Part 1 of 2 – The Pros
The expression “liquidity event” is not necessarily well understood among the general population. Let’s take a look at it from the Family Business point of view.
Essentially, a liquidity event takes place when the owners of a business, in this case a family, sell a substantial portion of their business (either shares OR assets) to an outside party, for cash or another form of asset that can more readily be turned into cash quickly.
It’s hard to get a handle on “governance” sometimes, and depending on the context, its meaning and connotations can vary greatly.
In some contexts, it’s a pain in the backside. In others, you can’t live without it.
Put me in the “can’t live without it” camp when it comes to family business continuity and family legacy.
Governance in those situations can be tricky, but you really need it, and this post will shed light on that perspective.
Institute for Family Governance
This week I was in New York for the first annual “Institute for Family Governance” conference. The IFG is in its infancy, and came into existence at the crossroads of STEP (Society for Trust and Estate Professionals) and FFI (Family Firm Institute).
Babetta von Albertini, of Withers Consulting Group in NY, the Program chair, is a member of both FFI and STEP, and I first met her at the FFI annual conference in London in 2015.
She is the driving force behind IFG and must be congratulated for pulling off a great kickoff event.
She also announced that the 2nd annual IFG conference will take place on January 25, 2018, and that none other than the legendary Peter Leach of Deloitte UK will be a featured speaker.
What the Heck is “Family Governance”?
“What is Family Governance?” could be the proverbial $64,000 question. But it’s more like the $64,000,000 question, because sometimes size does matter
If your family net worth is in the range of $64,000, please skip the rest of the questions, thanks for your time completing our survey.
If, however, your family net worth is in the $64,000,000 range, perhaps this topic is one you need to be paying attention to.
Okay, let me rephrase that.
If you care what happens to your wealth over the next generation or two (or more), then good governance will be important. If you don’t really care what happens after you die, don’t bother reading past this point.
What Happened to “Governance, Ugh!”?
For longtime readers and fans of my work (Hi Mom!) you may be confused by the title of this blog, which seems to suggest, via the “Aaaah” after “Family Governance” that it’s something good, and which brings relief.
You may be thinking “Hey Steve, how does this square with Chapter 8 of your book, SHIFT your Family Business, which I clearly recall was titled “Governance, Ugh!”?
My answers to this are many, including:
The Evolution of Governance
Back in 2013 when I wrote the book and called that key chapter “Governance, Ugh”, I did so based on my perception that the word actually conveyed that “Ugh” reaction to a large number of people.
I like to believe that the world of Family Business and Family Wealth has evolved somewhat since I wrote it, and based on what I heard in NYC this week, it has.
Even if the “world” has not yet evolved, though, I know that I have. Let me elaborate. I have always known that good governance is essential to creating a sustainable legacy for a family.
I used to be afraid to tell people that they needed “governance”, but shying away from the word made it seem “unspeakable”, which may have conveyed that it was also undesirable..
My Own Evolution
When the Institute for Family Governance, came to life, and when I realized that I was excited to discover it, that told me that I have evolved, as has my thinking and my desire to call it what it is.
Yes, we can continue to refer to it as “decision-making”, and “communication” and “structures and processes”, and “how we are all going to get along together” and “formalized rules and regulations”.
At the end of the day, for me, the best word to encapsulate all of these is GOVERNANCE.
The Real $64 Million Question
The real question is WHY is it required.
My short answer is:
Because your Wealth and Legacy won’t Preserve Themselves.
Family governance is a must, and it must be custom-developed by your family, for your family.
But it is definitely OK to get help with this. It is even highly recommended to do so.
To Be Continued
Watch this space for an upcoming blog:
5 Things you Need to Know: Family Governance.
Coming in February 2017
Happy New Year?
The first week of a New Year seems destined to bring up a challenge for me. Last January I was involved in a car accident that resulted in a concussion, and 2017 started with me accidentally drowning my phone.
