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Stopping the Disintegration of Family Wealth

I’m writing this blog on US Thanksgiving weekend, and it strikes me that one of the things I’m most thankful for is this weekly project of mine, which has forced me to keep my antennae up, so that I can share fresh thoughts every seven days.

I began this habit in 2012 and while many of the early posts have been dropped as my website moved from one place to the next, this process has been nothing but beneficial for me.

I can selfishly say that even if nobody ever read a single one of these posts, I know that simply writing them has been a useful exercise for me, because it has been essential to the way I integrate everything that I’m learning, reading, and thinking about.

It’s also nice to be my own editor and publisher, giving me free reign over all subjects and how I present them.

 

 

Just One Word as Inspiration

As I’ve done at times in the past, today I’m writing a post that was inspired by one word.

Well, actually, it’s a pair of related words, and it’s the juxtaposition of the two words that created the A-Ha moment that became the spark for this blog.

Those words are:

Disintegrate and Integrate

A few weeks ago I was on a long drive, listening to an audiobook to make sure that I stayed awake, and there it was.

I’m not even sure which book it was anymore, and I don’t know if it was the way the author wrote it or simply the way the reader pronounced the words, but I was struck.

 

 

Cartoonish Disintegration

Something about the word “disintegrate” that had never ever registered in my head was the fact that it is the opposite of the word “integrate”.

Hunh…

I had always had a mental image of disintegration that probably came from watching cartoons.  Picture someone with a ray gun, pointing it at an enemy and pulling the trigger, and they’re reduced to a pile of dust.

If you wanted to put them back together, presumably you’d need to integrate them, or maybe re-intergrate them (?)

 

Family Wealth Disintegration

I typically write about family business and family wealth, and the issues that come with transitions from one generation of a family to the next.

One of the biggest concerns of the Now Generation is always that the Next Generation will not be able to grow or maintain the wealth sufficiently, and that the wealth will eventually disintegrate.

They may not use those words, but that’s a common thread that runs through just about every family whose concern is wealth continuity.

Their top concern may lie in the lack of ability of rising generation family members, it may be that the family is growing faster than the wealth, it could be a stagnating business, entitlement or family discord.

 

 

The Opposite of Disintegration

Back in 2014 I wrote Solid Wealth vs. Liquid Wealth, where I talked about wealth that was “locked in” to an operating business and contrasted that to a post-liquidity event and the challenges around managing liquid wealth.

While I still like that analogy, I think that disintegration vs integration can give us a bit more to sink our teeth into.

So:

If we’re worried about disintegration, why don’t we 

consider ways that we can use integration to counter it?

 

A boat in the water

FOR the Family, BY the Family

A favourite saying of mine is “FOR the Family, BY the Family”.  Let me explain the context of that.

If a family is going to have any chance of having their wealth continue for generations, then they can substantially increase their odds of success by involving as many family members as possible in the plans for how that is going to happen.

In short, the family members need to be integrated into the planning.  That means having conversations with them, which includes more listening than talking.

 

 

Co-Creation Makes Better Plans

I’m not saying that this path is easier than simply dictating all the terms and conditions to them.  I’m saying it has better odds of succeeding.

You cannot expect that this process will all happen quickly or without any bumps along the way either, that’s also true.

But how important is this to your family, after all?

If you fail to integrate those for whom you are planning into the exercise of that planning, you can expect the wealth to disintegrate.

 

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Don’t “Transfer” Family Wealth; “Transition” It

For years now we’ve been hearing about the huge multi-trillion dollar “wealth transfer” that’s occurring thanks to the demographics of the Western world.

As baby boomers age, there’s no escaping the new realities that this huge demographic shift is causing.  But hopefully, we can escape some of the negatives that might accompany it.

I believe that when we think about how a family’s wealth should move from one generation to the next, we shouldn’t be thinking about a transfer, we should be thinking about a transition instead.

 

 

Is It Just Semantics?

