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"Whose Money Is This?" Part 3: Defining Values

Ensuring wealth is a force for good, in a family and the world, is a team sport. Start training client families now.

Answering the question “Whose money is this?” before it is too late is essential to a successful wealth transition in which relationships remain intact and the next generation maintains control of their assets.

According to the Family Business Institute, 30% of family business transitions succeed, which means 70% of those businesses—and the accompanying wealth transfers—fail.

To investigate why 70% of family businesses stumble, we surveyed 3,250 families. We discovered that transitions to the next generation occur more smoothly when the following three conditions are present within a family:

  1. Heirs are well prepared;
  2. Relationships among family members are based on trust and affable; and
  3. Families define their values and are proactive in planning their wealth.

In the first two installments in this series of articles, we’ve looked at preparing heirs and discussed how to build family relationships based on trust. In this final installment, we'll tackle the importance of defined values and proactive planning and attempt to sum up how building each of these three factors into your clients' family wealth-transfer process can answer the question, “Whose money is this?”

Define Your Values and Proactively Plan Your Wealth Transfer

A brother and sister were expected to run the family foundation together. Their mom was sure it would be a great way for them to learn to work together for a noble cause. However, they were terrified at the prospect. The brother was deeply religious, worked in a labor-intensive industry, did not want to accept money he did not earn and had very different ideas on how it should be given away. The sister declared herself an atheist, dedicated her life to nonprofit causes, had no trouble asking for money and had nearly opposing views on how it should be given away.

Once the siblings were able to articulate their individual values, they began to understand each other more deeply. This allowed them to come up with a strategy to give to meaningful causes they could both support. Once clear on the family values, they were able to also align on how the family resources would be used in their daily lives—for example, what they could expect to be paid regarding education, health care and living expenses. Having a clear understanding of their values gave them the scaffolding needed to align on the actions they each wanted to take in their individual lives. This mutual understanding set a new model for future generations.

In another family we worked with, the youngest son was labeled the black sheep. At 27 years old, he spent his time hanging out with his friends and playing video games. His relationships to his siblings and parents had become increasingly distant, and his desire to engage with the outside world was diminishing. The family was concerned he was drifting endlessly and not in alignment with the family value of contributing to society.

Finally, when he was asked at a family meeting why he was not coming to family events, he announced that he was sick and tired of everyone telling him what to do. He was frustrated that everyone in the family had a direction, and he was not “launched” in a role of contributing to society, which was an important value in the family.

He said every time he suggested an idea, it was shot down, or someone had a better one, so he just stopped trying. He was overwhelmed at the idea of finding his “passion,” and nothing seemed like a worthy enough pursuit.

One of the coaches asked him, “If you had free rein to try something, without any promise of it being successful, what would it be?”

He said he’d always been interested in commercial real estate, but he felt no one would take him seriously. So his brother-in-law, who ran a construction company, invited him to accompany him to work for a week and see if there was something there. One year later, the son is continuing to build his competence in real estate and preparing a proposal to make an investment with his father.

Both families lacked a set of family values and mission statement, which guide every decision the family makes.

It is ideal for everyone in the family to co-design the family values and mission statement. Naming the family values is a powerful way to put expectations into measurable, observable standards. Telling the stories that shaped your values, inviting them to tell theirs and then finding alignment among them creates the scaffolding that supports the family identity. Even though family members grow up in the same house, they all can experience different perspectives about significant moments in the family’s history.

Dinner-time conversations, even when the kids are young, shape a family’s values. Talk about how the family resources are applied in meaningful ways. Invite conversations about what the next generation cares about. Once you have defined your family values, it is easier to plan proactively for the future.

One family we worked with took a trip to Africa. While there, the 8-year-old learned there were elephants in need of care. She started a bake sale in her grammar school to save the elephants, and her efforts continued for many years.

In another family who came into sudden wealth, the 6-year-old was asked, “If you could do something good for the planet, what would it be?”

She said she would like to save the sea turtles and create a place where they could go to get well. The family is exploring sea turtle sanctuaries.

Defining your family values enables everyone to know who they are, where they come from and what they are striving to achieve. Understanding the family values enables the next generation to more easily cultivate what is meaningful for them.

A family value of “contributing to society” becomes something more than mom and dad donating to the zoo. It becomes a way for them to feel good about themselves and belong to the larger collective in ways that are meaningful to them. While they may not need to earn an income to support their lifestyle, they do need to have a sense of purpose and a direction so they can see they are making a contribution and that they matter.

Whose Money Is This Anyway?

The sooner you invite the next generation to discuss the question and engage their ideas, the more runway they have with you to learn to manage the family wealth.

“Prepared heirs” are those who understand their role of being good beneficiaries. They navigate their relationships well, have a strong sense of purpose and see how they can contribute to the family resources.

At the center of the question is trust. Do you trust them to manage the family’s wealth well? Do they trust you to transfer it well? The answer to those questions lies in your ability to start the conversations while you still can. That may require adding more skills to the trust and communication toolbox and possibly bringing in a third party so you can be assured the conversations will go well.

In trust-based relationships, people are able to speak truth to power, feel safe to express themselves honestly and have the skills to co-design a future that works for them.

Achieving that outcome will require you to define, articulate and align actions with the family values, roles and responsibilities so you can set an actionable course together in support of the use and purpose of your family resources. Proactive planning requires listening to the voices of the next generation while the decision-makers are still on the right side of the daisies. It means the next generation has a say in how the family wealth will affect them and how they can contribute to the legacy.

You will have a legacy; whether or not you intentionally shape it is up to you. Ensuring your wealth is a force for good in your family and the world is a team sport. Start training your family now.

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