Research has shown that 60 per cent of failed intergenerational family wealth transition are due to problems with trust or communication. Communication isn’t important in families. It is everything. If a family cannot communicate, it cannot function as a group. It’s that simple.

What does poor communication look like? An absence or lack of communication (e.g. “it’s none of their business”, “they don’t need to know”, “we know what is best for them”) is patronising, infantilising, and leads to a loss of trust. There is often hesitance to discuss family wealth or estate planning with family members because of the conflict it might cause. But not discussing simply leaves the latent conflict to fester. Some cultures have a strong concept of strictly obeying the mature generation – this has the potential to create interpersonal and internal communication barriers. Negative, emotional, distracting and damaging interactions among family members can lead to the “Family Drama Vortex”.

What does good communication look like? Creating a space where family members can ask and answer difficult questions like “What is our wealth for?”, “What is our family’s purpose?”, “What is our true value?”.  To communicate effectively, we need to listen. This may sound like a platitude, but not everyone can do it, especially when talking to someone we think we know well, such as our children.

A history of poor communication in a family means you have to work extra hard to regain trust and learn now to communicate well. To address toxic situations like the Family Drama Vortex, we must recognize that the drama and dysfunction are rooted in underdeveloped communication and interpersonal skills.

Because communication is difficult, especially across generations and borders, it can help to have external guidance and facilitation. That is best coming from a specialist, and not necessarily the ‘default’ choice of lawyers and accountants.

Consider This: How would you rate your own family’s ability to communicate? Are there some issues that “we don’t discuss” or that are shut down whenever they are raised?

Further reading: https://sg.asiatatler.com/life/rise-and-fall-of-family-wealth-how-to-achieve-financial-longevity, https://www.coutts.com/insight-articles/news/2021/investments/speech-therapy–our-guide-to-talking-wealth-with-your-family.html, https://www.wealthadviser.co/2020/12/04/293097/asias-wealth-management-industry-needs-ready-itself-great-wealth-transfer, https://onwallstreet.financial-planning.com/opinion/how-to-keep-multigenerational-wealth-in-the-family, https://e.vnexpress.net/news/business/generation-gap-communication-a-concern-for-family-concerns-4106858.html, https://www.ft.com/content/825947e6-bf2d-11e9-9381-78bab8a70848, https://www.forbes.com/sites/forbescoachescouncil/2019/04/26/is-your-family-business-in-turmoil-the-solution-could-be-communication/#792eb2e525ec, https://www.clevelandjewishnews.com/features/special_sections/legal_affairs/succession-planning-big-part-of-family-businesses/article_6cd9a79e-45b6-11e9-ab20-ff24b4e7b8fd.html, https://www.wealthmanagement.com/high-net-worth/hardest-part-planning-hnw-families-hnw-families, https://www.marketwatch.com/story/breaking-the-taboo-how-to-prepare-your-heirs-for-your-death-2019-03-07

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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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Not every entrepreneurship story is “rags to riches”.

Many high-flying entrepreneurs came from from upper-middle-class families. While they don’t owe their success entirely to mom and dad, without their parents’ help, be it financial or otherwise, they may have never gotten their ventures off the ground. Research has shown that 75% of entrepreneurs from 48 countries said that their family was involved in starting their businesses.

Family money and background plays a critical role when it comes to starting up a business. In some cases, it can provide a financial safety net in the case of failure. As much as economically, the family environment that has a big impact on the startup entrepreneur.

Entrepreneurial behaviour is driven by families, not just family businesses. Families can act entrepreneurially together to create growth, and foster entrepreneurship and positive impact in society.

This doesn’t happen by default. While the entrepreneurial spirit of the founder may be passed along to their children, the spirit and drive may dissipate in subsequent generations. Passing on the creativity and innovation of the founding generation across new generations is a challenge of the highest order

In some families, the elders were able to build intergenerational bridges to their grandchildren by mentoring them as young entrepreneurs. The value created in doing that is far more than financial.

Consider This: Does your family ‘remember’ the entrepreneurship of the founder(s)? What do you do to foster the continuity of the entrepreneurial spirit? (e.g. share stories? invest in entrepreneurial risk asset class? mentor rising generation entrepreneurs?)

