Preventing Conflict I: Preserve and Grow WealthCrisis, what crisis?
Every family – no matter their circumstance – experiences their share of turmoil.
While family conflicts rarely reach crisis levels, certain challenges, such as parents deciding when children are ready to be responsible stewards of family wealth, or when they are prepared to enter into the family enterprise, are more common than you think. And said issues can escalate due to poor communication, inadequate information or inconsistent approaches to problem solving.
A 2019 survey by wealth management firm Key Private Bank disclosed that nearly eight in ten family advisors for high net-worth individuals found “navigating interfamily dynamics” the most difficult aspect of estate planning. When these conversations break down, the relationships often follow suit. Richter Family Office professionals encourage their clients to look at the big picture and evaluate how the family is structured specifically to deal with these demands. They help clients manage a complete range of services, from portfolio management and tax advice to philanthropy and family governance. This approach encourages families to think holistically and determine how family history, values, goals and personal dynamics are entwinned.
By far the greatest barrier to maintaining family wealth is failing to manage internal family issues.
“Our work is not just about portfolio management or business dealings, it’s really about getting to know the humans at the centre of all the numbers, issues and assets,” says Gregory Moore, Vice President at Richter Family Office “It’s about identifying their objectives and working together to achieve their goals. Our job is to be advisors to the whole story, not just one narrative.”
Technical discussions across generations is a means of engagement that ultimately evolves into more fulsome and meaningful conversations. Having an advisor that interacts day-in, day-out with families has the knowledge, context and insights to broker complex conversations and issues when they arise.
And those challenges and conflicts inevitably arise. The great majority of wealthy families are unsuccessful at transitioning their wealth over multiple generations (about 70%, to be more specific). Failure may relate to inadequate oversight of a business or a lack of financial planning when distributing profits, but by far the greatest barrier to maintaining family wealth is failing to manage internal family issues.
At Richter Family Office’s Footsteps to the Future event, Globe and Mail business columnist and author Andrew Willis drew on three decades of business reporting to cite examples of how well-known Canadian families managed internal relationships and ever-changing business environments.
Willis emphasized that successful dynasties treated the family like a business by bringing in outside expertise and adopting processes and systems, such as governance structures, written investment policies or arbitration mechanisms, to foster intergenerational flexibility and resolve family challenges before they became disasters.
While not all families face the same magnitude of complexity as some of Canada’s leading business families, Willis noted that we can all learn from some of the challenges that these families have faced and apply certain elements of sound family governance to our own unique situations. At its most fundamental, being on the same page with other family members is essential to the smooth running of a family enterprise.
Technical discussions across generations is a means of engagement that ultimately evolves into more fulsome and meaningful conversations.
Case studies, surveys and research all suggest creating the right conditions for successful family decision-making helps preserve and grow family wealth for future generations. The right systems and approaches improve inter-family relationships.
“We recognize clients are looking beyond simply growing their wealth; they’re interested in engaging sons and daughters and grandchildren to successfully transition that wealth” says Moore. Creating continuity through a single point of contact helps everyone with the technical aspects of the estate and unlocks other pieces crucial to maintaining a family’s values and vision.
Imagine Richter Family Office as a financial and personal caretaker who responds to your family’s needs, goals and aspirations. Comprehensive treatment of family issues means they direct clients to the best resources, with the right amount of oversight to ensure those measures are effective.
By putting in place structures that emphasize transparency, information sharing, communication and collaboration, families create conditions for every member to succeed, even where differences exist. “A lot of people want simplicity, they want to have someone in their corner looking out for them and helping them maximize their chances of success in reaching certain goals – both financial and emotional,” notes Moore. “That’s exactly what we do at Richter.”