I’ll leave it to interested readers to Google these words in an attempt to parse all of their differences, and will instead concentrate on some simple and observable comparisons and contrasts.

The most fundamental aspect to consider is the time that something takes, from start to finish.

When I was a kid, one of my friends moved away because his Dad was transferred.  One day he was working in Montreal, then suddenly, he was transferred to Toronto.

He finished work on Friday in one place and started up his new job 500 kilometres away on Monday.

 

Wire The Funds

If you’ve ever wired funds somewhere you know that one day the money is in your account, and then the next it is not.

Somewhere during the day (usually at around 2 PM for some reason) the funds instantaneously go from one account to another.

They have been transferred. Boom.  Here one minute, gone the next. A single event has happened and is now complete.

When a family’s wealth, including the financial wealth and everything that comes with it, is transferred as a one-shot event, it can be a real shock to the system.

The word “shock” is rarely used as a positive in the area of family business or family wealth.

 

Arrow on wall

 

Slower, Smoother Transition

So what do I mean when I say “everything that comes with it”?

I actually wrote about a few of these details back in 2015, in Transition Planning: No Day at the Beach.

In that blog, I wrote about the transitions of management, leadership, and ownership.

Strictly speaking, a transfer typically deals with the ownership of the wealth.  When someone suddenly owns something, they are then usually expected to also manage it as well.

 

Ownership Is the Big One

One of the problems that can arise with intergenerational wealth is that the ownership sometimes goes from one individual to a group, who are often siblings.

This is where the questions surrounding management and leadership come in.

When more than one person now owns the wealth, how they will manage it, and who will take the lead are also questions that get put on the table.

If the word “governance” is suddenly coming to mind, congratulations, because that’s certainly where my mind is heading too.

 

Respect My Authority

Another related concept that doesn’t necessarily get discussed enough is that of authority.

With ownership of any asset comes certain authority, but it can depend on so many details.

And when you talk about authority, there is of course explicit authority and implicit authority, which do not always go hand in hand.  (Note to self: there’s a whole blog right there!)

Numbers and pie charts

Interdependent Wealth

The distinction between transfer and transition came up for me recently as I continue to make progress on my next book.

My working title is “Interdependent Wealth”, with a secondary title as follows:

How Family Systems Theory Illuminates Successful Intergenerational Wealth Transitions

That’s nine words in a secondary title, which feels like a lot, but I can assure you that a great deal of thought went into each and every choice that I made, right down to the final one, Transitions.

 

A Gradual Handover

It was during the choices I was making about these words that the whole transfer thing really hit me.

On a macro level, society is certainly witnessing a huge transfer of wealth.

But what’s more important to any family is what occurs on a micro level, and families should be concentrating on their wealth transition.

 

Event Versus Process

Bottom line, a transfer is more of an event, or one of many components or things that need to happen.  It is a tactic.

A transition is a process, it is the overall strategy required to make the right things happen, in the right way.

Focus on the whole transition, not just the transfer.

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Caring, Mattering and Meaning in Family Business

Caring, Mattering and Meaning in Family Business

This week I’m going to stay with my recent philosophical slant and write about three related subjects I’ve come across, that all deal with the human aspect of business families.

 

I Don’t Care How Much You Know 

I have some “go to” expressions that I’ve picked up over the years and I sometimes have a tendency to think that they’re universally known.

Then when I pull one out in conversation, I get a reaction that makes me realize how useful it really is.

I used one recently regarding the way experts are sometimes dismissed by their target clients as being too much of a “know-it-all”.

The expression I love for that is:

“They don’t care how much you know until they know how much you care”

 

Stakeholder Lives Matter

A few weeks later, I was reading the weekly newsletter of the Family Firm Institute, The Practitioner, which featured a piece aimed at trustees who serve on boards of directors, by Patricia Annino.

The following quote jumped out at me:

“Human nature tells us that if you can’t matter in a positive way, you will matter in a negative way because what is most important is to matter”.

