Q: How do we protect the next generation from blowing our money?

A: Stop right there. Whether you have created or inherited the wealth, the language of the question reeks of a power, control and mistrust dynamic.

Many families either hang on to their wealth or setup structures to prevent their children from “blowing it” (which is often controlling from the grave). Yes, it’s awkward having discussions about estate planning and family wealth, and who wants to talk about their own death?

A friend once said: “Procrastination is caused by fear. Don’t try to ‘learn’ how to stop procrastinating, find out what you’re really afraid of“. It might be fear of death, fear of losing control, fear that children will not do what you expect of them, fear that divorce might lead to a loss of the wealth, or something else (or all of the above). Understanding those fears is an important barrier to overcome.

Successful families have had a willingness to be open with each other about the wealth that they’ve created, and not wait until death to leave everything to their heirs. Legacy is about passing on values and life skills to the next generation. If that is done well, the money (while it may be significant) becomes secondary.

Consider This: What are you waiting for? What are you afraid of?

Original articles: https://naples.floridaweekly.com/articles/tips-to-prevent-your-kids-from-squandering-their-inheritance/, http://www.williamsonherald.com/features/business/commentary-consider-training-your-family-to-handle-inheritance-properly/article_1b04fd32-66ad-11eb-bdef-a3dab823138b.html, https://www.bloomberg.com/news/articles/2021-02-17/how-to-talk-to-your-family-about-money-inheritance-and-wealth-to-avoid-fights, https://www.kiplinger.com/retirement/estate-planning/601269/how-do-we-protect-the-next-generation-from-blowing-our-money, https://www.thisismoney.co.uk/money/pensions/article-8494985/Parents-hoarding-wealth-avoid-children-losing-divorce.html

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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post The Fear of Wealth Transfer appeared first on David Werdiger.

source https://davidwerdiger.com/2021/04/wealth-transfer/

Many families struggle with the ‘why’ of their wealth. Defining a philanthropic strategy is a great way for a family to articulate a purpose for their wealth. However, only 20% of families have a formal process for doing so.

At the start of COVID, there was concern that financial pressure on families would lead to a reduction in philanthropy. But in a recent survey, 43% of respondents said that the pandemic had not altered the way their family thinks about or acts when it comes to contributing to the community and wider society. The pandemic has also been effective in turning many families’ attention to the inequalities closer to home, which has led to an uptick in local giving initiatives.

The rising generation of family business leaders have been the driving force behind families increasingly integrating philanthropy into their business practices. Families are also using philanthropy to engage and educate their rising generation in the family business, and starting to think in a more holistic and cohesive way.

Philanthropy is a great entry point for young children about wealth – according to some it can start as soon as the child says ‘mine’ for the first time. Some experts encourage families to structure a three-part allowance for children: spending, saving, and giving. 

But philanthropy is not a panacea that will lead to fighting family branches uniting around a common theme and singing kumbaya. Conflicts between family members or branches can actually be aggravated through highly emotional discussions around giving. Tread carefully, and first build a foundation around shared values.

Consider This: Is family giving a source of conflict in your family? or something that brings family members together? Do you give with a strategy or is it more scattergun? Are you inculcating the giving culture in your family into younger family members? 

Further reading: https://mg.co.za/opinion/2021-03-09-few-wealthy-families-employ-a-philanthropic-strategy/, 
https://www.campdenfb.com/article/next-generation-takes-philanthropy-heart-family-business, 
https://www.wealthbriefingasia.com/article.php?id=189213#.X7NUQ3AzaUk, 
https://mibiz.com/sections/small-business/experts-see-short-long-term-shifts-with-family-business-philanthropy, 
https://ssir.org/podcasts/entry/giving_across_generations_maximizing_impact_through_family_philanthropy#

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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Philanthropy: COVID & beyond appeared first on David Werdiger.

source https://davidwerdiger.com/2021/04/philanthropy-covid/

Successful entrepreneurs are often control freaks. But they can’t control whether their children can take over the business or the assets and keep them growing.

