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Serving Families in Crisis, Hopefully Without Hostages

Expect the Best, Train for the Worst

Friends, colleagues, and regular readers of my newsletter (same $0 as this blog subscription) know that I recently participated in a training program that was off the beaten path for those in my field of practice.

It’s taken me over a month to reflect on the experience and share it here, because there was so much to absorb.

Everyone with whom I spoke about this opportunity, before I went and since I returned, has been intrigued by the fact that I attended, and curious about what I gleaned from the experience.

This week I’ll share the salient highlights, along with some surprises.

 

“Intro to Crisis/Hostage Negotiation for MHP’s”

Before diving in, the only reason this possibility came to me is thanks to my social capital, i.e. the relationships that I’ve built and maintained with the fantastic people in the community I’ve encountered, via PPI, FFI, and FEC.

Being involved in various capacities with these peer networks has resulted in many cherished relationships, and with relationships sometimes come unique invitations.

So it was when Amanda Koplin, founder of Koplin Consulting, reached out to me and asked if I’d like to fill one of the extra spots in the upcoming training program she was organizing for her team.

She’d mentioned this weeklong program during our work together on a PPI committee, and I guess I sounded intrigued enough for her to extend this generous offer to me.

I still recall her initial idea: “In a hostage situation they send the cops, because it’s a crime; but it’s actually a mental health crisis”.

 

Role Plays and Playing Roles

So there I was in Nashville, surrounded by mental health professionals – “MHP’s” — (which I’m NOT, but trying to fit in) all being trained by ex-FBI folks.

Meanwhile, we were all learning the material these trainers normally teach to law enforcement officers.

There were some official “role plays” along the way, but I was also quite pre-occupied in playing the role of not sticking out too much.

It’s amazing what you can learn when you step out of your comfort zone. And yet, it was not nearly as uncomfortable as expected.

 

Key Takeaway Message

As I’ve shared with many since then, the most important learnings were about the attitude and demeanor one needs to adopt when presented with a crisis situation.

Not surprisingly, the ability to remain calm is fundamental to becoming a resource to those in crisis. 

Their brains are filled with anxiety and therefore not functioning in an optimal way, so just by being there and remaining calm, you can already add lots of value.

Perhaps my lack of discomfort with this aspect stemmed from the fact that I’d been down this road in previous training programs, notably those in conflict resolution and Bowen Family Systems Theory (BFST).

It was underscored once again, and should never be forgotten.

 

Connecting with Those in Crisis – Not with their Heads

The second take-away was the importance of connecting with anyone in a crisis, and not just with their head. As noted above, their brain isn’t fully functioning in a crisis, so they’ll respond better to those who connect with them in other ways.

Getting someone to trust you in such situations comes down to connection at a deeper level whether you call it heart-to-heart, at a gut level, or having your souls connect.

Please note that these are my interpretations of what we learned, and these words were nowhere in the course materials.

In fact, I attended in search of learning to better connect with members of families I work with, so don’t be surprised that my learnings fall here.

 

Surprises Since My Return

Since coming back home, many people have asked about the experience, and so many of them get hooked on the hostage aspect, and not the crisis angle.

Indeed, some family enterprise situations do feature folks who do feel like hostages, but that’s really a whole other subject, because those are usually more “chronic” as opposed to the “acute” situations we learned about.

I suppose I shouldn’t be surprised that colleagues also seemed curious about the “what to do” in a crisis angle, whereas my experience was more about “how to be” in a crisis.

Like many life situations, much of it comes down to a negotiation of some sort, which isn’t rocket science by any stretch.

Keeping a cool head always helps.

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Why Succession Planning Fails…

Why Succession Planning Fails…… Despite Mostly Good Intentions

We’re all familiar with expressions like “failing to plan is planning to fail”, which might lead one to believe that families experience poor outcomes because they never got around to planning anything.

While there certainly are plenty of those examples one could point to, that view is actually pretty simplistic, because there are in fact many professionals who are kept quite busy working with and for families in these important endeavours.

Yet despite the amount of time and expense that goes into these activities, the results are often sub-optimal.

This week I want to dig into some of the main reasons that continues to be the case.

“We’ve Already Done It – It’s Taken Care of”

For people like me who toil in the world of the “family circle”, where the relationships and human capital are key success factors, a common refrain we get when we speak to people from family enterprises about succession planning is “Oh, we’ve already done it; It’s done!”.