I’m not sure that I ever heard it put that way before, but it really struck me.

The next sentence is also worth quoting, because I don’t think I could paraphrase it any better:

“Human nature also tells us that most people strive for recognition. Having voices heard and questions answered are critical to the ongoing dynamic.”

 

Part of the “One Big Happy Family”

Being part of a business family can be tricky at times.

There’s a group of people, with a common family bond, each with different interests, talents and abilities.

There are also lots of roles to play, in the business, in the family, and for some people, in both.

And at the end of the day, every single one of them

wants to, and even needs to, matter, in some way.

 

Purpose and Meaning

A few weeks ago I heard Kevin McCarthy, author of a number of books about “Purpose”, speak at a conference about family wealth.

He had a great quote right off the top of his presentation that struck me too. Here it is:

“The Enemy of Wealth is Meaninglessness”

Wow.

For some reason another expression that came to mind immediately was this one:

“The opposite of love is not hate, it’s apathy”

 

“Frenemies”?

I don’t know that I fully agree with the word “enemy” in McCarthy’s quote, but I know what he was getting at.

And that’s the fact that people without meaning will quickly destroy wealth, if they have access to it. So in that sense I guess “enemy” works.

But if we look at some opposites, would that make “meaningfulness” the “friend of wealth”?

I’m not sure I’d want to have to make the case for the correlation between meaning and wealth.

 

Wealth OR Meaning?

What happens if we look at the question of which one people would choose, if offered a meaningful life without wealth or a life of wealth without meaning.

I’m tempted to guess that many would quickly opt for the wealth without giving the question much thought.

I’m also inclined to think that many people who made that choice would soon regret it.

 

And For Your Offspring?

Sometimes things can be clearer to us if we remove ourselves from the equation, and instead ask what we would choose for our children instead.

So if you could offer your children a life with lots of meaning, or one with lots of financial wealth, which would you choose for them?

Of course, most people would hope that their kids would end up with both, but I think that too many people likely believe that if you have the financial wealth, the rest will take care of itself.

 

Not So Fast

I know for a fact that there are many members of families that are very comfortable financially who do not feel like they have a lot of meaning in their lives.

Those same people likely also don’t feel like they matter that much to their family.

And if that family has advisers who are great at their specialty, those family members likely don’t care how much they know.

Financial capital is always the biggest focus, but families should worry much more about their human capital.

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Questions of Discernment in Family Business

Questions of Discernment in Family Business

 

Discernment: Noun

  1. The ability to judge well
  2. Perception in the absence of judgement with a view to obtaining spiritual direction and understanding (in Christian contexts)

This week’s blog is sponsored by the word “Discernment”.

Okay, so that’s not literally true, as there are no sponsors of this blog. Maybe I just had a little Sesame Street flashback, and should have said that it’s “Brought to you by the letter D”.

I keep a file of blog ideas and every couple of months I put together a calendar of topics. This is the first time that I’ve noted my subject idea with a single word, i.e. discernment.

 

Bowen Family Systems, Spring Conference 2017 

Discernment first popped onto my radar screen over a year ago, in Washington DC at the Spring Conference of the Bowen Center.

Murray Bowen’s theory has eight concepts, but the one he called “Differentiation of Self” is both the “biggest” one, and one that people have the most trouble truly understanding.

Some Bowen fans, myself included, tend to explain it to newcomers as “emotional maturity”.

At this conference though, some speakers proffered the word “discernment” instead.

Hmmmm, maybe they were on to something. But I also wonder if most people “get” discernment right off the bat.

(See: A Systematic Business Family? for my blog on that event.)

 

Definitions

I began this post with the definition that I got when I Googled “discernment” and found it both sufficient and interesting.

“The ability to judge well” is a great start to understanding what I’m getting at, and I feel like it fits with the “emotional maturity” part too.