Entrepreneurs may be visionaries, but sometimes it takes an external advisor to identify choices that they might otherwise overlook. Transferring full control of an operating asset to children isn’t the only option. Neither is continuing the way things have always been done just for the sake of it.

The drive towards impact and ESG investment is running in parallel with the generational wealth transition. The stereotype that it is just young people who are interested in ESG investing is quickly becoming out of date. Often, parents say that they support this investment choice but when they were setting up the business in the beginning, their focus was on profitability. A common interest in environmental, social and governance investing can help parents and advisors connect with the rising generation.

That said, a change in investment approach driven by the rising generation can be a source of conflict, and needs to be handled judiciously.

For effective wealth transition, it’s important for families to learn how they can create value together through increased understanding of each other and a shared vision of their family’s future.

Consider This: What has your family done to raise the next generation of entrepreneurs? Are you able to deal with “Dad: I have a great idea – can I have a million dollars to invest in it?” Has your family experienced intergenerational conflict over investment decisions?

Original articles: https://entrepreneurship.babson.edu/power-of-entrepreneurial-family/, https://www.marketwatch.com/story/how-to-know-if-your-children-are-ready-to-take-over-your-business-2020-10-20, https://www.ft.com/content/dea5e5d1-8650-4819-aecc-699b612419aa, https://www.ftadviser.com/investments/2020/12/10/who-is-making-the-esg-investment-choices/, https://www.ftadviser.com/investments/2020/11/25/how-esg-can-help-succession-planning/

[Reposted with permission]

Actionable Generational Wealth Succession: For more in-depth, thought-provoking discussion points and commentary on family and business, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Environmental, Social and Governance Investing for NextGen appeared first on David Werdiger.

source https://davidwerdiger.com/2021/04/esg-nextgen/

What proportion of your family wealth is tied up in the operating family business? According to Camden Research’s recent report, succession is a greater priority for families than wealth preservation. Of the two, succession is surely the harder to achieve.

While we all push cliches and statistics about the survival of family businesses over three generations, perhaps we should be broadening our perspective? A family operating business is one store of wealth for a family, and one which is capable of employing multiple family members.

Another phrase currently doing the rounds is “business family” – a family whose wealth is well diversified and includes a number of operating assets. Such a family must focus on establishing strong governance for their assets, including rules by which family members can be involved in the operating assets, or draw on the family wealth to start new ventures of their own.

Such a structure, done well, is far more robust from a succession perspective, as it allows children who may not want to join the family business (and this is an increasingly common phenomenon) to do their own thing and still be part of the family asset base.

Consider This: Do your children want to follow in your footsteps? Have you ever asked them? Are your parents pressuring you to follow in their footsteps?

Original articles: http://www.campdenfb.com/article/succession-beats-wealth-preservation-top-priority-families, https://www.inkstonenews.com/business/chinas-big-family-businesses-lack-succession-plan/article/3000444, https://www.sunstar.com.ph/article/1782733/Cebu/Business/Soriano-Is-it-a-family-business-or-a-business-family

[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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Business Family Succession Strategy appeared first on David Werdiger.

source https://davidwerdiger.com/2021/04/business-family-succession/

Advisors don’t spend enough time thinking about their own succession and exit planning. Like most people, many are too involved in the day-to-day work. But like family businesses, exit planning for advisors is not just a financial transaction, but is also the chance to leave a legacy. 

The wealth management industry is ‘old’ – the average age of financial advisers today is about 55, with 20% of them 65 or older. Why? Because most of them have been servicing the incumbent generation of wealth holders. A similar profile would apply to accountants and lawyers servicing this group.

Research shows a mismatch between the ‘opportunity’ advisors see in the incoming intergenerational wealth transfer and tangible steps taken to address it. The wealth transfer poses a risk both for families and advisors., and both groups need to be aware of it and plan accordingly.

