Last week, we looked at the first three steps for growing long-term family wealth: creating effective communication, understanding your client’s shared family values and focusing the values into actions. This week, we will examine the last two steps of the process.
Step 4: Adopt a strategic approach
Advisors naturally gravitate to structural solutions. Similarly, clients who don’t enjoy the effort, risk and cost of planning tend to default to tactics because they feel as if something has been accomplished. They confuse mere action with achieving strategic outcomes.
The transition of intergenerational wealth is more likely to succeed in the long term if it starts with goals and purpose, and then moves toward plans and tactics that further those goals. Once the first three steps have created basic communication and decision-making frameworks, advisors should hold strategic meetings instead of reviews that are more like box-ticking exercises. For example, once a goal has been identified as important, it can be used as a basis for all existing documents and planning.
The advisor could start that meeting as follows:
Advisor: “In our previous meetings, you identified philanthropy as a core value for your family’s planning. It underpins much of your strategic planning, including the specific goal of establishing a healthy relationship with financial wealth.”
Client: “Yes, my father was unkind with financial wealth and used it to pit family against one another. I don’t ever want that to happen within our family. It destroys relationships.”
Advisor: “How did that affect the family business?”
Client: “My siblings could never agree with one another and communication was always about one-upmanship and gaining my father’s favour. His business succession plan failed because we all ended up in court.”
Advisor: “Let’s use our time today to explore how you feel about philanthropy and how you want tie that in with building a better family relationship with wealth. There are tactics we can discuss, but let’s leave that until I understand what must and what must not happen in your planning.”
Client: “In the past, we have been told to have meetings where our children are encouraged to donate to charity. It’s a good idea, but….”
Advisor: “But you’re looking for a deeper and more profound experience for your children? One that not only encourages engagement, but that also develops their social and human capital?”
Client: “Exactly. I am concerned that our plan, which simply pours cash into our donor-advised fund at death, does nothing to advance those needs. It’s great for tax purposes, but how does it engage and grow our family’s non-financial capital?”
Advisor: “You’ve made two important comments. First, your experience with money and wealth was very negative. Second, you want to develop the non-financial capital of your family in conjunction with your philanthropic goals. Let’s explore those topics in more detail. Tell me about…”
At this point, the advisor has created an emotional connection between the logic of the tactic and the strategic imperatives of the client’s family wealth planning. This is a position of tremendous power and privilege.
Consider another example. The marriage of a client’s child is an opportune moment to review an estate plan. Usually the discussion is simply about reducing risk in the event of death, divorce or disability. These are critical considerations, but they should be discussed in the context of the original plan’s values and objectives.
In contrast, consider these deeper questions now that there is a new member of your client’s family:
- How do we define family? Does it include a spouse?
- What information will we share with this person and when?
- How will we include them in our family meetings and planning processes?
- How will we incorporate their values into our planning?
- When and where will we provide them with opportunities to demonstrate leadership and stewardship in our family?
These questions allow you to explore the client’s mindset about change in the family composition. Thoughtful advisors will use these transition points in a client’s life to strategically reassess planning and, in the process, build a deeper connection with the family’s generational wealth. Once the process is built, reassess it regularly to ensure it still reflects the family’s core values.
This phase of the model is about implementing regular assessments of goals, objectives, strategy and tactical deployment. It connects the hard work of building communication and governance skills, identifying goals and creating mission statements.
Step 5: Bring the best mindset to the client
Adult development theory suggests that a group’s progress is limited by its leader’s maturity level. Therefore, an advisor’s level of development—how he or she deals with change, stress and complex situations—can play a significant part in the family’s success. An advisor can show real value to clients by seeking out allied experts that reflect mature leadership capacity to truly move the client forward in their planning.
To increase your leadership maturity, are you demonstrating a curious, abundant and growth-oriented mindset to your planning model? Do you cultivate a multi-disciplinary and genuinely collaborative approach to your client’s planning needs? Have you studied the stages of adult development and leadership theory to provide your clients with better meeting and group outcomes? Leadership consultants and executive coaches can train you on adult development theory. Moreover, if your client is a business owner, you may want to add peer advisory group chairs to your circle of allied advisors.
In an age where advisor value propositions are being challenged and changed by technology, the advisor’s mindset and network will become market differentiators. Moreover, millennial clients often want to work with advisors who align with their values.