Original articles: https://www.forbes.com/sites/nextavenue/2021/04/22/im-turning-my-young-grandsons-into-entrepreneurs/?sh=37814eb51c0c, https://www.theguardian.com/business/2021/jan/31/small-business-entrepreneurs-success-parents, https://entrepreneurship.babson.edu/family-entrepreneurship-family-business/, https://www.entrepreneur.com/article/357381, https://www.forbes.com/sites/dennisjaffe/2020/05/05/preparing-for-deep-change-in-a-family-business/#7efb375a7942, https://www.fa-mag.com/news/russ-prince–the-downsides-of-being-a-rich-entrepreneur-55401.html

Actionable Generational Wealth Succession 

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Unless your family business is a “mom & pop corner store” (which is more akin to owning a job than owning a business anyway), you will need to have a mix of ‘blood’ and ‘non-blood’ people working in it.

As any business matures and grows, there becomes a need for professionalisation and systemisation. While owners may put a high value on the people in the business (especially family), the true value created in any business is through systems. A business that cannot function as well without family members is not worth very much to a potential buyer.

Family or non-family CEO? That is a huge question for many family businesses, especially as the founder generation seeks to retire. Even if there is a family member who is willing and able, is that what is best for the business itself?

For a non-family CEO to succeed in a family firm, they must understand the values of the family. The family also needs to be able to articulate those values to the CEO, and monitor their adherence in some way (which is by no means simple).

The challenge for any incoming CEO of a family business is to maintain and respect the ingrained culture, and at the same time drive the business forward. It is important to create an atmosphere of inclusion and purpose, and ensure people outside of the family are also seen and heard.

In larger business with many family members involved, possibly from multiple branches of the family and multiple generations, the kinship tensions are multiplied to a great degree.

When family differences get in the way, it doesn’t necessarily make you a bad employee, or a bad child, sibling, or cousin. It’s important for family members to retain their own identity and not become overly subsumed within the family enterprise and its mission.

Having people outside the family circle who can provide objective feedback – whether as advisors to the board or mentors to family employees – can be very helpful.

Consider This: Does your family business have policies around how family members qualify for a position and their performance measured? Do you have a board with externals and/or mentors available so family members can have a forum to discuss issues of concern?

Further reading: https://knowledge.insead.edu/family-business/why-family-ceos-outperform-their-non-family-predecessors-16601, https://www.institutionalinvestor.com/article/b1rnywtxhyr5kq/How-Family-Offices-Can-Strengthen-Next-Gen-Relationships, https://hub.jhu.edu/2021/04/27/dynamics-of-family-owned-businesses-phillip-phan/, https://www.smartbrief.com/original/2021/04/expanding-family-business-while-preserving-its-culture, https://www.forbes.com/sites/chriswestfall/2021/03/29/leaving-the-family-business-how-to-know-when-its-time-to-go/?sh=569aa4571e7e, https://www.thomasnet.com/insights/how-to-prepare-to-lead-your-multi-generational-family-business/, https://www.campdenfb.com/article/transfer-family-business-power-next-generation-effectively, https://www.dailyherald.com/business/20200716/6-tips-for-running-a-successful-family-business

Actionable Generational Wealth Succession 

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A while back this viral meme swept the internet. “OK, Boomer” is/was the response of younger people to complaints by older people about their behaviour and attitudes.

Readers of this newsletter may know my attitude to the whole “generation wars” narrative – it’s a load of crap and we shouldn’t get caught up in it. Older people have been complaining about younger people for as long as there have been multiple generations on this earth, and research points to the reasons why we do this (see link below).

However, there is one thing commentators haven’t picked up about the “OK, Boomer” phenomenon. The problem with memes is that they are short, simplistic, and importantly they are conversation stoppers. When we throw up a meme, it’s like saying “I agree/disagree, here is my curt response, and there is nothing more to say on the matter”.

When it comes to intergenerational conflict, that is the worst way to respond, because what we ought to be doing is building bridges and enabling better communication and understanding between groups of people who look at the world (and express their opinions) in very different ways. This can’t be achieved with meme wars and throw away lines. The issues are complex and nuanced, and require bilateral efforts – yes, both generations need to work toward communicating better and understanding each other. It’s not easy, it won’t happen overnight, but with effort, it can happen.

Consider This: (Directed at older family members) Do you know what a meme is? Do you know why younger people like to communicate using memes, emojis, and social media? (Directed at younger family members) Can you imagine a time before the internet and social media? What do you think your parents and grandparents were like when they were your age? How do you think they related to their parents back then?