These well-meaning family members truly believe that because they’ve taken some structural and legal steps to address legal ownership and tax issues, that there’s no more work left to be done.

And because that work itself was long, costly, boring, and took them away from other important activities, the last thing they want is to revisit any part of it.

The professional advisors they worked with to get that important stuff done likely also led them to believe that they were now finished with this “unpleasant” work.

Making Plans for People Without Involving Them

So we’ve seen that thinking the work is all done is a common pitfall, but it’s often combined with an ever bigger misstep, which is not having all the right people at the table from the outset.

See: “Continuity Planning: Who’s at the Table?”

I know that this can sound like heresy to some, but when you’re making plans that will directly affect the next generation of your family, and in a very significant way, after all, it’s kind of crazy to me that so much of this work is being done without even so much as a discussion with those whom it will affect the most.

I wish that these situations could be the exceptions, but they are very much the rule.

Having the professional advisors of the parents draw up all the plans and agreements for the rising generation without even asking them what they want (or do not want) or telling them what they can expect, is very much the tail wagging the proverbial dog. 

But maybe that’s just me.

Not Keeping Everyone Involved as Things Evolve

Another reason that succession planning fails is again a variation of those noted above. This is where some plans were made, long ago, and even though many things have changed and evolved, those old plans remain on the shelf and are deemed “still good enough for now”.

Revisiting what was done way back then sounds like it makes sense, but we’ve got more important things to do now, and we will get to updating those plans when we get around to it. Stop me if you’ve heard this one before.

The business enterprise whose succession you planned for years ago is quite likely a very different business today.

Even more importantly, those heirs to whom you were leaving things when they were teenagers have also (hopefully!) evolved and grown into much more prepared adults, and their abilities, potential roles and expectations have also surely changed.

People & Relationships, Not Structures & Legal Documents

If you’ve noticed, there is a thread that runs through the problems I’ve outlined above, and that’s the fact that structures and legal documents, although important components of succession planning, are insufficient by themselves.

The people and the relationships between them, are a far bigger part of the picture, and always will be.

I know the subject can be delicate and having conversations about it can seem scary, and so most people want to avoid them.

But not having the discussions is even scarier. Making assumptions about your offspring and how they’ll handle what you leave them is fraught with potential traps and situations that can be avoided.

Family leaders who’ve achieved a lot of success expect to leave some sort of legacy, but too often they forget that this involves the people more than the financial wealth.

See Is Your Continuity PAL in Danger?

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Succession Without Governance Equals Chaos

Very Important Words for Families to Understand

This week I’ll cover some ground that will feel quite familiar to regular readers, but will combine some elements in new ways.

I often spend time considering the specific words we use when we talk about ideas around working with families, and there will be some of that too.

And of course, the genesis of the idea for this blog will also be part of the scene too, because this week it comes from some folks I consider both friends and mentors.

Let’s get on with the show.

Teaching Family Governance to Advisors

I’ve been a proud member of the faculty of the Family Firm Institute for a few years now, where I was brought in as one of the instructors for the course on Family Governance. It’s something close to my heart and has long been the subject of my writings here.

When I joined the faculty, there were already some great folks teaching the many courses that are part of FFI’s Global Education Network (GEN) program.

Included among them are Kirby Rosplock and Dennis Jaffe, both of whom taught me when I was a student, and whose industry experience cast way longer shadows than mine.

It truly has been a humbling honour to work with them, especially as we were recently tasked with updating the course materials. 

It was during one of those meetings that the line from the title of this post was uttered, and then repeated.

That’s when I knew this would become a blog post.

An Evolving Vocabulary and Using the Right Words

The members of FFI are mostly advisors who work with enterprising families, and they enroll in the GEN program to learn from others, so using the right terminology is part of the deal.

Personally, I’ve tried to shy away from using the term “succession”, in favour of “continuity”, but most people still use succession, especially with the popularity of the TV series Succession these days.

So when Kirby blurted out “Succession without governance equals chaos”, who was I to debate her words?

And then later when Dennis reprised her words, verbatim, that was it, I had my money quote.

It does kind of summarize a lot, especially in only five words.

So What Do We Mean by Governance?

I’ve long known that the term “governance”, especially when related to a family, can elicit groans, skepticism, and a general “allergic reaction” from many, if not most.

