Cary Stamp: Preserving Family Harmony In The Wealth Transfer Process
One of the great lessons I have learned from my membership in Vistage is that you should always have a “back-up” plan. What should we do when a key employee departs? How would we handle succession in the event of a pre-mature death? Fortunately, many of us have addressed these issues as business owners and some have addressed this with their family with regards to how to transition the family wealth. Unfortunately, the planning we have done for our business and the time we have spent preparing our employees is usually far more comprehensive than the effort we make to prepare our families for the eventual transition of our business, wealth and values.
Communicate: The Key to Successful Transitions of Family Wealth and Values
The statistics are staggering on this subject and they cross generational and cultural boundaries. For families that acquire significant wealth, that wealth is almost always dissipated in 3 generations or less! Over 90% of the time this is true. We will often spend time doing strategic and technical planning to save taxes or optimize the amount that can be passed to our beneficiaries but how much time and effort goes into training the beneficiaries to be good heirs and stewards of our fortune? Usually, very little is communicated and when a generation passes, the children are left with substantial money but few skills to manage the financial capital of the family.
We would advise that the training of family members be approached in a manner similar to how a successful business plans and trains their next generation of talent. Wealthy parents should share their knowledge and values with their children. They should also give the children some insight into the type of wealth they will be required to shepherd. This begins with a clarification of the family values and ideally a family mission statement. In many cases, the first generation has skimped and saved to start a successful enterprise but the second generation has never felt lacking in any material sense. This can often lead to the false impressions that the resources are unlimited and preservation of the family wealth should be a simple task.
The academic and anecdotal research on this subject has found that the answer is simple: COMMUNICATE. Parents need to speak with their children about their estate and succession plans. Children need to be willing to assist in the process by embracing the family values, showing a willingness to lead and, by acquiring the work experience and intellectual capital (education) to carry the family into the next generation. Communication of family values and family history also has the effect of reducing the feeling of entitlement in the younger generations. Many business owners are the first generation of their family to have financial resources. They were raised with experiences that were very different than what their children experienced.
One of the most effective communication strategies is to hold an annual family meeting. This is not a “DIY” undertaking. At most family meetings, the services of an experienced facilitator is vital. This can be a highly trained financial advisor or a therapist that has the knowledge to tackle family business issues. In many cases, it should be a team of both a financial advisor and therapist. The meeting should be held on neutral ground, outside of the family home or corporate offices. All stakeholders should be invited and the facilitator will work with the family to set the agenda. The first meeting will normally last anywhere from 5-8 hours and cover a broad range of topics including the succession plans, family philanthropic efforts, developing a family mission statement and a discussion of the family history.
When families implement a few simple steps, we have witnessed major breakthroughs that have brought the parents closer to their children, the children closer to each other and helped ensure successful transitions of family wealth and values.
Who is Cary Stamp?
Cary Stamp is a Vistage member and speaker. He counsels families all over the country on wealth management and transition issues. As a Vistage Resource, he focuses his speaking on how you can make an impact on the lives of your children and grandchildren by carefully stewarding the family wealth. He is a CERTIFIED FINANCIAL PLANNER, Accredited Estate Planner and Chartered Advisor in Philanthropy. Raised in Iowa and now domiciled in Jupiter, Florida, he has been a practicing financial advisor since 1990.