Number 2, “Perception in the absence of judgement” almost threw me off at first, but then it made me flash back to my post “Judgement, Not Judgement” from back in 2016.

The take-home message there was that having good judgement is laudable, but being “judgemental” is not.

The spiritual and Christian angles also intrigued me.

 

Questions to Help Understand Discernment

In order to get a handle on discernment and how it applies to business families, let’s look at some basic questions and examine them from a discernment angle.

I’ll start with questions requiring low levels of discernment, and then move along to those that call for higher and higher levels.

 

– “WHAT” Questions

Asking about “What business are we in?” or “What markets should we look to enter?” are simple and relatively straightforward for any business.

They are also necessary to consider from time to time.

They require good business sense, but don’t necessarily require much in the way of discernment.

 

– “WHO” Questions

Then there are questions about people, like “Who should we hire?” and eventually “Who should take over when Dad retires?”

Now the need for discernment gets ratcheted up a bit.

And in some sort of “meta” way, we are looking at judging people about their judgement!

Once you get into questions about people, things usually get a bit trickier, and emotional maturity is often called for to make the right choices.

 

– “WHEN” Questions

Those “Who” questions can be tough, but so can those around timing, like “When should we start working on succession?” and “When should we start having family meetings?”

Regular readers will quickly recognize my bias around these topics, and that’s okay too.

As long as we’re on the topic of my biases, let me be clear that my preferred answers to those questions is always sooner rather than later.

There’s a certain maturity required to start tasks that have been kicked down the road long enough.

Combining “Who” and “When” questions, well, now we are getting into the area of “How”.

 

– “HOW” Questions

To me the types of questions that require the most discernment are about “How”, like “How do we make sure we include everyone?” and “How de we make sure we follow through on all our plans?”

I’m reminded of the expression “Ideas are a dime a dozen”, which is all about simple “What” questions.

Execution and implementation are the key to making any idea work, and that’s where you need people with discernment.

A “good sense of judgement” requires plenty of maturity and wisdom around the all of the “Who”, “When” and “How” questions that are part of getting things done.

 

Whose Discernment Are You Counting On?

If you’re a family business leader, and you’re hoping for your family and business to be successful in the long run, finding people high on the discernment scale should be a priority.

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Who Messes Up What, Or What Ruins Whom?

Who Messes Up What, Or What Ruins Whom?

This week’s post is one that I’ve been looking forward to writing for a few weeks now, ever since I had lunch with a colleague and relayed this story to her.

It was her reaction that made me realize how simple and yet how powerful it really is.

Considering that I’ve been writing this weekly blog for over five years now, I can’t believe that I haven’t written about this yet.

 

Credit Where It’s Due 

Before telling the story, I should note that I would love to give credit to the person who told the story when I first heard it, but I really have no clue who it was.

It would not surprise me to learn that it was during one of the weekly teleconferences of the Purposeful Planning Institute, because those calls have inspired many of these blogs.

In any event, it’s one of those stories that has probably been played out in various versions hundreds of times, all over the world.

So my version isn’t a true, “verbatim” recounting, but more like a parable.

 

I Worked Hard for All of This

A successful businessman is meeting with one of his trusted advisors, as he begins to think about how he’s going to deal with the considerable wealth he has built up.

He mentions how hard he’s had to work for what he now has, and then adds,

“And I don’t want my kids to screw it all up”.

This part of the story likely sounds pretty familiar to many professionals who work with clients who’ve built up large amounts of wealth.

It’s not unnatural for anyone to be concerned that the fruits of their labour might be squandered.

 

The Other Side of the Coin

Later in the discussion, likely in response to a question posed by the wise advisor, the man has a bit of an awakening, and says,

“But I don’t want all my wealth to screw up my kids, either”.

If you’ve read even a few of my blogs, you already know that this was the true “A-Ha” moment of the story for me.

 

The Bad News First

The bad news is that so many professionals who work for such wealthy clients are really only specialists in solving the first part of the problem.