I normally try to soften things by adding that family governance essentially boils down to 3 questions:

  • How are we going to make decisions together?
  • How are we going to communicate?
  • How are we going to solve problems together?

I still talk about those, but today I want to add some meat to those, because they sound just a bit too simple and theoretical when you get right down to it.

Those “how” questions lead to a need for further clarification, around other questions that start with “who”, “when”, and “where” that typically get lost in the shuffle until it comes time to implement the governance.

What About the Chaos, and How Do You Avoid It?

Now the idea that “chaos” results from ignoring governance as an intergenerational succession approaches is one that some may doubt.

Well, if you want to tempt fate, “stick around and find out”, to borrow from a recent meme (a cleaner version of FAFO – see Urban Dictionary).

The basic questions posed above won’t answer themselves, and are best discussed:

  • well in advance of any issues, 
  • in as collegial an environment as possible, and 
  • with as many members of both generations as you are able to involve

Regular, Repeating Meetings to Discuss and Agree

The secret, if there is one, is to begin having a series of regular meetings, where, slowly but surely, you begin to learn to work together to find the answers to those questions.

You can’t be in a hurry to finish, because you will never finish. You’re playing the infinite game, it’s all journey, with no destination.

This can be hard for many to grasp, but that attitude is necessary to develop, and it can be contagious.

There won’t likely be any single memorable meeting, just many small decisions, made together, over time, that’ll enable your family to succeed with your succession, without the chaos.

Because succession without governance does equal chaos.

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Striving Before Thriving in a Family Enterprise

The Order is So Important

This week we’ll be looking at some ideas that are a bit different from those I’ve been sharing lately, so please join me as I “freestyle” a bit, while still trying to keep it real, too.

As is sometimes the case here, there’s kind of a convoluted story to how I got here, and I’m so glad to have a place to share these musings with others who appreciate my missives.

Contrasting a couple of words that exhibit some similarities is nothing new here (see On Observing and Absorbing in Enterprising Families and SFTU Versus STFU) for a couple of examples.

This week, we’re going to deconstruct “striving” and “thriving” to see what we can learn.

My first conclusion, which I hint at in the title, is that doing them in the right order is key. 

A second take-away involves the fact that family members from different generations should probably experience them at different times.

What Does It Mean to Strive?

Let’s start by looking at the meaning of the verb “to strive”. 

Here are some Google results I like:

  • make great efforts to achieve or obtain something
  • struggle or fight vigorously.

I like those because the words “effort”, “obtain” and “struggle” really resonate with me when I think about striving.

They feel to me like they are all about what you put into something.

What Does It Mean to Thrive?

Now let’s move over to the verb “to thrive”. 

Here’s some of what Google comes back with:

  • grow or develop well or vigorously.
  • prosper; flourish.

Now when I look at words like “grow”, “develop” and “prosper”, what I see are the results of some of those same efforts that one has “put into”.

This exercise has already borne fruit for me, as the “input vs. result of the input” angle is an unexpected bonus for me.

Now let me get to the convoluted story to set up the bigger picture for enterprising families.

Beginning with the End in Mind

With a tip of the cap to Stephen Covey, let’s begin with the end in mind, which is how this topic landed in my lap to begin with.

I was on a Zoom call where a recently retired executive was talking about her exit from her prominent role in her organisation, and she smiled as she shared how it was all going.

“It feels like I’m thriving without striving”, she related.

I quickly jotted those words down, believing that that would be the blog post subject.

Lately I keep hearing about the fact that everyone in my field talks about preparing the rising generation of the family, while the senior, “NowGen”, who are expected to exit, aren’t considered enough.

“I’ll write about how important it is to find opportunities for them to thrive without striving”, was my idea.

Well, not so fast.

Where Else Does This Apply? (Everywhere!)

As I considered that after having strived for so many years during one’s career, later on it would be good to simply thrive, based upon all the hard work one had already put in, I then thought about the entry, as opposed to the exit.

Imagine my “A-Ha Moment” when I realized that sometimes, especially in very successful families, the rising generation show up and are already thriving thanks to the family’s success, while many of them have not been forced to strive for themselves.

Thriving without having strived seems like a bit of a disconnect.

If you know anything about the challenges that such families face, you will instantly recognize how relevant this can be.

Stumbling Upon a Fundamental Truism

Success means more when it is connected to one’s own struggles to achieve it. 

