legalnews/family-matters-can-a-family-business-78318/?, https://www.chroniclelive.co.uk/special-features/look-family-businesses-divorce-17022880, https://www.heraldtribune.com/business/20191028/nepotism-is-keeping-it-all-in-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.

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#entrepreneurship

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Navigating Family Office Trends

October 19, 2022 caracolemanauLeave a comment

The family office space is constantly evolving. This is driven in part by the investment flavour of the month, global economic/political trends, wealth transition within families, the family follow-me-go-round (families looking at what others are doing), and the general competitive environment amongst FO offerings.

Essentially, a family office is a set of services used by a wealth family to manage its wealth and other associated needs. There are no rules for how a FO can or should operate; it ought to be driven by demand and need. The other important issue is market segmentation: the FO needs of a family with 5B+ of assets are very different to those of a family with 500M, and these differences are qualitative as well as quantitative.

Because the SFO and MFO models have expected structures and associated constraints, new service models are being developed, like the virtual family office. Offerings like this evolve to meet demand, and are needed because so many families are global, because technology can deliver such an offering in a distributed and secure manner, and because no single solution can incorporate the best of everything.

Consider This: Do you have/use a family office? Do you know why? Have you mapped the set of services you need against your set of providers and scored/benchmarked them? Have you considered the changes that your family may face over the next 5-10 years and whether the set of services you have now will meet your ongoing needs over that period?

Original articles:
https://www.forbes.com/sites/francoisbotha/2019/10/11/why-family-office-advisors-are-fast-becoming-extinct-and-how-to-avoid-it/#6547275049cf, http://www.campdenfb.com/article/family-office-principals-unconvinced-next-generation-readiness-succession, https://www.forbes.com/sites/robclarfeld/2019/10/28/what-is-a-family-office-and-do-i-need-one/#34c6e8395da1, https://www.forbes.com/sites/francoisbotha/2019/10/30/family-office-insights-10-trends-that-will-affect-family-offices-in-2020/#5a9ad1123fb8, http://www.campdenfb.com/article/big-shifts-family-office-succession-and-recruitment-2020, http://www.businessworld.in/article/Multi-Family-Office-Over-Single-Family-Office/04-01-2020-181434/, https://www.forbes.com/sites/francoisbotha/2020/01/08/opportunities-abound-within-the-family-office-space/#57a083828693, https://www.fa-mag.com/news/russ-prince–innovations-in-the-family-office-model-53377.html

Actionable Generational Wealth Succession

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#entrepreneurship

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Transition Planning Letting Go

October 13, 2022 caracolemanauLeave a comment

“How do I transfer wealth to my children without spoiling them?” That would be the most common question I am asked, and for most people, stands at the heart of the challenge of wealth transition.

But often this question masks what parents really want, e.g. “how do I get my children to do/be what I want?” That question is not about wealth, but about parental power and control. And when parents say “I don’t want to rule from the grave”, often they actually do, but just don’t want to make it quite so obvious.

There are no simple answers, nor even a set of tactics that can be applied. Rather, these questions are the starting point of a family relationship journey, which can lead to a stronger and more robust family that understands its purpose and shared values, and is well governed.

As much as wealth creators and incumbent controllers of family wealth want to control the future of their family, an important part of the journey is learning how to let go, which is often needed to help your children to become everything they can be.

Consider This: Do you (incumbent generation) have a clear understanding of your family’s (wealth) goals? Is there consensus on this amongst those now in control of the wealth? What steps have you taken to (a) find out what the rising generation want, and (b) communicate what you want to them?

Original articles: https://www.forbes.com/sites/rochellemclarke/2019/11/22/top-holiday-conversations-for-families-in-business/#6f82c4a52486,

https://www.forbes.com/sites/forbesfinancecouncil/2019/11/25/keep-thanksgiving-about-thanksgiving-by-connecting-wealth-and-purpose/#642db627799c,

https://www.thinkadvisor.com/2019/10/02/how-a-ubs-exec-gets-families-to-open-up-about-wealth-transfer/,

https://www.nytimes.com/2019/11/06/your-money/tips-to-ease-family-inheritance-tensions.html,

https://www.theatlantic.com/family/archive/2019/10/big-inheritances-how-much-to-leave/600703/,

https://www.wsj.com/articles/trying-to-control-your-heirs-behavior-from-the-grave-often-backfires-11571623620

Actionable Generational Wealth Succession

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#entrepreneurship

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50% wealth custodians

October 12, 2022 caracolemanauLeave a comment

Women are at least 50% of the population, yet historically have been poorly represented in the wealth industry – as custodians and managers of family wealth, in family business, and as advisors. But that is changing on all fronts.

