Why Shouldn’t The Family Wealth Run Like the Family Business?
March 10, 2014
Ask any successful business owner what his cash flows are for that month and he could tell you. How about income statement? Balance sheet? No problem. Succession plan? Done. So when you ask the same of a wealthy family about their personal wealth, why is the answer usually a blank stare? Wouldn’t it make sense that if the family were to apply the same resources and best practices used to create the wealth in the first place, wouldn’t it would make for much more successful management?
Life with wealth often comes with many challenges – applying a business lens to navigate these tricky situations can help increase the likelihood of success (ie: sustaining family wealth).
At a certain level of wealth, there is a critical need for wealth to be managed as a business. Oversight over the whole enchilada to make sure the right hand talks to the left, and the structures put in place don’t have unintended consequences because of lack of communication. Taking a step back and evaluating a family’s wealth from a neutral, independent perspective can lead to a much more favorable outcome.
We’ve seen that there are three general areas of a family’s wealth enterprise® –
- Strategy, Structure & Governance: decision-making protocol, succession planning, estate planning, governance structures
- Wealth Management Activities: financial activities, administration, regulatory compliance
- Ecosystem of Providers: all of the external financial services providers a family works with to execute all their wealth management activities
Most of the critical activities performed on a family’s behalf fall into one of these categories. Any decision being made needs to be evaluated on two fronts: one, how does this impact the family members directly? And two, how will this decision impact the other areas of the family’s wealth enterprise®?
When these areas of a family’s wealth are managed harmoniously, with the understanding that the activities in one can affect (positively or negatively) the other two, a family has a much better chance at beating multi-generational wealth transfer odds and sustaining their wealth.
So why a wealth enterprise®? Applying business lens over personal, family challenges can help to put things in the proper perspective. Read more about the wealth enterprise® and why it’s so critical.