This reminded me of one of my favourite Zig Ziglar sayings about putting in the hard work early in your career:

If, early on, you do:                   what you’re supposed to do 

                                                      when you’re supposed to do it, 

Later, you’ll be able to do:       what you want to do 

                                                      when you want to do it.

In a family enterprise, there is a time for striving, which hopefully leads to thriving. There can then be many years of striving and thriving at the same time.

Eventually, the leaders become elders and can continue to thrive, but without necessarily having to strive as much anymore.

After all, there are younger family members who are there for that, and presumably they’ve been well groomed for that.

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Why Set Up a Family Office

Plenty of Reasons to Make Such a Move

What used to be an obscure corner of the world of wealthy families has begun to go more mainstream over the past decade or so.

Whereas the term “family office” has existed for a long time, it used to elicit raised eyebrows of confusion, which nowadays have given way to nodding heads instead.

In many cases the confusion remains, but more people have heard the term and hence think that they know what someone is referring to when they hear it used.

Let’s dive in and look more deeply at this, from the perspective of the family who should be at the center of any family office, rather than the view of the professionals who work for such enterprises.

“If You’ve Seen One Family Office….”

Confusion about the family office space is compounded by the fact that no two family offices are alike, nor should they be.

They exist to serve a family, and every family is different and therefore has different needs, plus these needs evolve and change over time, meaning that they’re in a regular state of flux (or at least they should be).

This topic could take up an entire book (and it has) and I’m trying to hit a sliver of it in a blog post, so let’s get to the question in the title, “Why would a family even consider setting up a family office?”

On Inflection Points, Evolution, and Leadership

I’ve written on this subject before, notably in Putting the Family in the Family Office, for my site, as well as for other websites, for example, Don’t Forget the Family at the Family Office.

For a family to suddenly decide it needs a family office, there’s usually a catalyst, and the most frequent one is a liquidity event. 

For readers unfamiliar with that term, think about a family that owns a business worth $100 million one day, but then sells it and suddenly has $100 million of “liquid assets” instead.

Such a family suddenly has a new set of priorities and needs, and a family office can be the ideal way to address those.

Other families create a family office when they reach various inflection points as they evolve, often when there’s new leadership in the family, thanks to a generational transition.

But let’s never forget that the family’s needs should be driving everything (although this is often the exception rather than the rule).

After the Why – When, Where, Who and How

The Why and the When are typically connected, as the event kicks things into motion, bringing up other questions.

I laugh when I see articles about the best places in the world to set up a family office, focused on jurisdictions that are advantageous for tax and investment reasons.

Regular readers know my penchant for focusing on the family’s human capital over its financial capital.

The Where may become a factor as things evolve, but is rarely a huge concern at inception, unless there are billions of dollars involved.

The main questions I suggest families focus on are all about Who and How.

Don’t Forget the Family!

I’m a firm believer in having some family members involved at some level, because the family office will be responsible for a huge amount of the family’s net worth, and like any family business, the owners can and should play an important role.

If no family member is qualified to play the top investment role or handle other important executive functions, it becomes paramount for someone from the family to at least become quite conversant and comfortable with these subjects.

There’s certainly at least an oversight role that needs to remain in the hands of competent family members.

One Person at a Time: Grow with the Flow

One of the most important parts of the How is the question of timing.

I almost always advocate for a “go slow” approach, because you really want to get the culture right.

Hiring a person and making sure they’re the right fit takes time, and when you set up a family office, you’re truly playing the long game.

You need to find competent people to fill the roles that you can’t handle within the family.

When you add more people, you want to make sure they all fit well together too, and that’s not something to rush through either.

And since they’ll all be serving your family, you’ll want more than one family member involved in the selection process too, maybe several.

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Transition of Wealth

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Serving Exceptional Families – Proceed Slowly

Not Every Family Needs “Full Service”

The past couple of weeks we’ve been looking at “connecting” with members of client families and then matching the solutions we have to these families.

All this made me consider one of the biggest questions that people often have for me when they learn about the kind of work I do.

The questions come in a variety of forms, but generally boil down to this: “Who ARE these families that actually do all of this governance stuff?”, along with “where do you find them?”.

If you stopped 100 random people on the street, you likely wouldn’t meet any people from such families, and very few would even have a personal connection to one.

However, if you shared the names of families who continually work on their governance, those names would be recognizable to most.

Are We “Exceptional”; Do We Even Want to Be?