I must admit that given a choice for 2018, I would sign up for stupidly putting my phone in the washing machine over innocently getting rear-ended at a red light.
Even though I have nobody to blame but myself for the phone fiasco, I must admit that this year is off to a better start than last. And of course the drowning of my phone has given me a juicy blog subject to boot.
The Incident
Last Friday when I finally found my misplaced phone in the “last place I looked”, i.e. the pocket of my jeans, in the washing machine, well into its wash cycle, I was relieved that at least I had solved the mystery of “where the heck is it?”
The thrill of finding it was quickly extinguished of course, as I had already concluded that it was now merely a paperweight.
Now What?
Saturday morning I went to my phone service provider with it, holding a glimmer of hope that it might still be useful. No such luck.
I purchased a new phone, and then came the time to transfer what I had in my old phone. There is a great app you can use to transfer stuff (photos, contacts, apps, etc.) from an old phone to a new one. But it doesn’t work when the old one is dead.
Parallels
My work is all about helping families define and preserve their legacy, which includes very important steps that I explain to client families, which they cannot skip if they want to keep the odds of success on their side.
My old phone had lots of important stuff in it that I wanted to continue to benefit from. But it was now dead, and I had not done what was necessary to preserve what was in it by backing up everything.
Now, recreating what I had, became a much bigger challenge. In fact, some stuff, like photos, was gone for good.
Most of those photos weren’t critical, but they did have some value, which was now lost. Likewise, much of what the senior generation members have in their heads is not truly critical for the survival of the family, but it can often rise to a level above simply “nice to have”.
In case my analogy has been lost on you, allow me to spell it out more clearly. If you wait until after people have died to try to have a valuable relationship with them, it is MUCH harder to do.
Contacts
What about contacts? The way things turned out for me, thanks to technical ineptitude and the lack of foresight on my part, when my contacts updated on my phone, I got hundreds of names and email addresses from everyone I had ever emailed through my Outlook account, a majority of which are useless now.
The cell phone numbers that I actually wanted and needed were nowhere to be found.
I now have to delete a whole bunch of useless stuff, and I need to email a bunch of people and ask them for their cell phone numbers again.
So I got a lot of stuff I don’t want, and the stuff I want, I need to actually work to get, even though I already had it before.
This is kind of like having to go through all of the files and documents of a deceased relative, while never having had the benefit of the personal introductions to people who were important to the family.
Lesson Summary
Please realize what you have and figure out how to preserve it. And I’m not just talking about your phone. There are so many things that the NextGen and the NowGen need to work at transfering.
Better get started today.
So here we are again at the time of year when the old calendar comes off the wall and the new one goes up. Didn’t we just go through this?
The title of this week’s post comes from a book I’ve been reading, called Finish Big, by Bo Burlingham. I have gotten in the habit of doing my morning workouts while reading instead of watching TV, which has allowed me to cut into my unread books pile.
On my Kindle one recent day, I finished my ride mid-chapter and closed down, and the next morning when I resumed, “The Key Question” was the bold sub-heading that hit me right between the eyes when I rebooted.
Hmmm, I thought, a great and timely blog topic.
What IS the Key Question?
There are SO many questions that we consider every day of our lives, most of them without thinking too much, and many of them of very little consequence.
When you look at the photo accompanying this post, which shows me along with some models hired for photo ops at a friend’s recent office Christmas party, a number of potential questions may come to mind.
I happened to receive this photo by email from my friend the other day, and when I showed it to my daughter, her laughter was all I needed to hear to know that I needed to include it here.
So if the key question is “Why?”, the answer is because I got the pic, I laughed when I saw it, others thought it was funny, so I decided to share it.
If it is a “What” question, however, as in “what is going on in this pic?” the simple facts of “what” along with “where”, “when”, and “who”, have also been addressed, albeit briefly.
“What” and “Why” questions preoccupy much of our lives, but for me, the Key Question for 2017 should be HOW?
I invite you to also consider more “HOW” questions, many of which you may have been subconsciously avoiding.