But who advises the advisors on managing this? I have been following this niche issue for a number of years, and will be launching a series of products including educational, knowledge base/community, and specialist consulting to advisors and their firms.

Consider This: Families: have you had an open discussion with your advisors about their ‘parallel’ transition? Rising gen family members: are you comfortable with your parents’ advisors becoming yours? Advisors: are you aware of the risks and opportunities to your business with the generational wealth transition? Have you formally assessed this?

Original articles: https://www.wealthprofessional.ca/news/industry-news/helping-advisors-pave-the-path-for-succession/331963, 

https://www.forbes.com/sites/forbesfinancecouncil/2020/07/27/the-psychology-of-a-retiring-advisor/?sh=53daca6f57a6,

https://www.kiplinger.com/retirement/601878/your-financial-adviser-wants-to-retire-too,

https://www.napa-net.org/news-info/daily-news/what-are-biggest-practice-issues-advisors,

https://www.ftadviser.com/your-industry/2020/11/19/advisers-slow-to-address-wealth-transfer-opportunity/,

https://www.journalofaccountancy.com/news/2020/dec/succession-issues-surge-at-accounting-firms.html

[reposted with permission]

Actionable Generational Wealth Succession: For more in-depth, thought-provoking discussion points and commentary on family and business, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post The Cobbler’s Children go Barefoot appeared first on David Werdiger.

source https://davidwerdiger.com/2021/04/cobblers-children/

[repost; still relevant today] The pandemic is not over, but after a year, we know a lot more, and there are reasons for hope. There are feelings of ambiguous loss, of knowing we can’t go back (and perhaps not wanting to), but missing who we were and what we had “before”.

As 2020 draws to a close, we may be catching up with family, in some cases after being separated for a long time. It is a time to celebrate being able to reconnect, but also to recap all the *(&^$ we’ve been through during the year.

Grief is a process, and in order to come out the other side of it, it is important to actually grieve. We can do this both individually, and as families. Rather than have COVID talk dominate our family gatherings, it might be helpful to formally acknowledge what we have lost during this year. At a family gathering, you might go around the table and have each person briefly review the impact of COVID during the year on them, and on the family at large. Once that it done, you could agree as a group to formally close the book on 2020, and take a fresh positivity into the coming new year.

Consider This: Has your grief over COVID been continuous throughout the year? Has every meeting started with a mandatory rant about COVID? Have you thought about both the positives and the negatives? Have you thought about how life might look for you and your family post-COVID?

Original article: https://rojospinks.medium.com/2020-will-never-end-unless-you-grieve-it-71910e183c3c

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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Grieving Through COVID appeared first on David Werdiger.

source https://davidwerdiger.com/2021/03/grieving-covid/

A successful wealth transition means the family stays intact and they maintain control of the assets. Ideally, you’d like both. Some families can only achieve one, and some end up with neither.

People often setup their estate plan so that it will avoid tax and preserve wealth, but they’re really not paying attention to the impact of their plan on the next generation. The biggest risk to their assets is not the market or the business or even the competence of the people they have supporting them. It’s actually the people sitting around the dinner table. If they can’t function as a family, then it may end up losing both the family relationships and the family wealth.

Give with a warm heart or a cold hand? It’s a parent’s prerogative on how they plan to spend and gift their wealth. However, with people living longer and a lack of planning around proper wealth transfer, many people are receiving their inheritance at the wrong time in their life. One benefit to beginning the gifting process early is being alive to see how your children benefit. You can watch and support/advise (you may want to ‘advise’, but your children may want and need your ‘support’) them on taking risks, making key purchases and enriching their lives 

Poor communication is the cause of most failed succession plans. Despite death being one of the few certainties in life, it’s amazing how difficult some people find it to talk about it. Being transparent and open about money with your family and the responsibilities it conveys can be a valuable education piece for your children.

Families don’t just inherit wealth, they inherit the same patterns. It’s also important to be aware of the patterns (positive and negative), and whether they are helping or hindering family members.

