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Five Steps to Grow Family Wealth for the Long Term: Part 1

Long term family wealth preservation has never been more important. Low interest rates, slow wage growth, economic dislocation and disruptive innovation are making capital preservation more vital than ever. Avoiding wealth entropy is a critical imperative for the high net worth client and their advisors. Using a purposeful and long-term approach to sustaining and growing all sources of family wealth will preserve the family’s bounty for generations to come. It takes effort, a thoughtful guide and time. It will be worth every bit of time and treasure to create your own abundant estate.

 

I recently authored a two part series on Advisor.ca entitled Five Steps to Grow Family Wealth for the Long Term: Part 1

Chris Delaney, B.A., LL.B., B.Ed., TEP, FEA is the Author of “The Naked Opus: Growing Your Family Wealth for the Long Term”. He is a Professional Speaker, Lawyer and Family Wealth Strategist focussing on helping families and their advisors grow true family wealth for the long term.

He can be reached on twitter @FEAdvisor and @NakedOpus. Please also visit www.nakedopus.com for additional contact information.

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Five Steps to Growing Your Family Wealth for the Long Term: Part 2

Intergenerational wealth planning is a process, not an event. It takes time, effort and resources to construct capacity to grow and sustain wealth across generations. Process teaches the next generations to appreciate the sources of their family wealth and how it was earned and created. It is not merely a series a meetings that results in a document followed by no further interaction. It is a dynamic and intergenerational process that is constantly writing and rewriting the family wealth script.

This is fundamentally a long-term approach to the wealth as “patient capital”. It requires a long view of the sources, purpose and potential of the family wealth. Effective communication, regular family meetings, an understanding of shared family values and goals, and some system of decision-making are important requirements.

A growth-oriented mindset is a strategic mindset. Create a process designed to reveal your family’s goals and objectives and successful strategies and tactics will follow. In “The Naked Opus: Growing Your Family Wealth for the Long Term” I identify the SMRT strategic engine. After creating a family mission statement, a good process might include:

  • Success in the achievement of the mission is made possible by identifying key personal and family goals;
  • Meaning is brought to goals by setting clear objectives to break the big goals down into smaller, achievable steps;
  • Recipes for action are established when strategies are created to achieve the objectives;
  • Things that will be done to execute on the strategy are tactics.

Too often, estate planning starts and finishes with the things that will be done before any consideration has been give to what success will look like and how meaning will be brought to the plan. The cart is truly in front of the horse.

I recently published a second article in Advisor.ca entitled “Five Steps to Growing Your Family wealth for the Long Term: Part 2″. I hope you enjoy the piece.

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Four Reasons Intergenerational Wealth is Destroyed in Three Generations

I recently posted an article on Advisor.ca entitled “Four Reason Intergenerational Wealth is Destroyed in Three Generations”. Here is the link to that article.

More information is available in “The Naked Opus: Growing Your Family Wealth for the LongTerm” available in single copies or e-book at Chapters/Indigo, Amazon.ca and Amazon.com

 

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Six Things About Millennials That Could Damage Your Estate Plan

Millennials and Intergenerational Wealth Transfer

Family members who became adults around the turn of the century in 2000 are Millennials. Today, these people are fast approaching their fortieth birthdays and their parents, typically, are entering their late-60s and early-70s. Millennials are the “next” generation when it comes to intergenerational wealth planning. They are also the ascendant and rising group in family enterprise business transitions. Successful family wealth succession (or transition) demands an understanding of their disposition, needs and goals.

Millennials are often characterized by a lack of institutional loyalty or attachment. They also tend to transition and change their employment on a more frequent basis than their parents and grandparents would ever have dreamed. In fact, a recent report from Gallup Inc. suggested there were six major functional changes ahead in relation to the disruptive influences Millennials would have in the future. Understanding some of these changes will help make purposeful intergenerational wealth planning more successful.

The changes summarized in the report were:

1. They don’t just work for a paycheque – Millennials seek purpose;
2. They are pursuing personal development over job satisfaction;
3. They don’t want bosses or people that tell them what to do – they want coaches;
4. In employment, they don’t want annual reviews but instead prefer authentic and regular conversations;
5. Work is not simply a job, it is an expression of life choices and purposes;
6. Millennials are less interested in shoring up weaknesses than they are in developing their strengths.

This latter observation was identified as the most profound in the survey. The authors state “Gallup has discovered that weaknesses never develop into strengths, while strengths develop infinitely.”

