If you’ve amassed sizable wealth, or are on the right path, it may be time to consider how to pass that on to children and grandchildren without harming their futures and destroying family harmony.
Family wealth — how it’s managed, transferred and used — can generate major drama among family members. As wealth grows, so does the potential for that money to foment conflicts and bad financial decisions that can reduce a family’s financial position and even ruin intra-family relationships forever.
We can look to the strategies used by today’s ultra-wealthy families to avoid or mitigate such negative outcomes — and find ways to adopt similar strategies in our own families, says Bob Bove, Wealtth Advisor & Certified Exit Planning Advisor at The 4:8 Group.
Smart Business spoke with Bove about why family meetings are critical when transferring wealth.
How can family meetings facilitate successful transfers of wealth?
One of the most effective tools harnessed by the ultra-affluent is the family meeting, educating heirs and potential heirs about sound financial decision-making, to identify shared family financial values and maintain and grow family wealth in a unified manner.
Family meetings can help avoid the problems that can arise when inheritors lack preparation to manage the money prudently. Regular meetings can also help families keep wealth together, which allows being able to access high-minimum investments and leveraging a larger fortune to lower the cost of financial advice and services. The underlying objectives are family cohesiveness, superior management of the family’s future across generations and the preservation and growth of wealth. The family meeting provides a venue for multiple generations to discuss financial matters. Common topics include:
- Promoting financial literacy in inheritors
- The family investment philosophy
- Family philanthropic values and activities, and how they are financially supported
- New business ventures and funding them
Family meetings are where a family’s values and mission are discussed and honed. Governance structures are addressed and refined. In many cases, family meetings are great settings to plan the steps needed to prepare the next generation for leadership.
What are the steps to a successful family meeting?
The more specific and refined the goals, the better. Create an agenda, delineating what is to be discussed and what decisions can be made. Get input from all involved family members. By taking suggestions from everyone, you are more likely to achieve the desired group results.
Second, the focus should be the goals and agenda. Therefore, it is usually wise to mitigate day- to-day distractions, for example, by holding the meeting away.
How can an outside professional help achieve success?
The most effective meetings have an outside professional involved as a facilitator. This individual will help address the more complicated and difficult issues and keep the discussions on track and focused on the end goals and action steps.
The facilitator helps ensure all family members are involved and contributing, and can help mitigate conflicts. Third-party professionals commonly include attorneys and accountants, wealth managers and multifamily office senior executives, family business consultants and life coaches.
Typically, action-based to-do steps result and need to be turned into formal projects, with milestones and clear expectations about who will be accountable for specific steps. Also specify how actions will be tracked and reported back to the family.
The final step entails determining the degree of success attained. Based on assessment of the outcomes, new actions to help reach the stated goals are identified. These can be a refinement of current actions or a different approach entirely. Moreover, the results always factor into the goals and agenda for the next family meeting.
Every family has its own dynamics and traits. Thus, the process can be modified depending on the aims of the family. ●
INSIGHTS Wealth Management is brought to you by The 4:8 Group.