WHAT, WHY, and HOW
Let’s move this over to the usual subject matter here, that of family legacy.
WHAT you have today, the business, the assets, the wealth, is pretty easy to ascertain factually. You have lots of professional advisors who can help you figure out exactly what you have, in hard numbers, on paper.
WHY you worked so hard to get to where you are, and the sacrifices you made to get here, and the reasons behind many of the tough decisions you made, are mostly things that come from the past, and include many important factors that drove you to succeed.
These WHATs and WHYs are very important, but by themselves, they will not suffice.
The Future is HOW
Every family that has worked to develop sufficient assets to be concerned about leaving a legacy, will eventually get to the stage where their main concern shifts to HOW.
How do we keep this going? That’s why professionals who advise such families don’t talk about succession planning, but instead talk about “Continuity Planning”.
HOW are you going to ensure that these assets will hold together into future generations, thereby sustaining your legacy?
These assets are not simply financial assets, by the way, but also less tangible things like human and intellectual capital, and if you haven’t been paying attention to those, the chances of the financial wealth being enough to hold the legacy together will decrease substantially.
HOW is a Transition, NOT a Transaction
Many families delay even thinking about these key questions for a variety of reasons; they’re too busy making the pie bigger, they think they will live forever, they aren’t sure where to start, etc.
It is complex stuff, and everyone in the family has their own viewpoint. Many professional advisors also have a hard time getting out of their silo of expertise to give you proper big picture advice.
Future blog posts will talk about creating a Family Continuity BluePrint. We will be getting back to the basics of the Three Circle Model, so feel free to read these refreshers:
Stay tuned to future posts for more on making “HOW” the Key Question for 2017 for your family. If you are not yet subscribed, please do so here and now!
P.S. (The facial expression of the handsome guy in the photo seems to convey “How do I get myself out of this?”, doesn’t it?
I am not sure what it is about my brain, but it will often catch a word in one context, completely forget about it for weeks, and then light up like a fireworks show later when that word surfaces again in a different context.
The word will then dominate my thinking for a while, until I write a blog about it. Thanks for coming along for the ride as we deal with this week’s word, “coordination”.
Advisors: Cooperate or Collaborate?
As an advisor to business families, I am forever alert to the goings on in this space, and there’s lots of talk about how professionals who serve families should work less in their individual silos, and much more collaboratively.
I believe in this, of course, yet I am also realistic in my understanding that this is a tall order for many professionals who simply don’t know how to actually do this well, and for whom the short-term negatives will often seem to outweigh the associated positives.
Some like-minded professionals have put lots of work into trying to define the benefits of working collaboratively, as illustrated by this great NAEPC white paper.
I first learned of this document in July, at a breakout session during the annual Rendez-Vous of the Purposeful Planning Institute, where collaboration was shown to go much further than simple cooperation.
Cooperation should be a given between your advisors, but full collaboration may be a step too far for many. There was also some talk about coordination, as an intermediate place.
The word coordination stuck with me, since acting as a “coordinator” is something I already do while working with the members of the family.
Bowen Family Systems Theory
This week, I was in Washington, taking part in the Postgraduate Training Program at the Bowen Center at Georgetown University. Our early morning presenter on each of the three days was Dr. Dan Papero, and as usual he did not disappoint.
He presented some of his views on “Differentiation (of Self) from the ground up”, and along the way, there it was again, the magic word, “coordination”.
The specific context of which he spoke it is now a blur to me, but the jist of the idea was that in a family system, coordination was something to be aspired to. So there it was again!
My head began to spin with the concept of coordinating not just the advisors who work with families, but the members of the family themselves.
Clarity, Clarity, Clarity
The word “clarity” has also been front and center in my brain lately, and it struck me that coordination and clarity have somewhat of a symbiotic relationship.
Wait, what?
One of the biggest hurdles that a family must overcome to get their generational wealth transition “done right” is getting everyone on the same page, i.e. having a shared clear picture of what is at stake and what needs to be done.