Consider this conclusion in the context of your own estate planning or business continuity planning. Many people consider wills with incentive clauses to encourage the development of better behaviour around money management, relationship choices or career and education commitment. This research suggests that is the wrong approach and that, instead, you should be focussing on the strengths of the inheritor and investing in those qualities.

Investing in the strengths of a person, while being mindful of their weaknesses, is effective and purposeful estate planning. However, it is a rare estate plan that features strategies and tactics coordinated on the investment of the strengths of the family’s human capital. Yet, it is well understood that investing in the human, social and intellectual capital of the inheritor and the family in general is the greatest purpose for financial capital. It is also a key method of ensuring that financial and other sources of family wealth are able to survive into the third generation and avoid the old adage “shirtsleeves to shirtsleeves in three generations”.

I will address more of these findings in later posts. However, it is worth noting that every one of them highlights the transition from top down “do as I say” approaches to more collaborative and holistic methodologies and processes. This also has fundamental implications for all planners including philanthropic gift planners, insurance agents, private bankers, lawyers, financial advisors, family business consultants and accountants. Relationship management will be about taking the time to truly understand core values, develop mission direction and a strategic intergenerational wealth plan based on purpose.

Chris is the author of “The Naked Opus: Growing Your Family Wealth for the Long Term”. It will be available in Chapters/Indigo on August 24 and elsewhere soon after. For speaking, facilitation and more information visit www.nakedopus.com

 

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How to Avoid Shirtsleeves to Shirtsleeves in Three Generations with Family Wealth

Most estate planning virtually guarantees your family wealth will be destroyed before it can transit to the third generation of your family. The familiar adage “shirtsleeves to shirtsleeves in three generations” is as true for intergenerational family wealth transfer as it is for business families. The first generation creates wealth, the second stewards it and the third squanders it with frequently sad outcomes for the loved ones.

The causes of wealth destruction are deeply rooted in how we view our family’s true sources of wealth, the amount of effort we exert and methodology we use to plan our estates and the communication practices within our families. We also plan only with the short-term in mind and ignore the powerful, dynamic intergenerational forces that are fundamental to long-term wealth succession.

Understanding that financial wealth is a servant of other sources of family wealth is critical to developing strategic plans that will ensure family wealth survives across many generations.

The other sources of family wealth wealth include a family’s intellectual, social and human capital. Once these are identified they can be invested in and grown from one generation to the next. This purposeful investment of financial capital creates a virtuous circle of family wealth stewardship, entrepreneurship and legacy

What do we mean by intellectual, social and human capital?

It takes effort to identify these sources of family wealth is a ket step in strategic intergenerational wealth planning.

 

The Naked Opus: Growing Your Family Wealth for the Long Term suggests a five step process for growing family wealth for the long term. It’s a flexible model that can be manipulated and retooled to fit the authentic planning needs of every family.

It starts with communication and values, builds towards alignment around mission and features The Abundant Estate with the SMRT strategic engine for family wealth decision making.

Chris Delaney, B.A., LL.B., B.Ed., TEP, FEA is the Author of “The Naked Opus: Growing Your Family Wealth for the Long Term”. He is a Professional Speaker, Lawyer and Family Wealth Strategist focussing on helping families and their advisors grow true family wealth for the long term.

He can be reached on twitter @FEAdvisor and @NakedOpus. Please also visit www.nakedopus.com for additional contact information

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Grow Family Wealth: 5 Things Advisors Can Do to Succeed

 

The intergenerational wealth of a family is at risk unless an advisor understands the causes of the “shirtsleeves to shirtsleeves” experience that destroys wealth by the third generation. We will explore all of these various causes in a series of separate blogs but, for now, here are five top things that advisors can do to grow a client family’s wealth for the long term:

  1. Adopt an Abundance Mentality;
  2. Take a close look at the process you have for your clients. Try to take the client’s perspective and ask yourself “who is this process really serving, ME or the CLIENTS?
  3. Examine your circle of allied professionals and ask yourself the same question- “How do we function as a multidisciplinary team to serve our clients?” ;
  4. Identify your top 20 client relationships – take 11-20 and ask “What do I really know about these clients and what their planning goals really are? Be fierce about discovering their true motivations!!
  5. Create a strategic process intergenerational wealth planning model for your clients – start at values and goals then proceed to tactics

Let’s examine each one a little more closely.