Consider This: Is your wealth transition plan ‘just’ an estate plan? What is more important (if you could only have one): being a family or a group of co-owners? How much do you ‘invest’ (with a long term outlook) in each of those?

Original articles: https://www.fool.com/investing/2020/08/21/how-you-can-ensure-next-gen-is-ready-for-wealth-tr/, https://www.wealthprofessional.ca/news/industry-news/what-do-the-wealthy-worry-about/333641, https://www.bloombergquint.com/gadfly/parents-shouldn-t-wait-to-pass-down-wealth-to-children, https://cyprus-mail.com/2020/10/04/perils-of-wealth-transfer-to-children/, https://www.forbes.com/sites/forbesfinancecouncil/2020/10/30/dont-overlook-these-two-pieces-of-your-wealth-transfer-strategy/?sh=4d49333c397f, https://www.moneymarketing.co.uk/opinion/we-must-get-comfortable-talking-about-death/, https://www.financialexpress.com/money/succession-planning-for-family-business-patriarchs-must-transform-from-leaders-to-mentors/2114781/

[reprinted with permission] full article repost

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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Considerations for Wealth Transition appeared first on David Werdiger.

source https://davidwerdiger.com/2021/03/considerations-wealth-transition/

There are several good reasons why family enterprises should care about making active efforts toward gender equity. If they want family members to be involved, their talent pool is limited, so why waste 50% of their potential? A more diverse leadership team will reap the same benefits that have been noted in the non-family business world. Finally, family cooperation, collaboration and harmony are important to families, so excluding women from paths to leadership can lead to resentment and conflict.

In general, the family business world appears to be somewhat behind the corporate sector in explicitly considering issues of gender equity. There is variability across the world, and it is apparent that cultural norms play a strong role.

Some examples: only 7% of senior management positions in the 100 biggest firms held by German families are women, and the top people managing those firms are mostly male, German and advanced in age. In India, women-led family businesses have increased by 58% since 2007. In the US, married women 45 and younger are twice as likely as older married women to make the financial decisions in their families, which is partly due to women marrying at later ages than their parents’ generation (note that these studies are not directly comparable as they don’t all focus on family enterprises).

Another portion of the US study measured unconscious bias in the financial advising industry and found that while most advisors have “good intentions,” they are still more likely to make (incorrect) assumptions about the investment knowledge and risk appetite of women. Researchers used live eye tracking technology to measure how long a financial advisor spent making eye contact with each partner in a heterosexual couple and found that advisors, regardless of their gender, spent 60 percent of the meeting focusing on the male partner.

Consider This: Do the women in your family have roles in the family enterprise? Do they want to? Have they been asked? Are education opportunities within the family applied equally to males and females?

Original articles: https://www.forbes.com/sites/prudygourguechon/2019/01/16/how-family-businesses-can-take-the-lead-in-achieving-gender-equality/#4520f2916f6e, https://www.dw.com/en/german-family-owned-businesses-still-male-and-conservative/a-53739934, http://www.businessworld.in/article/Breaking-Through-The-Patriarchy-Women-Calling-The-Shots-In-Family-Business/02-08-2020-303553/, https://www.nbcnews.com/know-your-value/feature/younger-women-are-twice-likely-make-their-families-financial-decisions-ncna1238859

[reprinted with permission] full article repost

Actionable Generational Wealth Succession: For more in-depth, thought-provoking discussion points and commentary on family and business, access my Familosophy newsletter archives: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Women in Family Wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2021/03/women-in-family-wealth/

If you couldn’t bear to watch Megan Markle bare her soul to Oprah (or if you couldn’t look away from it, and from the endless commentary that followed), here are two practical things you can actually take from the latest episode of this saga:

1. There are serious challenges to growing up in a wealthy family with a public profile. The weight of expectations is heavy, and finding identity and meaning can be difficult. Marrying into such a family has similar but slightly different challenges.