When I am asked how I can help such families, providing better clarity is usually my top answer.
Once the picture of what needs to be done is clear, the work of organizing the family’s structures and governance then begins in earnest, but this work does not just magically happen.
You guessed it, that work must be coordinated.
The family’s work must be clear and coordinated, but much like the chicken and the egg, we can never be sure which one comes first.
Back to the Three Circle Model
It is is complex because it combines the three areas of the family, the business, and the ownership (see The Three Circle Model) and these three also share in the “which comes first?” dilemma.
Clarity before Coordination or Vice Versa?
Families who undertake the work required to achieve some family alignment will be better coordinated and therefore be much more clear on the work to be done.
And families who are clear on what needs to be done will find it easier to coordinate this work.
Some families are naturally better at this than others, but most could benefit from outside help.
The families that I had in mind when I titled this piece shall of course remain nameless. Hopefully they do not rhyme with your family name.
Most families are not nearly as coordinated as they could be or should be. Clarity, from an outside perspective, can be an enormous help.
Happy Thanksgiving, Canada
Sometimes these blog posts are inspired by the time of year, and so on this Canadian Thanksgiving weekend I will share some thoughts on gratitude.
But a whole post on being thankful is really not my style, so I will also try to tie in another idea that has been ruminating in my head lately.
Last year at this time, I came across a post on Twitter, the contents of which I have shared verbally with a number of people. It was from David Chilton, author of the Wealthy Barber. (If you ever have an opportunity to hear him speak, do yourself a favour and go).
Spotlight on Gratitude
He posted something along the lines of “If you are healthy and you live in Canada, every day is Thanksgiving”. Amen to that.
Gratitude is a subject that entire books have been devoted to, and I know many people who need to be reminded of just how good we have it sometimes.
We can easily slip into complaint mode too often, with what could best be described as “first world problems”.
Process vs Content, Process vs Event
Last week I wrote about process versus content (FamBiz Conflict: Resolve it or Manage it?) but there is another comparison with process that people in the family business and legacy space like to talk about too, and that’s process versus event. (see Striving for a Succession Non-Event)
My challenge is now to try to tie this in to the Thanksgiving theme in the hopes of adding some coherence to this post. Here goes.
Who Needs Whom More?
When you were born, you needed your parents more than they needed you. As you reach the end of your days, you will very likely need your children more than they need you.
There are exceptions of course, but please bear with me here. Life IS a journey, or a process, if you will. Somewhere along the way in life, the answer to the question “Who Needs Whom More” flips.
Your children need you more when they are young, you need your children more when you are old. But when does it flip? And does it “flip” quickly like a coin, or slowly, like turning around the proverbial oceanliner?
I daresay that it is much more of a process than an event.
You Reap what You Sow
When we were kids, my sisters and I were thankful for our parents, although I am not certain that we expressed it frequently enough. As they grew older, and we matured, I know that they became more thankful for us.
Ideally, gratitude is something that we learn from our parents, and then teach our children. Parenting, manners, how to behave, how we do things in our family; all are part of the legacy and heritage we pass along to following generations.
As any farmer will tell you, as you sow, so shall you reap.
Values versus Valuables
Family wealth succession can be very complex and involve lots of detailed transactions and documents concerning the family’s valuables.
But your true family legacy depends much more on passing on the values of your family.
I hope that gratitude is one of the values that my children have picked up from their parents, I know that I got most of my values from mine.
My kids are teenagers now, but I have been treating them as much as possible as if they are adults for a while now.
Trying not to tell them what to do, trying to make sure that “you’re not the boss of me” is not something that even remotely enters their minds.
Equals versus “One Up, One Down”
Am I doing this because I realize that someday I will need them more than they need me? Perhaps, subconsciously.
My point is that the longer it takes to turn around the answer to the “Who Needs Whom More” question, the better.
A relationship of equals, adult to adult, with nobody in the “one up” position, and nobody “one down” either.