Finding ways to create bulletproof structures to preserve wealth is nothing new for many specialists who pride themselves on how they can minimize taxes, and restrict how the wealth will be used by its intended beneficiaries.

Unfortunately, too many clients are too short-sighted to see that this will also produce many unwanted side effects for their family down the road.

 

Now the Good News  

The good news is that there are now more and more people who understand that only worrying about preparing the assets for the heirs leads to sub-optimal results.

And not only that but people are now also realizing that this is not a question of either worrying about preserving the wealth OR preserving the family and their relationships, it’s actually possible to do both.

 

It’s Not Either/Or, It’s Both/And

In fact, by concentrating on the second part, and making sure that the offspring will be prepared to receive the wealth, you will increase the chances that the family will be able to maintain and even grow the wealth in future generations.

I’m reminded of a blog I wrote a few years ago, Successful Planning: Who Should Be Involved?

It contains the profound quote,

“Plans that are about us, but don’t include us, are not for us”.

That is a verbatim quote, from a different context, but it fits perfectly here too.

 

FOR the Family, BY the Family

It starts with someone recognizing the importance of this. That could be a member of the family, or it could be a wise advisor.

Long-term planning at it’s best is truly long-term, i.e. inter-generational.

If that wealth is to serve multiple generations of a family, the sooner the members of the following generations get involved, the more likely they will be successful.

 

Efficient or Effective?

You could simply worry about the preservation of the wealth, and create rigid structures that are tax efficient and ensure that some wealth will be available for future generations.

That would certainly be more efficient.

But if you want your plan to be effective, get the

younger generation involved as early as you can.

You won’t regret it, and neither will they.

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Your Response Is Your Responsibility

Your Response Is Your Responsibility

This week’s blog is a bit on the philosophical side, as opposed to practical. Then again, some people may think that’s just par for the course for me.

I’ll be sharing some of my thoughts on things relating to one’s responsibilities in a business family.

I’ve been thinking about this piece for a while, I’ve got lots of ideas kicking around, and they’re coming at me from different places, so let’s get started.

 

Your Responsibility

The first place this came up for me occurred a few years ago while reading about some family members who expected to reap the benefits of being part of a family business, but who didn’t necessarily realize that there was another side to that coin.

That other side, of course, is responsibility, because you shouldn’t expect to get all the positives without contributing anything yourself.

Unfortunately, as often as there are next-generation members who expect something for nothing, there are just as many occasions where the parents never tried to instill that sense of responsibility either.

 

Respond, Don’t React 

I’ve also been writing about working on my personal ability to slow things down, and “respond” to a situation or comment, rather than shooting from the hip with a “reaction”.

I’m actually just waiting for someone to ask me for “my reaction” to something so that I can reply that I prefer not to share my reaction, but would rather take a moment to reflect so that I can provide “my response” instead.

 

Response + Ability = Responsibility

Taking things further, I recently saw a video on LinkedIn, where a speaker was explaining that each person should actually feel compelled to respond to situations to the best of their ability.

The man recounted that he and his wife had taken in several physically challenged foster children because they “were able to” so they felt it was their responsibility to do so.

While I applaud people like that, I believe that they’re truly very rare, and I know if suggested we all go that far, I’d likely “lose” a lot of you.

 

Strengths Finder

I’m a big fan of the Strengthsfinder tool that has you do a quick survey and then gives you your five greatest strengths.

I’ve completed it a couple of times now, a few years apart, and the strength of “responsibility” showed up as part of my Top 5 both times.

To me, doing what needs to be done, especially when you said that you would do something, is not something that is negotiable.

 

My Response

So let’s get back to the title of this post, and get into the “my response” part a bit more.

The particular scenario I have in mind is one most of us have seen before, and if you’re part of a family business or work with business families, you’re probably pretty familiar with this too.

Some family members who work together are having a meeting, or just chatting together when one of them gets triggered and “goes off” on the other.