Adopt An Abundance Mentality:

The fact is that most advisors and their clients view the world through a lens of scarcity. It’s human nature and we all do it unless we have carefully designed processes to improve our decision-making analysis. Advisors fear losing clients or the wealth of a client while clients fear losing their financial wealth more than they are able to focus on it’s abundant, long-term potential. In fact, as Daniel Kahneman and Amos Tversky suggested with Prospect Theory, most people substantially fear a loss over a similarly sized gain. Fearing loss results in stilted and tunnel-visioned planning that misses the opportunity for growth and abundance in client estate planning.

Instead of the tunnel vision of scarcity, advisors should help clients develop a decision making process that features the abundant estate potential of every financial situation. We should ask, “where are the opportunities to invest in and grow our family’s human, social and intellectual capital?”.

Whose Needs Does My Process Serve?

Checklists are an incredibly useful tool to ensure that the essential steps of a critical process are followed. They remind us of small and key steps that can easily be forgotten. However, checklists and best practices are usually prepared by the advisor and applied generically to every client. The perspective of the checklist is that of the advisor. It is often a process of ticking boxes to protect the advisor’s interests.

Ask yourself some basic checklist testing questions:

  1. What is going on that has brought the client here today?
  2. What questions would a client ask of me but which are not on this checklist?
  3. What could go wrong in this situation which isn’t revealed by the answers to the questions on my checklist?
  4. What assumptions and beliefs not revealed from the checklist, if proven incorrect, will destroy this plan?
  5. Have you dug in deep enough? Did you dig in at all? Did you ask fierce and difficult questions that tend to be uncomfortable but which create planning breakthroughs as the client’s real needs and fears are finally exposed?
  6. Did you ever veer from the checklist or best practice out of curiousity?

Remember, a good checklist is not the end of the discovery, it is just the beginning. And, a best practice for a family is only the one that is best for them.

My Multidisciplinary Team

Clients, especially the high net worth, are expecting and receiving integrated multidisciplinary experiences from their advisory teams. The rise of single and multi-family offices is a testament to the truly aligned potential of an advisory team. It works very well for everyone involved. In fact, research suggests that advisors experience increased business through a commitment to engaged team collaboration.

Building your own team or developing your skills at being a collaborative and a high functioning team member is, in part, about adopting an abundance mentality and enhancing your processes to respond to authentic client needs.

Build From Within

Your best clients are the ones you already have on board. They chose you and have stayed with you through the great moments and the trying times. Have you made any effort to discover the real reasons for their loyalty and commitment? Why did they choose you? What is your value proposition with every client you manage and advise? Is it a commodity or is it strategic?

Understanding your own goals and values is essential to building connectivity across the generations of family wealth. Clients will understand the importance of planning for their family wealth as a values-driven process if you can explain your own mission in life and work. The law of attraction suggests that referrals will be better and your multidisciplinary professional team will be deeper and stronger if your purpose is at the core of your abundant-minded business model.

Build this process out onto your clients starting with your bench. Typically, your top clients are already likely to get your most frequent and regular attention. The next tier, maybe 11-20, are still part of your pareto-efficient book analysis for future growth and value. Create a new, authentic and purposeful process for them to help with their intergenerational decision making in all aspects of their family wealth.

Build a Process for Helping Your Clients Grow Their Intergenerational Wealth

The Naked Opus: Growing Your Family Wealth for the Long Term suggests a five step process for growing family wealth for the long term. It’s a flexible model that can be manipulated and retooled to fit the authentic planning needs of every family.

It starts with communication and values, builds towards alignment around mission and features The Abundant Estate with the SMRT strategic engine for family wealth decision making.

Chris Delaney, B.A., LL.B., B.Ed., TEP, FEA is the Author of “The Naked Opus: Growing Your Family Wealth for the Long Term”. He is a Professional Speaker, Lawyer and Family Wealth Strategist focussing on helping families and their advisors grow true family wealth for the long term.

He can be reached on twitter @FEAdvisor and @NakedOpus. Please also visit www.nakedopus.com for additional contact information.

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Collaboration and Communication Are Vital:

The dynamics of intergenerational wealth planning require communication capability to effectively share values, goals and objectives. Every family communicates but often not regularly or very well. Purposeful family meetings, sometimes facilitated, will create skills in the family so that authentic strategies and effective tactics can be developed by their skilled advisors.

Professional advisors that function in a collaborative manner with other trusted advisors will enjoy a planning synergy that further enhances the long term sustainability of the wealth. Smart collaboration means an estate planning lawyer, tax advisor, insurance professional, investment professional and family wealth strategist/family enterprise advisor that can work together towards the best interests of their common client.