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True wealth management success requires more than financial skills

Though the management of a business family's financial assets is important, the success of the family should also be considered in terms of the members of the family living satisfying and productive lives.

A financial advisor would measure the success of the family business by thriving assets. But handling wealth successfully involves more than financial skills. One must also consider the effect the wealth has on the lives of the family members. For a family to handle wealth well they should apply the following ground rules to both their family and business lives. These rules have been compiled from over 100 interviews with wealthy family members and my ongoing work with many business families in Europe and North America.

Ground Rule 1. Make sure family members understand what money can and can't do.
Wealth cannot substitute for good selfesteem, competence, good relationships and being involved and interested in what you are doing. A wealthy individual needs to know that wealth is not necessarily the key to his or her value as a human being.

Ground Rule 2. Make sure that your family values all the skills and interests of its members, not just the financial skills.
Wealthy families not only have money, they also have people who can become entrepreneurs, inventors, public servants, engineers, doctors, scholars, sculptors, writers, skilled investors and philanthropists. Families that nourish the development of their members' skills, passions and interests are adding to the overall resources of the family. Families that fail to recognise the competence and interests of their members are undervaluing the potential contributions of family members.

Ground Rule 3. Encourage the development of 'skills for life', including the financial competence of family members.
One of the major fears of wealthy parents is that the wealth will destroy the younger generation. Because of this, some parents provide little information about the money until absolutely necessary. Others give their adult children minimum access to, or control of, the finances and fail to educate them appropriately. Members of the next generation receive large sums of money without any idea of how to handle it. Consider the shock felt by one inheritor who described the way she discovered her wealth.

"I didn't know I was going to be receiving money until my mother sat me and my older sister down one day and said, 'I want you to know that tomorrow you will be inheriting a lot of money and here's the statement and the person you should talk to'. "

Jilliene Schenkel, an American wealth advisor, also makes a very good point when she comments:

"We would never give a young adult a car if they had not taken driving lessons. Why do we expect young adults to handle wealth with no preparation?"

Ground Rule 4. Encourage family members to use money in a thoughtful way.
Though your family may be able to afford to spend a considerable amount of money, are they thoughtful about how they use their money?

In this materialistic world where people are surrounded by suggestive global brand images, parents are under considerable pressure to buy their children expensive items such as toys and clothing. Parents may think that the real lessons the children need to learn about wealth can wait until the children are older. The experience of one wealthy mother I worked with is indicative of how parents have to resist the temptation to indulge their children. She refused to buy her daughter a second expensive doll, even though all the child's friends had more dolls, because she didn't feel it was appropriate. Standing her ground, she told her daughter, "Just because we can afford it does not mean that it is right for us to spend that much money in that way".

Other considerations involve donating money to worthy organisations. How do families decide which organisations to fund? What are the criteria they use to make the decisions? How do they evaluate the effectiveness of the organisations?

Ground Rule 5. Work on effective and clear communication skills between family members.
One difficulty for wealthy families is that there is often a reluctance to talk about money. Thus members of the next generation are not told how much money they have, how it is invested, how much control they have over the money and under what circumstances the control and access to the money will change. This makes it difficult to plan. For example, one woman I worked with had moved to a new city recently with her children and had bought a house. She was trying to work out how to budget for the renovations it required. Her family had not told her that the company had made a large distribution of dividends the previous year, of which her share was €5 million. This would more than pay for the renovations, had she wanted to use the money that way.

Ground Rule 6. Don't underestimate the hidden potential talents of your family members, and don't overlook the female family members.
Women are becoming more involved in leadership roles in family businesses and in the management of financial assets. Recently I learned of four women who were invited to chair the boards of family businesses where previously women had not been welcome. Three of these companies were in the USA and one was in Europe. In all four cases, the women brought to the family business interpersonal skills as well as skills they had developed from board work in other organisations. The family business found these skills extremely useful in the core business.

Some families have learned the value of women's contributions following the death of a male family member. For example, after her husband died, Chon Gomez-Monche was asked to become Chairwoman of Gonzalez Byass SA Jerez in Madrid, Spain. Similarly, daughters have risen to positions of leadership in families where there were no sons to take over, as in the case of Antonia Ax:son Johnson of the Axel Johnson Group in Stockholm, Sweden.