Original articles: https://www.theguardian.com/commentisfree/2019/nov/05/millennials-baby-boomers-gen-z-lets-stop-with-these-nonsense-buzzwords, https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201911/3-psychological-drawbacks-the-popularity-ok-boomer, https://www.vox.com/podcasts/2019/11/22/20978050/ok-boomer-tik-tok-meme-generational-divide-podcast, https://www.mediavillage.com/article/ok-boomer-and-the-lure-of-demographic-warfare/, https://www.vox.com/2019/11/19/20963757/what-is-ok-boomer-meme-about-meaning-gen-z-millennials,https://www.al.com/life/2019/11/what-ok-boomer-says-about-the-generational-divide.html, https://www.vox.com/science-and-health/2019/11/12/20950235/ok-boomer-kids-these-days-psychology

Actionable Generational Wealth Succession

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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Q: If the world’s two richest men cannot keep their wives happy, what hope do we have?

A: No, that’s not a real question – it’s a meme that circulated following the news of the divorce of Bill & Melinda Gates. Many people with wealth realise that money can’t make a wife (or anyone) happy, but that doesn’t stop them trying.

In business, sometimes we decide to “throwing money at a problem”. That means directing significant resources (financial and otherwise) towards solving the problem.

In families, throwing money at a problem is taken more literally – directing liquidity to placate unhappy family members. The assumption is that it will “smooth things over”, but because it uses money as a proxy for the underlying problem, it doesn’t address the underlying problem.

The best this response can hope to achieve is to kick the problem down the road, i.e. defer dealing with it or pretend it doesn’t exist. However, consider that (a) the problem is not solved, and (b) in the meantime, the underlying family issues can continue to fester and can actually become worse.

Consider This: Have you “thrown money” at a difficult family situation? Why? What did you expect to happen as a result? What actually happened?

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 to transition the family business to the next generation?” The answer depends on (a) who is asking (incumbent or rising generation) and (b) when (in the life-cycle of the business) they are asking. More often than not, the question is raised too late – when the incumbent generation is thinking of retirement, when there are already unstated expectations from both generations, and when there is already latent conflict.

The key ingredients to a successful family business transition are open communication between the generations working in the business and with other family stakeholders (current and future owners), a shared vision both for the future of the business and for the family itself, and a good governance structure.

Those things are the foundation required for succession. They come before identifying the right family member to occupy any particular management position.

Most families don’t set the foundations first, but that doesn’t mean all is lost. A process of vision alignment, improving communication and establishing strong governance can get things on track and reduce the risk of the latent conflict blowing up.

Consider This: Has your family business thought about succession? Have your imagined or visualised what succession looks like (for both the incumbent and rising generation)? Do both generations have a clear understanding of what will happen and when?

Original articles:

https://www.forbes.com/sites/forbescoachescouncil/2019/10/16/the-10th-commandment-of-family-business-succession-create-family-unity/, https://knowledge.insead.edu/family-business/the-key-to-making-succession-work-in-family-business-12546, https://www.propertycasualty360.com/2019/09/26/six-lessons-to-successfully-moving-a-family-business-to-the-next-generation/, https://www.asianjournal.com/life-style/lifestyle-columnists/family-unity-is-critical-for-business-continuity-part-2-of-2/, http://www.campdenfb.com/article/bringing-next-generation-family-business, https://www.forbes.com/sites/forbesbostoncouncil/2019/09/16/how-to-transition-a-family-business-to-the-next-generation/#2d9ab33c173d

[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.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement 
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There are many consultants out there who advise non-profits on things like strategy, marketing, grant-writing, etc. The market for the philanthropic dollar follows the usual 80/20 rule: 80% of the funding comes from 20% of the donors (it’s probably far more skewed than that – more like 95/5). A particular area of focus for consultants is therefore how to capture the high-end of the market – HNW family giving. We can think of this as the ‘sell-side’ of philanthropy.

On the ‘buy-side’, there are the families. Because of supply-demand economics, it is a buyer’s market: causes are most always chasing families rather than the other way around.

Families choose causes for a variety of reasons, but too often those reasons are unorganised and reactive. They may be a response to a personal connection, or a direct solicitation. That may leave family members looking back at a schedule of the gifts for the year and wondering why, and what their impact has been.

It behoves families on the ‘buy-side’ to take a more strategic and proactive approach to their philanthropy. That starts with having a strategy and goals, and then choosing to allocate in a more sophisticated way. This can be balanced by an ‘allocation’ or ‘bucket’ for opportunistic or reactive giving. 

Consider This: What proportion of your family’s giving is reactive vs proactive? Does your family have articulated goals for its philanthropy? How does it measure against those goals?

Original articles: https://www.forbes.com/sites/johnjennings/2022/04/30/top-tips-for-effective-charitable-giving/, https://www.forbes.com/sites/forbesfinancecouncil/2022/03/28/philanthropy-four-steps-to-giving-strategically/, https://www.wealthprofessional.ca/news/industry-news/its-a-great-time-to-help-clients-think-about-their-philanthropy/362908

Actionable Generational Wealth Succession 

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

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Friends and family members often turn to lawyers (and other professionals like accountants and wealth managers) they know in because they naturally trust a lawyer who is close to them rather than a stranger. But is this the best approach?