The percentage of wealth in the world held by women is steadily growing – as a result of inheritance (females generally outlive their husbands), divorce and entrepreneurship. In the Middle East, 20-40% of wealth is held by or for women. In Asia, there has been a surge of wealth creation by female entrepreneurs. A new female-led multi family office in San Francisco is taking a different approach to wealth management by incorporating socially-minded investment and personal branding.

Males and females have different investment strategies: for women wealth is a means to an end, while many men see the accumulation of wealth as a goal unto itself. We raise girls to be savers and boys to be risk-takers. Finally, there is significant talent within the female members of wealth families which is waiting to be unlocked, and potentially wasted if not given the right opportunities.

Consider This: What roles do female members have in your family (business, wealth management, philanthropy)? What if anything is holding them back? Are there cultural barriers in your family to their advancement? Are they sufficiently educated to be effective wealth custodians?

Original articles: https://www.worth.com/a-new-kind-of-family-office/, https://international-adviser.com/women-changing-the-wealth-landscape-in-the-middle-east/, https://www.ft.com/content/9bb4d056-d928-11e9-9c26-419d783e10e8

Actionable Generational Wealth Succession

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#entrepreneurship

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Family Led Philanthropy

October 6, 2022 caracolemanauLeave a comment

Family philanthropy can be a very effective way to bridge generations and engage the rising generation. However, according to a recent poll from Key Private Bank, there are significant differences between parents and children on matters of giving.

Most parents are not discussing philanthropy with their children, let alone agreeing on causes. 82% of advisors say very few clients involve the next generation in family philanthropy. Faith-based causes represent 73% of interest from parents, but only 3% from children. On the flip side, ESG causes are 3% from parents, and 59% from children.

It is self-evident that a lack of communication would only feed a further divergence of interests between generations. With increasing life expectancies and therefore a greater overlap between parents, children, and grandchildren, there are two likely outcomes: find common ground across generations, or fall into conflict.

Consider This: Who makes the philanthropy decisions in your family? To what extent are younger family members informed about choices or engaged in the decision making process?

Original articles: https://www.forbes.com/sites/francoisbotha/2020/07/29/how-the-worlds-next-generation-of-ultra-wealthy-are-redefining-what-it-means-to-give-back/#112919c85aad, https://www.prnewswire.com/news-releases/lack-of-family-conversations-about-philanthropy-fuels-differences-of-opinion-finds-key-private-bank-poll-300920068.html

Actionable Generational Wealth Succession

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Public conflict resolution in family wealth

October 5, 2022 caracolemanauLeave a comment

The conflicts that take place within wealthy families are often on display through the media as a result of their public profiles (and because people want to read about them). For outsiders, they can be hard to understand: What are they fighting about? Surely there is enough there for everyone?

But in fact, wealthy families have all the same family issues as others: sibling rivalries, favouritism, jealousy, power struggles, and the search for identity. The only difference is that in wealthy families, the conflicts can be played out with much bigger stakes.

Throwing money at a family problem doesn’t make it go away – the best it can achieve is to “kick the can down the road”, or defer it. It’s rarely about the money, which cannot – in and of itself – make people happy. Solve the underlying issues, and the money component suddenly becomes easier.

Advising a family business, or developing a wealth/business succession plan with a family is part business advisory, and part therapy (often more of the latter)

Consider This: How many arguments within your family look like they are about money, but are really about deeper issues?

Original articles: https://www.townandcountrymag.com/society/money-and-power/a27191152/rupert-murdoch-family-therapist-dynasties/, http://www.campdenfb.com/article/keep-out-ring, https://www.theatlantic.com/family/archive/2018/12/rich-people-happy-money/577231/

Actionable Generational Wealth Succession

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#entrepreneurship

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Manage or Avoid Family Conflict?

September 28, 2022 caracolemanauLeave a comment

What would you rather in your family: to manage conflict or avoid it completely? Before you jump to door number two, snap out of fairy tale land and accept that family conflict cannot be avoided. Conflict is a part of any relationship, and especially present in families, and even more so when significant assets are added into the mix.

When family members are driven by self-interest, this leads to zero-sum dynamics. The ‘losers’ in any conflict will eventually get their chance to harm the ‘winners’ and these forces are a destructive influence on the whole family.

What helps families thrive through generations is unity, and that is supported by (among other things) the ability to manage conflict. Indeed, dealing with and resolving conflict can lead to a shared sense of purpose which strengthens family bonds and determination, rather than perpetuate long-term rivalries.

Having a framework and common set of rules for those connected to the wealth is essential, as is maintaining transparency and ensuring individuals and their needs are recognised and considered. Allowing for the division of assets under specific circumstances can potentially mitigate some aspects of conflict.