It really never is “Too Late”
It’s never too late to try to make things better, and the outreach can come from either side.
This week I was reminded about the old saying that “the people you meet on the way up are the same ones you will meet on the way down”. I think it applies here too.
Please remember that, you will be thankful that you did.
Families have been around seemingly forever, and some family businesses go back centuries, but the words we use to describe and discuss matters in the field continue to evolve.
Family business as a field of study is still in its first handful of decades, and interest in it continues to grow.
Today I want to add my personal take on a few of the more important concepts, while hopefully updating some definitions for 21st century realities.
After each, there is a link to a previous post in which the subject was also discussed in this space.
“Family Continuity”
Families typically hate discussing “succession planning”. Well, nobody wanted to buy “death insurance” either, so, “Life Insurance” was born, and has become an undeniable success.
So it shall hopefully be for “Continuity Planning” too. It is far more pleasant to think about, talk about, and plan what is going to “continue” (i.e. stay the same) than it is to plan for things “after I die”.
I use “Family Continuity” rather than “Business Continuity” because while the famiy and the business are intertwined, my preferred focus is on the family. I will leave the business continuity matters to other professionals, who are in abundant supply.
See: “Say Goodbye to Succession Planning”
“Enterprising Family”
Most family businesses start small, and as the business grows, more family members can become involved. Other lines of business may follow, as well as more of a focus on the family than on any one business. The family business morphs into a “Business Family”
As this Business Family attitude and behaviour takes hold, in another generation or so, if all goes well, there is a critical mass of assets and people to become what many aspire to be, a multi-generation Enterprising Family.
Many families dream of this, few will achieve it. But you can’t get there if you don’t understand this first.
See “Family Business” Versus “Family Wealth”
“Family Legacy”
There are many definitions of legacy. I like to think about it as “what will we be known for and remembered for”. I say “we” because I strongly feel that it takes a family, through multiple generations, to truly carry out a legacy.
See “Family Business HR – Human Resources, or Human Relations?”
“Family Alignment”
If you want the family legacy, getting the family aligned is a key. Getting them all aligned requires dialogue. Notice I did not say “monologue”?
Two-way conversations, over an extended period of time (months and years) to get everyone on the “same page”, are a must.
There are roles and responsibilities for everyone in an enterprising family, and the clearer these are, the better. But they cannot be dictated from above.
Family alignment must be developed from within.
“Family Continuity Blueprint”
One of the best ways to get everyone on the same page, is to literally get everything on one page.
I have developed a “Family Continuity BluePrint” to do just that. I have shared it on a limited basis with others working in this space, and the feedback is overwhelmingly positive.
It is my own derivation of the “Business Model Canvas”, designed just for enterprising families, who are concerned with building lasting continuity, to ensure their legacy.
See “Planning your Dreams and Dreaming about Plans”
“Multi-Disciplinary Fluency”
Of course any good plan will need qualified advisors to help set it up and to execute it. Combining family, business, and ownership means that it is unlikely that a one-size-fits-all advisor will be found.
Your best bet may be to find one person with the “multi-disciplinary fluency” to hold it all together (thanks to Dean Fowler for coining the term, and John A. Warnick for helping propogate it)
See “Take My Advice: Don’t Take My Advice”
“Trusted Advisors”
This overused term has almost become meaningless. If you don’t trust them, they should not be your advisor. If you are ever concerned that the advice they are giving you serves them more than you, that’s a huge red flag.
See “The Value of a Trusted Family Business Advisor”
Conclusion
Once you have made the decision that you are an enterprising family, and you want to work on family continuity, to ensure your legacy, that’s a big step.
Then it’s time to work on family alignment, using a BluePrint, to get everyone on the same page, literally. Getting help from advisors with multi-disciplinary fluency is key, and so is making sure that their first concern is your family, NOT selling you a product or pleasing their boss.
Ready to start?
There is something about reflecting on the past and dreaming about the future that can get us excited. When we specifically involve our family members in these thoughts, it can be even more remarkable.