Not every family is destined to be exceptional, and many don’t envision themselves as such either. 

For some families, just imagining themselves in this way is actually unnatural and even abhorrent.

Too often, though, professionals who serve families who’ve achieved a certain level of wealth creation begin to make assumptions about what these families should be doing to preserve that wealth.

Well crafted strategies to minimize taxes and keep financial wealth protected have become the go-to starting point for such families, because a whole industry of professionals exists to take care of these issues.

I’m always wary of situations where the tail ends up wagging the proverbial dog, and for me the “dog” is the family.

I prefer to help the family figure out what makes it exceptional and then plan for ways to grow and preserve that.

Once the family has set those priorities, by all means then let’s get the professionals involved to figure out the best strategies to employ to help accomplish that.

Many Varieties and Versions, and Ways to Make Progress

Some families will have an operating business that they wish to preserve, and finding ways to ensure that it continues to evolve and thrive with the economy, while still being owned by the family, might be their focus.

Others may have had a liquidity event, and are now searching for new opportunities, either through direct investing or philanthropy, or both, and incorporating the rising generation of their family into those projects will take center stage.

Still others may be searching for ways to recreate the entrepreneurial spirit and create a “family bank” that will allow their offspring and all of their human capital to thrive in their own ways.

There are so many possibilities, and the path chosen will vary from one family to the next.

No Two the Same = All ARE Exceptional

And because no two families are the same, they ‘re each potentially exceptional in their own right.

Too often, as advisors, we want to show how smart we are and we rush to get the family moving on our pet project for them, and that where we may be doing them a disservice, hurrying them into action.

A family is a system of many moving parts, and it takes time to engage all of those people properly, to the point where they even understand and believe that there may be a “family project” that will arise from the financial resources that have been created, by previous generation(s) of their family.

Vision, Mission, and Values Work

Some colleagues reading this will nod their heads and agree that helping the family identify its values and then figure out a vision and mission are great first steps, and in many ways I agree with them.

I’m advocating for more basic connection work in advance of those specific projects, which then become more clear with time. 

Discovery work with such families can take months before recognizing where we should actually begin to co-create a family project together.

Yes, the values need to be surfaced at some point, typically early on. But then the mission and vision need to be carefully considered in the context of where the family is now, and what its capacity is to undertake its first steps together in new ways.

An Iterative Process, More Journey than Destination

We’re talking about a family journey over the coming decades together, so there should be no rush to complete the plan in days or weeks.

It should be an iterative process; more about a journey than a destination.

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Matching Solutions to Each Client Family

Plenty of Sophisticated Sellers Out There

The family enterprise world continues to evolve and mature, and it feels like the supply side is way ahead of the demand side in most cases, and that’s not necessarily a good thing.

There really is no single reason for this, nor anyone at whom we need to point the finger of blame, it just seems to be that way.

With time and a bit of effort, and a bit more evolution and focus on what’s right for each particular family client, this is already beginning to change, albeit ever so slowly.

Let’s jump in and look at the problem I’ve dubbed “solutions in search of families”.

The “I Have a Hammer” Syndrome

The simplest version of the issue is that many solution providers are pretty much a “one-trick pony”.

If I go to the barber shop and ask them if I need a haircut, unless I got one there the day before, I can already guess the answer I’ll get.

Likewise, if a family leader who knows that they need to do “something” goes to see a lawyer, they’ll be offered a legal solution; if they start with an accountant, they’ll be offered an accounting solution, and so on.

For the simplest family cases, this is all “plenty good enough”.

For families with more complex situations, though, this is where we can end up with the tail wagging the proverbial dog.

Interdisciplinary Work Towards Custom Solutions

I have long been a fan of families working with a variety of different specialist experts in order to come up with a custom solution for their particular needs.

While it might seem expensive to involve so many highly compensated experts in such planning, the synergies the family gets almost always far outweigh the additional time and cost they absorb on the front end.

The field of such experts continues to evolve in this direction, as professionals learn to work together in the best interests of the families they serve.

As the pendulum continues to swing in this direction, I recently had lunch with a colleague, after which I had a bit of an “A-Ha” moment.

And it had little to do with the fact that I had just eaten the most expensive soup I’ve ever had. (Yes, it was delicious.)

Everything Is Available; Everything is Affordable

I’d been invited to lunch by a colleague from a large multi-family office (MFO) to discuss ways that I might be a resource to them and to the families they serve.