Actionable Generational Wealth Succession

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#entrepreneurship

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QE2 -> C3

September 26, 2022 caracolemanauLeave a comment

The leadership transition from Queen Elizabeth II to King Charles III has been a fascinating insight into the preparation and execution of a succession plan. Within minutes of the announcement of her passing, the media was flooded with coverage, clearly well prepared in advance. Established protocols, known to insiders, were quickly put into place. Everyone was ready for this, yet when the moment came there was an outpouring of grief for one of the most widely venerated leaders of our time. The Queen is dead. Long live the King.

Queen Elizabeth ruled for 70 years – about three generations. We can reasonably expect King Charles to rule for about one generation. Looking way into the future, William could ascend to the crown sometime in his 60s (perhaps 10 years younger than his father), and then rule for about one generation.

Elizabeth’s reign was exceptional because she had to take on the role aged just 26. The ‘normal’ path is to become monarch from late middle-age until death, but these are hardly one’s best years to offer in service to the Commonwealth. The system does not have a notion of ‘Emeritus Monarch’ which would allow a shift in role at say age 75-80 so that the rising generation can take their place. Could such a thing ever happen?

In families, we can think of adult life in three stages: rising leader, leader and elder. The elder stage is very important as it allows leaders to evolve into a new role in their later years, and gets the best out of family members while they are in their prime. When an elder passes, the transition can be seamless.

Consider This: Does your family support and facilitate leaders to step away from active roles and become family elders? Are the skills of aspiring leaders being put to good use in support of the family?

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment
#entrepreneurship

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Generational Attitudes to Wealth

September 22, 2022 caracolemanauLeave a comment

Wealthy people broadly come in two flavours – wealth creators and wealth inheritors – and each have very different characteristics.

Attitudes to money and wealth are usually established as we grow up and largely remain with us for the duration of our lives. Creators often grow up without a lot of money and therefore have different attitudes to spending and the value of a dollar, are uncomfortable talking about it with their children, and often look at the wealth they created through an “ownership” rather than a “stewardship” lens. If they have created the wealth through starting a business, they also have a set of beliefs (resilience, confidence, sense of invincibility) common among business founders and entrepreneurs.

Inheritors view the world very differently, sometimes feeling conflicted or guilty for the “sin” of not having to earn it like most others. Depending on their upbringing, they may not have a sense of the value or spending power of money. They are often challenged to develop their own identity – not wanting to be known as “the child of …”, and needing to make their own mark. Their mark may often be in the non-financial arena (because their parents already made it financially).

In order to effectively transmit or transition the wealth to the next generation, both creators and inheritors need to understand their difference, and learn new skills (raising children with healthy money attitudes, adopting a “stewardship” approach, finding meaning beyond money).

Consider This: Have you considered how your attitudes to wealth might differ compared with your parents or children? Have you had family discussions about these differences and what they mean to each of you?

Original articles: https://edition.cnn.com/2019/07/23/success/financial-enabling/index.htm, https://www.fa-mag.com/news/russ-prince–among-super-rich–self-made-wealthy-and-inheritors-think-differently-45566.htm, https://www.fastcompany.com/90372281/5-lies-youve-been-told-about-generational-wealth, https://www.forbes.com/sites/forbesbooksauthors/2019/08/06/better-together-stewarding-wealth-and-wisdom-to-prevent-affluenza/#2e9f03807a58

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment
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Transition or separation?

September 21, 2022 caracolemanauLeave a comment

Kenny Rogers sang of the importance of knowing “when to hold ’em, and when to fold ’em”. Any succession plan worth its salt isn’t just a plan of who will succeed whom in running the business. It also needs a “Plan B” for the scenarios where the chosen successor is unwilling or unable, where there is no successor, or where a generational transition of the business might lead to serious conflict.

Some business founders/owners enjoy the early stages of creating and growing a business, but then tire as the management becomes more bureaucratic by necessity. Or worse, the founder is the one who does the “exciting” activities, and then passes it to the next generation who inherit a mature business with little scope for innovation.

Another possible obstacle when transitioning is the family dynamic of the rising generation: will they (collectively) be able to govern/manage the business without conflict? Will they end up being unwilling partners joined at the hip and with most of their wealth tied up in a single asset? Most families will choose to be financially separate and on good terms, than sharing assets and fighting over them.

Consider This: In your succession plan, have you done “scenario planning” to consider the ways thing might not go as you plan or aspire? To what extent has the rising generation’s own aspirations been taken into account at the planning stage?

Original articles: https://www.investmentnews.com/article/20190528/FREE/190529949/sometimes-a-sale-is-the-best-succession-plan, https://www.forbes.com/sites/forbescoachescouncil/2019/07/29/the-fifth-commandment-of-family-business-succession-know-whether-to-sell-or-transfer/#62382dc52307

Actionable Generational Wealth Succession

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