Ground Rule 7. Face up to unfinished business in family affairs so it doesn't affect the management of your wealth.
Wealthy families need to be able to work together in the business, on the board or when dealing with joint family assets in the family office. If they are to be successful, they need to be able to respect each other, to listen to each other, to appreciate each other's strengths and to accept their weaknesses. They need to be able to value the different perspective that each member brings and they need to be able to disagree and raise any concerns with each other.

Learning how to get along with one's siblings, for example, is important in all families, and it is particularly important for family members who will work together throughout their lives dealing with the family business and joint family assets. Resentments that are not resolved may fester and often continue from one generation to another, making working together difficult.

In families where issues of identity, separation, respect, independence and control are not worked out in childhood and adolescence, these issues reappear in adulthood, especially around control of money and involvement with the family business. Members of the older generation who have not dealt with their own emotional issues around giving away money or who have their own unresolved issues of identity and self-esteem may have a difficult time giving over the appropriate power to the next generation.

Ground Rule 8. Address the concerns of both the older and the younger generations.
The older and the younger generations in wealthy families often have different concerns and a different outlook when they think about the family's wealth. Lack of awareness of each other's feelings, perceptions and thoughts can lead inevitably to conflict. Understanding what the different generations' concerns are can help to develop solutions that meet the needs of all the family members.

For example, the older generation may not want to turn over money to the next generation when they are young adults, fearing that receiving the money will destroy them. On the other hand, the younger generation may feel disturbed that their maturity and skills are not being honoured or recognised. Discussing the different concerns can allow the family to find a way that works.

Ground Rule 9. Encourage family members to lead satisfying, productive and responsible lives.
This is the most important ground rule of all. The following lessons have been offered by the many people and families I have worked with.

Don't simply live on your money.
People from wealthy business families often have lots of options. They can work in a business, potentially the family business, or a profession. They can commit themselves to some meaningful, though not necessarily remunerative, activity and develop the skills necessary to make it successful.

Those that choose to simply live on their money have lives that are far less interesting and fulfilling than those who make a commitment to something beyond themselves. Successful wealthy families communicate to their children that they expect them to do work in the world that matters to them.

Do work that matters to you, as opposed to work that matters to the older generation.
There is sometimes a conflict in business families between what the older generation wants the younger generation to do with their lives and the desires of the younger generation. While the older generation might expect particular children to go into the family business, one or more might prefer to be a doctor, artist or teacher or work for a philanthropic cause. Increasingly, there are families that understand that in the long run, the family is best served by allowing family members to do the kind of work that matters most to them.

Use your money to act on your values.
Most often, members of a business family share certain values. Having wealth can provide many opportunities to act on your personal values and on the shared family values. Acknowledging and valuing one's connection to others brings richness to one's life. With this connection, comes caring and responsibility for those in one's family, in one's community and in the world as a whole.

Engender philanthropy in the next generation using the following practices.

- Give young people money to give away at the same time that they receive money to spend. Giving money to causes they care about enhances young people's self-esteem and encourages philanthropy.
- Suggest that young people find out about organisations addressing the issues they are interested in.

As young people grow older, some take a particular issue, for example, homelessness or the environment, and will investigate various organisations addressing the issue.

- Work on a joint philanthropic project as a family.

Working together on a philanthropic project can strengthen a family. I know of a number of wealthy families that have given money to Habitat for Humanity and then spent some time helping to build homes for, and with, low-income families.

- Children can participate in the family's foundation, either as observers, advisors or members of a junior board.

When Bob and Wendy Graham started the Namaste Foundation, all their children participated in making philanthropic decisions. Those who were old enough served on the board of directors. Working together on the foundation allowed the children to learn how to evaluate projects, make decisions collectively and experience handling money responsibly.

It is never too late for a family to learn new skills, whether they be financial skills or communications skills. One of the benefits of wealth is having the resources to pay for courses or coaching for family members. It is also not too late to consider involving women or the younger generation in the family enterprise.

Money is a wonderful asset but it cannot substitute for self-esteem, competence and a meaningful, productive life.

Money should be used wisely, irrespective of how much there is.

Families should value all the skills and competences, not just the financial skills, of all their members, both male and female.

Families should develop good communication skills, deal with any unfinished emotional business and take into account the concerns of the different generations.

Lastly, families should be open with each other about the family's financial situation, and financial competence should be developed early. 

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