My original title for this post was “Beware Solutions in Search of Families”, because I had the “I have a hammer, so everything looks like a nail” idea in my head.

But the lunch with my MFO friend revealed another version of the challenge, so I rejigged the title to “Matching Solutions to Each Client Family”, because our discussion revealed a different challenge.

I heard about clients who could afford any and every possible “solution”, but for whom the “problem” to be solved had yet to be clearly identified.

I also heard about a firm that was positioned to be the resource to supply and/or coordinate each solution as needed, but, despite having their shelves fully stocked with great stuff, felt at a loss to figure out where to begin.

Crawl Before You Walk, Walk Before You Run

It became clear to me as I digested my soup and my seabass that both the supply side and the demand side of this equation, despite having met and decided that they were a good fit, were still at a bit of a loss to figure out the first steps.

Admittedly, I was hearing about some relatively new potential clients of this MFO, which for me is always the most interesting time, because there’s so much to discover.

My mind works on a much slower timeframe than most (thanks, Dad).

My advice was to proceed slowly, one step at a time.

You want to run with it, but you should walk first, and perhaps even crawl before that.

Taking Time to Properly Connect, First

If this has a familiar ring to something you read here recently, kudos for paying close attention.

Just last week, in Relationships Support Structure, What Supports Relationships, I wrote:

 

            “If you are privileged to work with families,

      and you want to solidify your relationships with them,

             it is well worth spending time and effort 

                on your deeper connection with them.”

 

I recognize that many advisors don’t feel like they have that luxury of time to build this connection.

My suggestion is to find the time, because it’s usually worth it.

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Striving for the “All AND Nothing” Inheritance

Striving for the “All AND Nothing” Inheritance

So Much Better Than “All OR Nothing”

I’ve written around 500 blogs over the past decade, and sometimes I convince myself that I’ve shared all the gems I’ve ever heard, somewhere along the way.

And sometimes I find out I’ve missed some.

This past week, I was invited to be a guest on a podcast, and the host asked me for three to five things that all parents strive for as they imagine the inheritance they will leave.

I quickly recalled a nice blog post that dealt with three of them, The “Family HUG” We’re All Looking For, and then began to wonder which two others I could suggest as a good complement to those.

“Oh, I know”, I thought to myself, “let me find that blog about David York’s ‘All or Nothing’ concept!”.

As you may’ve guessed, I realized that I’ve yet to write that one, even though this nugget goes back a couple of years for me.

So, belatedly, here we go.

A Familiar Resource Once Again

Maybe it’s because I’ve shared York’s wisdom before, notably here: Great Expectations in Enterprising Families and Family Wealth Dynamite: One Stick or Two?, among others.

The “One or Stick Two” part of the dynamite one was probably what fooled me into thinking I’d already shared this week’s take-home message here.

Nevertheless, when you know of a thought leader like York, who shares good stuff regularly (and not just the same stuff over and over again), you know that you have someone worth paying continued attention to.

Just make sure you credit them for their ideas, and don’t try to claim them as your own; because this is a relatively small world, .

So, after all this build-up, I must be building up to something worthwhile, right?

They Can Handle It All

The first half of York’s two-part inheritance scenario is familiar to many.

Parents who have accumulated significant wealth will often worry about the capacity of their heirs to “handle” everything that they might possibly inherit.

As I wrote here, in Who Messes Up What, Or What Ruins Whom, they don’t want their offspring to screw up the wealth, and they also don’t want the wealth to screw up their family members.

Many professionals who advise such families have heard these concerns ad nauseam, to the point where an entire industry has sprung up to provide hundreds of structural “solutions” to this dilemma.

However, according to York (and other enlightened advisors), these parents should be working towards making sure that they have raised their offspring to be able to handle all of their wealth.

Wouldn’t it be nice to know that after you’re gone, the wealth you leave your heirs will be well taken care of, because you raised them to be capable stewards?

Sounds Great. Okay, What’s Part 2?

And, if you do prepare your offspring to be able to handle the wealth that you plan to leave them, there’s actually an important side effect.

Chances are good that those who’ve been raised this way would actually also do just fine if ever you decided to leave them nothing.

That’s the second part of this, in case you hadn’t already guessed it.

Everyone thinks wealth is all about the money, but it’s really all about the people. Wealth comes and goes, sometimes remarkably quickly, in families.

