Shifting FamBiz Time Horizons

Shifting FamBiz Time Horizons

Family businesses are known for looking at things from a much longer time perspective than larger, publicly traded companies.

They aren’t concerned with how their decisions will affect their next quarterly earnings release, and instead focus on how things will look in a quarter century.

 

How Fixed Is a Time Horizon?

The long-term view can stay the same for decades, but sometimes events occur that make changes desirable over a much shorter timeframe.

One of my continuing roles in managing our family office is handling the asset allocation to various professional outside investment managers.

We recently decided to divest one position and I was surprised to learn that there would be an early withdrawal penalty for not having held it for the 5-year minimum.

Hmmm, I wondered, why had I not noticed that back then (it’s been over four years)? Simple, at the time it did not seem like it could ever be an issue.

Things change…

 

Time Flies

In another sphere of my life, a couple of years ago I was in Boston with the family, and we went to the Harvard bookstore to look at their swag.

I curiously asked my kids if they’d ever thought of attending that school.

I’ve since done campus tours at most of the Ivy League schools, plus a bunch more, with both of them, and yet in a few months that important chapter of my life will also be behind me.

How could my focus change so quickly? It feels like just yesterday we were looking at daycares.

 

Teens, Seniors and the Sandwich

Maybe it’s just that I’m part of the sandwich generation, with two teens and an octagenarian mother who depend on me.

During those life stages, a few short years can change many aspects of one’s life.

But every family has people at various ages and life stages, and that’s part of why business families are so complex.

 

Family Life Cycle

If you read some of the books around family wealth and making it last over generations, you’ll surely come across authors who talk about “100 years” as a timeframe to consider.

I have to admit, when I first saw this a few years ago, I thought it would be difficult for most people to grasp.

Heck, I was working in this space, and I was having trouble wrapping my mind around it.

I’m pretty sure I “get it” now, but I’m not sure if it’s because I’ve become used to hearing it, because I’m a few years older myself, or because I’ve “matured” into a different life view.

 

Legacy Families 

If you want to learn from families who’ve been successful in transitioning wealth from one generation to the next, and done so more than just once, well, you almost have no choice but to look at those who have lasted a century or more.

At the recent Institute for Family Governance conference, one speaker mentioned that a 20-year investment time horizon for a family might be considered “short term”, and I agree.

But if I want to look at things that way, first I need to almost be able to remove myself from the equation.

I now realize that maybe the investment we were divesting shouldn’t ever have been made because it did not fit such a long time horizon.

 

My 100-Year View

Or maybe for my family, a 100-year horizon isn’t appropriate, because our family never quite reached the wealth level necessary to become a “legacy family”

Maybe another lesson here is that it’s easier to help some other family deal with these questions than it can ever be to look at this for your own family.

It’s really difficult to look at these kinds of multi-generational issues when you and your life are part of the equation.

It’s much easier for me to draw out your expected lifespan and matter-of-factly talk about how things will look decades later. Doing that for me, um, not so much.

 

Not Fun? Doesn’t Mean You Don’t Need to Do It!

Realizing that things are complex and potentially not fun does not absolve you of the responsibility to actually take care of important things, though.

Thinking about the importance of this is the first step to getting started. Now go and find someone who can keep you on track.

Then together you can take the steps needed for a true 100-year plan.

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