What Signifies Your Success?
Your upper centi-million- or billion-dollar business? Your leadership? Your Wealth? Your family?
Building Wealth vs Managing Wealth
Building wealth such as a first-generation business owner or a second-generation CEO succeeds in these endeavors as they have finely honed skills, perspective, experiences over time and they also have the tools and practices they need.
So, what happens to those skills in the transition to your family wealth management practice? This is your next business; and it needs your business skills.
Engage in learning to develop purpose and annual meetings with family, advisers and staff business visions into an integrated and aligned strategic plan. It will enable you to actively work to preserve and protect your wealth for today and into the future for family members.
Background
As the family office industry began in 2002, families fled institutional wealth management services, taking their wealth and trusts with them. They chose to open family offices, fired their long-term trust advisors in favor of managing their wealth their way. What they did not know is that family driven wealth management and the legal entities that are part of this, are fraught with dos and don’ts, murky roles, and obscure legal language. Thus began my journey for a better, more meaningful solution. The only question was would I find one or would I have to build it? The answer is both!
Ultra-Affluent families want to manage their business assets and have control over wealth decisions. Yet even at higher levels of wealth ($billion dollars plus) they do not meet the thresholds for breakpoints in cost that larger firms enjoy.
A Modern Approach to Family Driven Wealth Management
Step 1: Assessments & Factfinding: getting to know you, your business, your family and advisors, document gathering.
Step 2: Workshops and Meetings: Relevancy Conversation (what is important to family & advisers), Annual Family Strategic Planning Meeting, Frameworks, Educational Workshops for family members.
Step 3 may begin with outside resources but includes the firm to connect family offices and private family trust companies to trust accounting of their SD trust company.
Step 3: Projects: 1) Qualification; cash flow to support, how many generations, funded trusts 2) Structuring family offices for trust work and or 2a) private family trust company, 3) systems & technology -in-housed systems analyst or it may need to be outsourced to a systems and technology firm.
4) Infrastructure structuring checklists for do-it- yourself family offices and private family trust companies and, 5) Enabling families to understand their practice Challenges & potential Solutions.
Step 4: Relationship Work: Pre-Transitions, Transition, Post-Transition to Fiduciary Wealth management — preparing both the managerial and administrative aspects of family wealth management. This comes after a wealth transfer plan is established.
v Pre-transitions — assessment of family history with wealth the wealth transfer strategy, suitability to family knowledge or skill, the fiduciary Relevancy Conversation for family, trustees, advisers, and staff
v Transition — include the following aspects under “Family Fiduciary Wealth” — Execution of the plan is where Carl can assist as a Business Trustee.
Ø Family Fiduciary Wealth; active support of client, family members and the office executives.
This approach is representative of the family first.
Next is best practices for the managerial and administrative sides of family offices/private family trust companies.
When a family is multi-generational, or has multiple branches, may be using multiple trustees for generational trusts, the following may be appropriate;
Ø Business Planning: nonfinancial aspects of wealth management; concise mission or purpose; what the family seeks to preserve or protect or accomplish. Develop the contingencies, control issues, family leadership succession, advisory changes, and educational programs for younger generations. Carl can assist.
Ø In house versus Outsourcing: the commodity side of wealth management may be performed in-house in the family office or private family trust company. Non-commodity services (for capital assets such as business holdings), should be outsourced to outside resources that are a best fit. Carl can assist.
Private family trust companies get support from the South Dakota trust jurisdiction regulators and examiners; requirements, due diligence and examinations.
The following Best Practices are for family offices as these are not regulated entities. Yet the reliance is on individual trust officers. Private family trust companies are for trust work only and it hires the individual trust officers, just as a public trust company does. The managerial staff may include family members and advisers that reside in a family office along with investments, partnerships.
These practices are the responsibility of the managerial staff:
Ø Audit — long term habits for practices that will stand the test of time to preserve information for family members and the succession of advisors.
Ø Adhering to business practices — improve the measurable administrative performance and identify the inherent risks of higher-level strategies and legal entities such as trusts, installment sales and partnerships. Carl can execute.
Ø Documentation: is a record over time, from set up, maintenance, decision makers, implementations, or changes in strategies from inception onward.
Ø Anticipating Advisor or Fiduciary Transitions — individuals are not perpetual. — family members or a senior trust officer — yet these can rob a family of vital information; what an advisor or trustee was thinking about, proposing, or providing.
v Post-transition is product neutral. The purpose is to oversee, educate as needed, monitor, and conduct meetings as appropriate.
Summary
With the industry experience and resources, the professional judgment and perspective that comes with experience, it is possible to help clients who want control over their wealth to overcome the 90% plus of families who fail to successfully pass wealth to the next generation and beyond with their own family trust company and use of a trust jurisdiction focused private family trust companies, not by the trust jurisdiction of institutional trust companies.
Your First Step
Whether you have an active practice or you are thinking of getting started with trusts and asset transfers this modern approach is tailored to you.
Start by scheduling time for a conversation