Now if only we could make sure that the past memories and future dreams were all positive!
We start worrying about our offspring before they’re born, and sometimes even before they’re conceived. But for simplicity’s sake, let’s say it all starts at birth.
We also worry about what will happen to them after we’re gone. Of course after we’ve passed away, there isn’t really much we can do about anything anymore.
For practical purposes, the moment a baby is born, they become a future heir, and upon the death of a parent, they become the true heir.
During the time when a parent and child are both alive, there are many stages that they go through as they move from “baby” to “heir”.
Not All Distinctions Are Clear
Unlike birth dates and death dates, the movement from one stage to the next is usually less clear. Let’s look at some examples.
When does one move from “baby” to toddler, to pre-schooler? Do these stages always last as long as we hoped, or are they too long, or too brief? Do the child and parent agree on when they moved from one stage to the next?
Some of the periods are quite clear, “high school student”, for example, or undergraduate in college, with specific start and end dates.
There are overarching periods too, like “dependent”, and that one can become a bit ambiguous too. Parents usually say they want their offspring to become independent, but sometimes their actions make it look like they’re unsure how to go about that.
If the family owns a business, there’s a whole new set of stages, like part-time employee, summer intern, full-time employee, whether starting in the mailroom, or otherwise.
Then there are other business roles, like manager, VP, leader, board member, owner, CFO, CEO. Some of the distinctions are clear, some overlap, some do not apply, and a whole bunch of others can be added too.
Business Roles, Family Roles
Outside the company there are even more important roles, even if they do not come with a business card and title.
We don’t like to think about the time when there will be a role reversal, and the child will become the caretaker, and the parent will be the dependent. It is, however a reality that most of us will face. And it might be sooner than we expect.
There is a natural progression to all of this, but it isn’t always smooth, and in fact it can be quite “lumpy”, not to mention bumpy.
If you are concerned about your multi-generation legacy, as I believe you should be, it makes sense for both generations to be on the same page, but often they are not.
I have done some gross over-simplification here as we have gone along, only looking at a one child, one parent scenario.
Yes, I know that things are usually even more complex, involving two parents, and multiple children. My point is that even the one-parent-one-child situation is rarely simple.
I thought about calling this post “From Baby to Heir, and Everything in Between”, but shortened it. I want to highlight that there is a fixed period of time, while both generations are alive, where you can both truly work on the relationship.
Natural Order of Things
The relationship will NATURALLY change, from dependent to caretaker, from child to former child. I like the word “offspring”, as it covers both, and hopefully gets the parents to stop thinking of adults in their 30’s, 40’s and 50’s as “kids”.
The parent goes from leader, in the “one up” position, through a period of “equal” adults, and then finally to dependent, or “one down”.
Not thinking about this doesn’t change it, it only delays your doing what needs to be done.
Are there some relationships in your family that are still stuck in a framework that is no longer suitable, and is unsustainable?
What are you going to do about it? These conversations need to happen, however difficult they are to get started.
“It’s MY way, or the Highway”
That expression is familiar to most people, and if you have ever been around an old-fashioned founder of a family business, it may hit especially close to home.
It’s interesting to note that as recently as a few decades ago, the default reaction to someone making this exclamation has probably changed.
What I mean by that is that in the middle of the last century, a family business leader who demanded that everything be done their way would more often than not succeed in getting everyone to do as they pleased.
In the early decades of this century, however, I would venture to guess that more often than not, they will have difficulty in getting everyone to buy into the “MY way”. So much so that fewer people will even dare utter that phrase.
So what has changed? Well there are a whole bunch of societal changes that have been occurring over the past few decades and it is important to be aware of how they are affecting business families.
Two Kinds of Life Expectancy
People are living longer, and staying productive and healthy for many more years than in the past, and the typical business founder has some difficulty letting go. Decades ago, their offspring could join the family business with the expectation that they would get to a point where they would inherit the business while still young enough to get to do things their own way. Not so much today.