Advisors can provide the best services when they are objective and are governed by reason and not by emotion. Often, and especially in a family situation, they specifically need to be the voice of reason while clients are the ones whose decisions may be driven by passion and emotions.

For lawyers in particular, the issue of ‘who is the client?’ is important. Initially, the client is usually the patriarch / matriarch as wealth owner. But as the family grows, things can get complicated. It may not be possible for the lawyer to act ‘for the family’. Where there is a ‘family office’, consideration will be needed as to what the family office actually is and who is, in fact, the client.

Similarly, wealth managers may not be permitted to talk to the children of their client without a formal engagement. And of course, don’t engage a wealth manager if you’re going to be uncomfortable sacking them if they don’t perform well.

The relationship between a family and all its advisors needs to have just the right amount of ’emotional distance’.

Consider This: How close are you to your advisors? Are they too close that you can’t get rid of them if you needed, or adequately assess their performance? Do you have genuinely independent voices at the table?

Further reading: https://abovethelaw.com/2022/06/lawyers-shouldnt-get-too-emotional-when-representing-friends-and-family/, https://www.lexology.com/library/detail.aspx?g=47051b35-6556-4bfd-b130-58fa573336f5

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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Family is (hopefully) for life. If the family business starts to interfere negatively with the relationships in the family, then there is imbalance. Family businesses are challenging because of the overlapping of family, business and ownership (known as the “three circle model”). Researchers from Harvard have extended this into four “rooms” by adding in the board room.

Because family members wear multiple hats, are in multiple circles, or sit in multiple rooms, they need an awareness of how those roles influence the decisions they need to make. Father or boss? Director or cousin? Manager or owner?

It’s most important to be able to have open and trusting conversations about needs of the business and expectations of the family. Those are underpinned by the core values and the common values across both personal and professional life. Each successive generation should ask why they are in the business. Successful family businesses foster a sense of stewardship among all members of the family (no matter what their specific roles).

Making multiple roles work requires setting boundaries between work time and family space. Conflict will happen, so rather than “fake harmony” (see previous article), the ability to communicate, deal with issues, and have “constructive conflict” is essential.

Some kind of a conscious separation of ownership and management is very helpful. Avoid having “too many chefs in the kitchen”. Family members who work in the business should be recruited and evaluated with the same criteria as anyone else. And “don’t hire whom you can’t fire”.

Consider This: Do family members involved in your family business understand the different hats they wear? Have you ever had to performance manage a family member employee? Do you have the governance structures to deal with conflict?

Original articles: https://www.forbes.com/sites/forbescoachescouncil/2021/04/22/how-to-balance-a-family-business-with-family-values-13-tips/?sh=1e3380cc11c7, https://www.country-guide.ca/guide-life/family-business-handbook-how-to-build-and-sustain-a-successful-enduring-enterprise/, https://www.businessobserverfl.com/article/five-steps-every-family-business-should-take-for-a-successful-succession, https://economictimes.indiatimes.com/news/company/corporate-trends/how-can-family-businesses-keep-themselves-from-splitting-by-separating-ownership-and-management/articleshow/81427776.cms, https://www.jdsupra.com/legalnews/defining-and-documenting-roles-in-a-1032865/

Actionable Generational Wealth Succession 

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#nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment

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The challenges of bringing up children with wealth are predicated on the idea that said wealth will transition to said children. But what if it won’t?

Some families are thinking more about giving away the bulk or almost all of the family wealth to charity. In the US, families are talking about giving a maximum of $15M to each child (and the rest to charity).

There are different reasons driving this (don’t want to leave children with “too much” or overly entitled, want to make philanthropy the family legacy), and different approaches (e.g. setting up a foundation and having family members involved, so they remain part of the legacy). Of course depending on the numbers involved, giving away “the bulk of” can still leave more than enough for generations to come.

It’s important for families to understand their “why”, and take their children on the journey.

Consider This: If you plan to give significant family wealth to charity, have you considered the reasons? Which family members were involved in the decision? Are you doing it for positive or negative reasons? Will the distribution of the wealth result in a lifestyle downgrade for future generations?

Original articles: http://www.campdenfb.com/article/families-giving-away-their-children-s-inheritance-charity, https://www.bloomberg.com/news/articles/2019-04-22/hong-kong-property-scion-has-no-house-no-inheritance

Actionable Generational Wealth Succession

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