One of the hardest issues is: who can one talk to about this? Who can genuinely understand the experience, show empathy, and be a helpful sounding board? I don’t think this can come from a televised interview and the opinions of the social media masses. As my good friend says: “the poor want to be rich, and the rich want to be happy”. People without wealth or fame see them as a panacea that will solve all their problems. People with them understand that they come with their own problems.

However … 2. There is an intergenerational narrative here that has struck a chord with some younger people. A stodgy old institution deeply rooted in colonialism and vestiges of racist culture being exposed publicly (by a whistleblower) and forced by external pressure to change and adapt to the times. That is a similar script to the #MeToo movement and other such exposures of established cultures.

This is not the forum to discuss how a royal family stays relevant in a changing world. However, this same narrative plays out in many families, where the rising generation challenges established cultures. Those families need to build their own intergenerational bridges, and work out how to adapt and remain relevant to their own emerging stakeholders, both born and married in..

Consider This: Do the members of your family have a support network that provides empathy and a safe space to vent? Are they comfortable with their “privilege” and able to see both the positives and negatives? Is your family able to openly discuss and challenge family cultural norms?

Original articles & further reading: https://www.telegraph.co.uk/women/life/meghan-millennial-hero/, https://www.psychologytoday.com/us/blog/your-brain-work/201203/has-coddling-entire-generation-children-set-them-fo, https://www.npr.org/2016/09/13/493615864/when-it-comes-to-our-politics-family-matters, https://www.nestegg.com.au/retirement/11590-intergenerational-imbalance-the-central-problem-of-our-time, https://www.thenational.ae/opinion/comment/everyone-suffers-when-younger-and-older-people-don-t-mix-1.811571

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: www.transitionbook.co/member-area/

Photo source: Creative Commons 2.0 #familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Megxit II: The Interview appeared first on David Werdiger.

source https://davidwerdiger.com/2021/03/megxit-ii/

Q: We have three non-family board members in their 70s on our family board. How should we handle moving them on?

A: The composition of the family board is a careful balance between family members & independent voices, and maintaining regular turnover is very important. Often, families will establish a board with some family members, the family lawyer & accountant, and perhaps some other trusted advisors. But without due attention to the board composition, the group can remain static for a period of time, until they suddenly realise it’s time to bring in some fresh people and energy. What is required is a board succession strategy.

This involves analysing the mix of skills, ages, tenures and backgrounds that the board needs now and in the next few years (bearing in mind any anticipated major events the family expects to be dealing with during that period). That should be compared with the current composition, which can help identify any gaps. Open discussions with each board member individually as well as collectively are essential so everyone understands their role on the board, and how long they would like to continue there. People generally find it easy to join boards and committees, but hard to leave them.

While in the corporate and non-profit worlds, a common limit to board tenure is 6-10 years, families are different and terms can and should be longer. Family and ‘corporate’ memory are more important on family boards, and provide essential value and context, especially in times of crisis. That said, a board stacked with a bloc that has been there for 20+ years can be a barrier to necessary strategic renewal.

Usually, board composition falls to the chair. But in family boards, the chair may not have those skills, and it can therefore be helpful to bring in a specialist to assist with a regular review process.

Consider This: Do you track board tenure and skills for your family boards? Have you ever openly discussed board member’s plans to leave the board?

Further reading: https://www.forbes.com/sites/forbescoachescouncil/2019/05/29/the-second-commandment-of-family-business-succession-create-a-board/#594c014529ea, https://insight.kellogg.northwestern.edu/article/family-businesses-adapt-next-generation, https://www.bizjournals.com/bizjournals/news/2019/07/18/being-fair-but-not-equal-divvying-family-business.html, https://www.forbes.com/sites/matthewerskine/2020/06/29/succession-planning-and-the-professional-management-of-family-owned-companies/#1e19236e4272

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: www.transitionbook.co/member-area/

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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The post Q&A: Board Succession Strategy appeared first on David Werdiger.

source https://davidwerdiger.com/2021/03/board-succession/