The other kind of life expectancy is a term that I coined here myself, just for this blog. When invited to join the family business, more and more Next Generation members are thinking hard about what they expect out of their life.
Education = Options
Many families who have successful businesses will encourage their children to get a great education, but while they are getting educated, they are also getting exposed to the world of opportunities that such an education affords them.
What often happens is that a number of great options become hard to resist. If the choice is to return to the family fold and fall in line with a parent’s, “My Way”, or to go out and forge your own path, well, at least one of those paths is usually more tempting.
It can be understandably disappointing for parents to discover that a business that they built “for the family” does not seem to have any interested “takers”.
Families with means encourage independence in their offspring, and then lament the fact that they are no longer able to interest their children in being involved and taking over.
No Magic Bullet
At the risk of disappointing readers expecting me to provide a magic bullet solution, “sorry”. But I will offer some words of advice just the same.
It is true that there are more and more good “highways” out there, and if your “former chidren” have found a career for which they have a passion, then that’s probably better than having them come work for you and hate Mondays.
Also, if you have built a sustainable company and do not have any heirs who want to work there, all is not lost. Have you thought about having the family continue to own the business, even after you retire, having it run by professional, non-related management?
If you want to be involved with your children and they have an entrepreneurial spirit that they inherited from their parents but they are not exactly enthralled by your business, have you thought about helping them get started in a business venture in a field that they are passionalte about?
These last two ideas, long term family ownership of the business and starting a new business with and for your kids, are just a couple of ways to avoid the old question of My Way OR the highway.
The Family > The Business
If you have an open mind, and some creativity, you can look for ways to do things “Our Way”, and try a few different highways.
When thinking about the next generation, I always encourage people to be a great parent first, and think about the business second. I hope you see the wisdom of that approach.
…the rain is gone.
Jimmy Cliff was not an advisor to business families, but he certainly put his finger on one of the bigger issues that families are faced with as they try to figure out how to make sure that their legacy makes it to following generations.
It has nothing to do with making the rain stop, and everything to do with CLARITY.
This all sounds so simple, doesn’t it, that making things clear is what you need to do, and if and when you do that, the rest is easy. Well, as important as achieving clarity is, it is rarely easy. But it is an essential first step.
OK, so what are we talking about here? Maybe I need to be more clear. True enough, because I could be talking about a whole lot of different things here, right? Well, yes, and maybe I am.
We are talking about business families, or UHNW (Ultra High Net Worth) families, or legacy families, and we are talking about when they get to the important decisions that need to be made surrounding the passing of their wealth to their succeeding generations.
The senior generation and the rising generation each see things from their own point of view, and a good deal of what they each feel is important will often remain undiscussed.
Let’s now add in the professional advisors to the family, from the accountants and lawyers to the wealth managers, bankers, insurance people and tax specialists.
Each of these trusted specialists also tends to see things from their own professional perspective, and since each one is armed with their own specialist hammer, they will often see every family’s issue as being just their kind of nail.
All of the parties are well meaning, competent, and intent on arriving at the best possible result for the family, because they all know that while it is not easy to beat the odds, this family has just what it takes to pass on their wealth for many generations to come.
After listening to a variety of ideas from their trusted advisors and even the members of the rising generation of their family (who will play instrumental roles in seeing the plans through), the leading members of the family who must ultimately decide on various courses of action are often hesitant to act.
The finger pointing can now begin. The rising genration can point at their parents and blame them for not trusting their children, the lawyer can blame the accountant, the insurance person can blame the tax guy, and Mom can blame Dad.
All along, the missing ingredient was clarity.
Here are just a few of the items that were probably not made clear, either because everyone assumed the answers where understood and agreed upon, or because they required discussing issues that are just no fun to talk about.
Now I never said that making these things clear was simple, and I guess after looking at these questions it is easy to understand why these things get overlooked in the name of action, any action.
But as professionals helping families, we have to do a better job of helping families “see all obstacles in their way”.