What happens next can make or break the way this will go.

 

What’s My Part in This?

It would be so easy to “react” in the same old way that we always have, and likely ratchet up the anxiety level and make things worse.

Instead, what I’m suggesting here, is rather than sharing our reaction, we take a couple of deep breaths and instead share a response.

That simple pause, combined with a reflective “what’s my part in this?” can change the direction that this interchange seemed to be going towards.

 

Easier to Blame Others

True, it’s easier to blame the other person for everything that has ever gone wrong in a relationship.

But, if you want to change how things turn out going forward, you know that there’s really only one person that you can actually change, right?

We are each responsible for our own responses.

We can simply react like we always have, and things will likely keep going down the same path.

Or, we can try to refrain from quick reactions and instead offer up a more appropriate response

My favourite way to remember the key distinction is a medical one.

When the doctor says you’re having a “reaction”, it’s never good.

When you begin to “respond” to a treatment, it’s usually a good sign.

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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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Family “WealthCo” Opportunity Knocks

Family “WealthCo” Opportunity Knocks

A couple of weeks ago I travelled to Toronto to attend a one-day investment conference aimed at Family Offices.

As someone who used to be interested in the nuts and bolts of investing my family’s investment assets, I used to attend a lot more of these events

I had a bit of a flashback as I listened to speakers talking about the future direction of the S&P500, and what the Fed was expected to do with interest rates.

But I let out more than one contented sigh of relief, as I also recognized that I have now found more interesting things to occupy both my mind and my time.

The Family Office aspect of the conference thankfully added some more interesting ideas to the agenda.

 

Liquid Assets

The first noteworthy take-home message that I got from the day came from the very first panel.

On stage were a number of investment specialists, all of whom are charged with providing investment vehicles and advice to a number of family offices and families of wealth.

Most “family offices” are formed after a “liquidity event”, in which a substantial business asset is sold by a family, creating a pool of capital available for investment in other assets.

 

The Family “WealthCo”

One panelist (whose name escapes me, otherwise I would happily credit him) noted that when he has a client who experiences such an event, he makes sure that they do not become complacent.

Too often (and I have seen this up close myself) when a family sells an operating company and winds up with a proverbial “pile of cash”, they think that things are now going to be so much easier.

They wrongly believe that they’ll be able to become “Do-It-Yourselfers” for much of what they’ll now need to manage.

The speaker related that he always insists that these client families realize that whereas they previously had an “OpCo” (operating company), they were now the proud owners of a “WealthCo”.

This WealthCo requires diligent leadership, qualified people, and formal procedures and governance, just like the OpCo did.

His message is worth keeping in mind, and I’ll certainly be using his term going forward.

 

Opportunistic Opportunities

During the same panel, I got another interesting “blog-worthy” tidbit, and this time the fact that I don’t recall the speaker’s name may be a plus.

Speaking without notes, someone was talking about evaluating opportunities, and used the adjective “opportunistic” and then searched for the right noun to complete the phrase.

He eventually ended up uttering the phrase “opportunistic opportunities”, to a mild chuckle. I note this not to make fun of someone on stage searching for the right word (been there, don’t that) but because his “expression” made me realize something important.

 

Not All Opportunities Are Created Equal

The point that was driven home for me is that not all “opportunities” that are presented to us are in fact “opportunistic”.

In fact, one of its biggest challenges a family “WealthCo” faces is the careful selection of which opportunities to pursue.

As someone who’s selected some very good opportunities over the years, I must grudgingly admit that I have made a number of poor choices too.

And if you think that you’re qualified to “cast the first stone” as the exception, then I must either congratulate you, call you a liar, or suggest you scan your memory bank again for some examples.

 

Diligence and Governance

Earlier I noted that a WealthCo requires procedures and governance, and I know that it’s tempting to really enjoy the newfound freedom that comes with putting liquid investable assets to work.

