When you think about your family dynamics, do you have a feeling of unity? Specifically, that level of harmony within your family that can offer the greatest opportunity for generational success.
Preparing your family for the future is important, particularly if you own and run a family business that you hope to pass to future generations. Business owners utilize a variety of techniques to create unity among employees, such as offsite retreats, team building exercises, and creating mission statements.
How do you develop that same sense of cohesion on the home front? Your role as family leader is to build unique, strong, and confident children who can work together, whether it’s to continue a family business or preserve your family’s legacy. How do you prepare the next generation to deal with wealth-related issues, and address the concerns of entitlement, low self-esteem, and a lack of motivation?
Focusing on the following four areas may be a good way to start building your strong family dynamic:
Education about the family’s wealth
Talking to your children and educating them on the family’s wealth can be difficult. Start by asking yourself the following questions:
- How much information about the family’s wealth is enough for heirs to know without destroying their motivation or creating a sense of entitlement?
- When and how do you tell your children what the numbers are, and when they will have access to the money?
- How do you bring spouses into the family in a way that allows them to feel welcome, while, at the same time, getting them to sign a prenup before the wedding?
- How do you prepare your children to be responsible stewards of your wealth?
Once you know what you are willing to share and when, you can begin to foster open channels of communication and encourage an open dialogue about a sensitive subject.
Most family disagreements are not about the issues at hand, but rather, how the information has been communicated among family members—or not communicated at all. A communications test can be very insightful and can reveal the communication styles of each of your family members. More importantly, you will learn how to change the styles that may be creating a negative impact, in turn enhancing group decision making. Understanding past disagreements allows you to find ways to improve the nature of future conversations.
Group decision making through philanthropy
In many wealthy families, decisions are made at the top, with very little involvement from the next generations. Family philanthropy is a great way to start making group decisions, but don’t bring in philanthropy day one. Doing so introduces a “me” decision, not a “we” decision (a parent-telling versus a team-learning experience). Introducing philanthropy at a later stage can likely yield greater “buy-in” from all and allows your family to test drive decision making with money they’ve already decided to give away.
Begin group decision making by starting small and working up to bigger decisions. For example, “what do we do for family vacation this year?” or “what education resources should we bring in this year to our family meeting?” Then move on to bigger family governance issues such as, “what do we do with the family foundation?” or “should we be advocating pre-nups for new family members?” If your family tries to make difficult decisions before it has built a foundation of communication and trust, these issues can be fraught with emotion and can lead to disaster.
Often, problems transitioning family wealth are exacerbated by the nature of people who build the wealth. Most decisions are made behind closed doors. Using the tools outlined above before an anticipated wealth transition can be very helpful. As families become skilled in the group decision-making process, they are better prepared to engage the next generation in making positive, intelligent decisions regarding family wealth long into the future.
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.