“Hey! Let’s all get together to talk about our family’s money!”
As invitations go, that one’s a hard sell. But, says Nancy Golding, QC, a tax partner in BLG’s Calgary office, clients today are generally amenable to family meetings to discuss wealth and estate planning. Long a mainstay for rich families, these kinds of discussions are becoming standard for many clients, including those with moderate amounts of wealth and straightforward estates.
That may be because the rewards are so great: better communication and healthier family dynamics around money; an integrated set of financial, tax, legal, philanthropic and family governance plans; and fewer surprises when someone dies. “It takes a tremendous amount of stress off clients,” says Ian Hull, a certified legal specialist in estates and trusts at Hull & Hull LLP in Toronto.
Advisors meet with clients and their families for a variety of reasons. Experts offer several:
- To give children the big picture of their parents’ overall estate and financial plans: what they have, what they’re doing with it and why.
- To create a holistic family understanding around its wealth.
- To help families articulate and enact their philanthropic goals, and to groom younger members to take on increasing responsibility for the clan’s charitable giving.
- To teach younger generations about investing and money management. Golding, for instance, will often bring in a family’s financial advisor or accountant to discuss investing, and set up trial accounts and investing plans.
- To provide information to younger adults about cohabitation or prenuptial agreements, and other strategies, like trusts, to safeguard a family’s wealth and its members’ well-being; here, Golding will sometimes bring in a family lawyer.
- To create business succession plans: Which, if any, children are interested in taking over a family business? What if children’s desires don’t align with their parents’ goals and expectations?
- To respond to a crisis, like a death or diagnosis.
Generally, it’s older clients (e.g., parents with adult children) who initiate these meetings as a way of communicating their desires and plans to the younger generations. But Alphil Guilaran, co-founder of Vancouver-based Financial Literacy Counsel, is often called in to facilitate meetings by clients in their late 30s and 40s. “They’re midcareer, they’ve got young families and siblings, their parents are aging, there’s a certain amount of wealth and possibly a family business, and they want to know where they stand.”
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Sometimes, he says, those meetings are “catalyzed by children’s sense of inadequacy”; they may not want to or feel they can take over a business they’ve been groomed to lead. Or they feel they’ve been raised in the shadow of their parents’ success, wealth and expectations.
That’s one reason a certified family counsellor is a standard member of the critical-care team that Guilaran assembles for these discussions. The team also includes a facilitator or mediator (Golding and Hull, for instance, both have mediation and conflict resolution training); the family’s lawyer or accountant (or CFO of its business); speakers on special topics like charitable giving or family law; and sometimes a personal family advisor or concierge who knows about family relationships and roles.
All three experts agree that preparation and structure are key to minimizing strife. Through meetings and questionnaires, they’ll gather background information from their clients about each participant, and discuss the goals of the meeting and how it should run. For instance, what level of information do they want to share? Parents of teenagers and children in their 20s or 30s, for example, may not be comfortable disclosing precise portfolio numbers until their children are older. Other considerations: should spouses be invited; which children get along; who should be seated next to whom; and who has the capacity and desire to take over the family business?
A business setting
Based on this reconnaissance work, the experts create an agenda for a meeting or set of meetings, which they share, along with ground rules around basic decorum. Hull’s rules also emphasize that the process is confidential and that participants can’t sue each other as the result of the exchange.
“It sounds a little bit controlling on my part,” says Hull, “but I like to remind people that this is a business meeting.”
To create businesslike environment, all three experts recommend holding meetings in neutral, professional settings: at a law or accounting firm’s boardroom, a private hotel conference room, or a resort or retreat centre. Guilaran once hosted a series of family meetings on a cruise ship, and has seen successful meetings built around beautifully catered meals. “People come together around food.”
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Once everyone’s in the room, meetings can be highly structured or more organic, depending on goals, agendas and personalities. It’s important to be flexible in these discussions, says Golding, because “things come up.” For example, a parent thinks that a child wants to take over the family business, and the child discloses that that’s the last thing they want to do. “So the meeting will need to be very different at that point.”
All three experts see these meetings as a chance for children and parents to understand more about each other’s hopes and dreams, and for younger generations to learn, proactively, how to manage wealth.
Golding remembers working with a family where the parents never discussed their wealth — which turned out to be considerable — with their children. The inheritance, she says, “bowled them over. They weren’t prepared for it, and it was a really steep learning curve. I think these parents did a disservice to their kids in not helping them be more prepared.”
Read: How to retain your clients’ kids
Before meeting, the Vancouver-based Financial Literacy Council strongly suggests that family members read these two instructional articles:
- “Six Dimensions of Wealth: Leaving the Fullest Value of Your Wealth to Your Heirs,” by Dennis T. Jaffe, PhD, Journal of Financial Planning, April 2003
- “Acquirers’ and Inheritors’ Dilemma: Discovering Life Purpose and Building Personal Identity in the Presence of Wealth,” by Dennis T. Jaffe and James A. Grubman, The Journal of Wealth Management, Fall 2007