There can be a tendency to see many opportunities as being much more “opportunistic” than they really are at first glance.

You need to force yourself, as a family, to look at your family wealth as a “WealthCo”, that needs to be managed and governed in as serious and diligent a manner as you ran your former OpCo.

 

Think (and ACT) Like a Family Office

In my book, SHIFT your Family Business, Chapter 9 is called “Think Like a Family Office”. The WealthCo idea takes it a bit further, and actually suggests that you “Act Like a Family Office” too.

WealthCo is just another way of saying it. However you say it, just don’t get complacent with the newfound freedom liquidity brings.

Govern yourselves accordingly.

Next Week: I’m looking forward to the first ever Guest Blog post here next week. Kim Harland will be supplying a guest piece here, while one of my original blog posts will be going to her subscribers.

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Liquidity Events in a FamBiz: Pros and Cons

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.

Read more

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5 Things you Need to Know: Family Inheritance

Family Inheritance

While few people actually relish thinking about the details of the inheritance they will leave their family when they die, most do spend at least some time wondering how to make sure that things will go well among their heirs.

We’ve all heard of families where relationships were harmed, sometimes beyond repair, as the result of how this important question was dealt with. If you do not want to be one of THOSE families, please read on.

Also note that these are five things everyone should know and understand, but that doesn’t make them an exhaustive list of important considerations, or even a “top 5 list” for every family situation. This blog should never substitute for legal advice for your unique family situation.

 

  1. Big or Small, the same issues arise

You don’t have to have a net worth in the gazillions to be affected by the potential negative fallout from poor decisions in this area.

Siblings have been known to never speak to each other again as the result of parental decisions that were made that surprised everyone, even in cases where the inheritance barely covered the cost of the funeral.

Rule 1: Don’t assume that there isn’t enough to worry about

 

  1. A WILL is Key

It should go without saying that every adult needs a will. Unfortunately, statistics show that many do not.

Many people who don’t likely assume that they have plenty of time to take care of it, you know, “later”. There are cemetaries full of people who guessed wrong on the question of exactly when they were going to die.

You need a will, and it really should be current. A good rule of thumb is to review it every five years.

Rule 2: Make sure you have a legal will, no excuses!

 

  1. A Will is NOT Enough

Now if you have your will in place and are thinking you are in the clear, well, sorry, we still have (at least) 3 more items here!

You have decided to leave certain assets to certain people in a certain way, and it’s all written up legally in a will. Here is the important question: do the people who will inherit your assets KNOW what they will be inheriting?

At least some form of basic communication is absolutely essential. If you haven’t already done so, please make sure that everyone understands what is going to happen. If you can let them all know together, at the same time, even better.

Letting them assume, and having different people understand different versions of it is a sure recipe for trouble.

Rule 3: Your heirs should know what is coming

 

  1. “Pre-Mediation” Can Make Sense

When a dispute goes into mediation, parties are brought together, and along with a neutral third party, they examine everyone’s interests and work towards a satisfactory conclusion.

The idea of pre-mediating is to put the scenario on the table with the parties before it actually comes into play.

The main point is that if you leave things to your heirs in the way you planned, AND that will cause problems after you are gone, why would you not want to re-adjust while you still can?

If this idea scares you, then that is a sign that yours is actually precisely the kind of situation that could most benefit from this.

Rule 4: Play out the details while you still can

 

5 “Surprise” is NOT a Good Thing 

I have heard Tom Deans (author of Willing Wisdom) speak several times. He describes the sound that many lawyers tell him they’ve heard from at least one surprised heir at the reading of many a will.

It is difficult to convey in writing, but imagine a gasp with an audible “aaargh” or “euhhhh”.

That surprised sound from any of your heirs is NOT what you should be going for.

Rule 5: Let your family grieve and celebrate your life, not shake their heads in disbelief.

 

If you know someone who should be thinking about these questions but may have been avoiding them, please feel free to forward this to them. You will both be glad you did.

 

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