The difference is rarely about the size of the pile, it’s more about the people entrusted to look after it.

Preparing Them for Either Scenario Is the Same

What if you did leave them nothing?

Let’s be clear, this is not a suggestion that you not leave anything to your heirs, that’s not it at all.

People do that for various reasons, and some famous ultra-wealthy people have publicly stated their plans to leave modest sums to their progeny. That’s a whole other discussion, perhaps for another post.

My point is that raising your offspring to be self-sufficient and independent is something everyone should strive for, regardless of how much financial wealth is at stake.

If they’re prepared to receive nothing, they’ll also likely be prepared to handle everything.

Which One Should You Aim For?

This is a bit of a “chicken and egg” question, which makes it intriguing.

If you have significant wealth, being concerned that it’ll be too much to handle is normal, so parents sometimes resort to warning their children that they’ll get nothing.

Preparing them for nothing AND for everything will probably work out better.

Either that or preparing them for everything AND nothing.

Go for AND, not OR.

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How to Build a Family Dynasty

How to Build a Family Dynasty

Five Key Considerations

Once a family has accumulated a good deal of financial wealth, at some point, it becomes wise for them to shift their focus from making their proverbial pie bigger, to figuring out how to preserve the pie and transition it to future generations.

This is typically a bigger challenge than expected, and despite having access to high-caliber experts to assist them, families often stumble here.

Many speak of family legacy (including me), but this week I’m pivoting to a related concept, to answer another question, i.e. “How do you build a family dynasty?”

Here are five important things to consider when thinking about this complex subject.

1. Families Grow Exponentially

As soon you mention the word “dynasty”, my mind quickly goes into “multi-generation” mode as a basic assumption.

We’re usually talking about wealth creation that began with one generation and then continued through at least one or two more generations.

Something that creeps up on families trying to stay on top of this is simple math. 

As you add each generation of offspring, you’re adding people (or households, sometimes a simpler way to count) at an exponential or geometric rate.

If you take an example of three children per family, you go from one household to four, as the three leave the nest, and then if each of the three have three offspring, that’s already nine more.

I’ll stop the math there, but once you add that next generation, it quickly skyrockets.

2. Will the financial wealth grow at the same pace? 

That takes some work, and usually lots of luck too!

  • What Got You Rich Won’t Keep You Rich

Wealth is often created via an entrepreneurial venture that becomes a family business, or more recently by success in entertainment or sports, or having shares in a unicorn business that goes public.

Those occurrences do not typically happen or repeat often, and so the odds of them showing up in the same family again within another generation or two are low.

My point is, the skills that got you rich are not the same ones that will keep you rich. 

That realization doesn’t always come quickly to the one who caught lightning in a bottle and then believes they have some special power and invincibility.

3. It’s More About People Than Money

I know that almost everyone thinks it’s mostly about the money, but that isn’t typically where things go sour.

Having lots of money and then staying rich isn’t that difficult if you’re only trying to satisfy one person, or one household.

When you consider a family that’s growing exponentially (see #1, above), making sure there isn’t a revolution, as they work to stay wealthy and become a dynasty family, you begin to realize it’s the people that you need to pay attention to, even more so than the dollars.

4. Family Governance Is Key

Long time readers of my work won’t be surprised that this post is now pivoting towards a pontification about family governance, because that’s a hobby horse I ride quite regularly.

Every dynasty family will continually need to work on answering three main questions:

  • How are we going to make decisions together?
  • How are we going to communicate effectively?
  • How are we going to solve problems together?

When people hear the term governance, in relation to family issues, they typically make an unpleasant face, and I get that. 

That’s when I share those three questions as my definition, which is easier for most to grasp.

5. The Work Is Never Done

Family governance itself has a few key characteristics that make it special.

  • It’s less about formal agreements, structures, and mechanisms
  • It’s more about informal agreements and ways of being together
  • You cannot simply buy it off the shelf from an expert
  • You need to co-create it as a family
  • It needs to evolve as the family and its needs evolve

For those reasons, plus the fact that each of the growing numbers of people also continues to evolve, this is never a “one and done” or “set it and forget it” situation.

Yes, there are some family dynasties around, but not that many.

If you look at them closely, you’ll probably see that they fully understand the points I’ve shared here.

Can it be done? Yes.  

Will it be easy? No. 

Is this for your family?

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