Considerations When Managing Family Wealth

Jake Claver

Managing family wealth isn't just about money, it's about securing your legacy. Discover the key considerations that matter most! 💼💰  Find more from Jake Claver by visiting the links below:  🖥Digital Ascension Group - https://www.digitalfamilyoffice.io 🖥Join my Mastermind Community at https://mastermind.beyondbroke.com  📱Official social media📱 Twitter/X -   / beyond_broke   Instagram -   / jakeclaverqfop   LinkedIn -   / jacobclaver   TikTok -   / jakeclaverqfop   Medium -   / jake-claver   Substack - https://jakeclaver.substack.com/

Transcript

00:00We're going to break down all the different components of what it takes to manage your

00:04family's wealth into future generations. So let's get into it. The first of those is going to be

00:10actually getting the next generation involved before it's time. I see so many families and

00:15have discussions with people that, you know, they stipulate things within their will or their trust

00:20where there's going to come a day when those assets get passed on to their kids and they're

00:25going to come into the fold and help manage, you know, the investments or the business or the real

00:30estate, whatever that might be. But if they really don't have the skills and expertise to do that,

00:35do you think they're really going to do that well? And most times that's not the case. I've had one

00:40just the other day, two brothers, you know, they didn't do some of the things that I'm going to

00:44discuss here and now they're at odds fighting over the commercial properties that their father left

00:50them. It's just not a good situation. And those kids were even involved in the business beforehand

00:55but now because there was an alignment in the goal and the vision, which is what we're about to talk

01:01about next, they really, they're at risk of tearing down everything that their parents built.

01:08So you want to make sure that the kids are involved. You want to bring them to the office. You want to

01:11involve them in the business. They need to know what they're going to be managing, what they're going

01:15to be dealing with and have the skills and expertise when it comes time to actually step into that role

01:20and so that you can transition away. And so next, you know, just like I discussed there,

01:26you're going to have to have an alignment of interest across the family. What we do in our

01:31family office when we structure things is we put together governance documents, one of those being

01:35a family constitution. And you're going to have your mission statement, your core values, your

01:40principles, all those are going to be outlined in that document so that the family is all on the

01:45same page. And that way, when you do pass the baton, they know what the overall goal of the

01:50family is and there's not bickering back and forth. Now, I will say that you do want healthy

01:55competition, which is another component of this, in the mix, right? So as you're setting up that

02:02criteria for the next person to step into that role, you want to put incentives in place and you

02:07might have multiple heirs that could take that role. And you're ultimately going to have to make that

02:12decision on who you're going to pass this on to. And maybe it is, you know, you've got two sons that

02:17are going to run it, but you're going to want to make sure that when your time comes to meet your

02:21maker, they are well-prepared and they both understand their roles in running that business,

02:27managing that capital, whatever the family has for assets, you want to make sure that they're in

02:32alignment for that. And that becomes even more important as the family grows into future generations.

02:37And we'll get into, you know, how you can kind of mitigate that and put that together

02:41in a later section here. So the other component that I want to go back to is when you do transition

02:48that role, this is all, we're all going to have that time, right? There's going to come a day where

02:54maybe you're in your fifties, maybe it's in your seventies that you kind of want to step back from what

03:02you have been doing with your family and the business or the investments or the real estate.

03:07And you're going to want some more time to spend with the grandchildren. You're going to want to,

03:11you know, take all those vacations and you may not want the whole day-to-day grind that you've

03:15had to put up with in your twenties, thirties, forties, you know, and again, sometimes longer,

03:19some people live for that, right? Uh, more power to you. But at the end of the day, there's going to

03:24come a point where you want to pass the baton to the next generation. And in doing that, I've seen

03:29people falter. Um, maybe it's because you're scared that the children aren't aired yet. Um,

03:37they haven't shown, you know, all the things that you had outlined, uh, in the documentation,

03:44uh, that would allow them to step into that role. Um, but at some point you're going to have to be

03:49okay with that and you're going to have to have confidence in them. And when you make that

03:53transition, it needs to be smooth. I've seen other situations where it drug out for years

03:58as the parents still wanted to stay in and take control and remain in control of the business and

04:03make big decisions, but they were at odds with where the child wanted to take the business. And

04:08it was actually in the detriment to the business because the employees didn't know who to go to

04:12with the problems. Uh, they didn't know who they needed to communicate with. Um, and some people even

04:17left because of those things. So it needs to be, you know, maybe six months to a year,

04:23not ideally even faster than that. Um, when you do make the transition from being the leader,

04:30the patriarch, the matriarch that established the wealth and you're handing the baton down to the

04:33next generation. And not to say that you don't have some controls, right? So maybe you still sit

04:37on the board, you just operate in a lesser capacity, uh, and you don't want to necessarily

04:42let your ego, as we all have one, uh, get in the way of what's going to be for the betterment of the

04:48family. It's oftentimes the next generation sees things that, that you might not and vice versa,

04:53you know? So it's, it's hard to navigate these waters, but that's why we're having this discussion.

04:58So next I want to get into, uh, let's say somebody wants to marry into the business.

05:02I think that it can be done in a way that it's not intrusive. Um, and it can be outlined,

05:10right? Again, so when we put this documentation together, you can set forth some stipulations

05:14on what the criteria that that, uh, child needs to meet with their spouse. Um, and that's going to

05:20be different across a lot of different families for different reasons. Um, but at least if you

05:25specified that and, and set forth some of your expectations and communicated with the child or

05:31the next generation that is, you know, um, looking for that spouse and going to bring them into the

05:37fold family, then they're prepared for some of the arguments that you might have or opposition that

05:44you might have when they're doing so. And so again, touchy subject, but this is important,

05:51especially when managing the family's wealth long-term. Um, the spouses that you're,

05:56that the next generation chooses, uh, are going to have an impact on how that money is spent.

06:01Um, you know, some of the long-term goals of the family, those need to be communicated up front

06:05when making that selection and even courting, you know, that the spouse or future potential spouse,

06:12um, all those, all those values, principles, things that are in the, uh, constitution,

06:17those need to be in alignment with their interests as well. Some of those might be philanthropic,

06:22they might be business interests. Again, you know, if they've got a background in real estate or

06:27some of the other investments that the family often participates in, that can play a role as well.

06:32Um, and as the family grows, this is the other thing I had mentioned earlier,

06:36you know, let, let's say you get three, four, five generations in, um, you know, there's a lot of

06:42family offices, the Rockefellers, the DuPonts, um, some of the iconic American names that people know

06:49Argyll's similar. They're five, six, seven generations deep. Um, and they still maintain

06:56their wealth over that time span. And the way that they've done that is they have annual family

07:01meetings, uh, whether that's on a quarter or annual basis, they have a board of family members that

07:07help make decisions that are involved in all of the businesses that are underneath the family office.

07:12And, you know, obviously there's going to be oppositions from time to time. People are going to

07:17have difference in opinion and ideas, but if you're able to come together on a frequent basis and

07:22have those discussions and keep family members involved and engaged, and again, remind them of

07:27the core values, principles, and mission of the family, they're going to be able to judge those

07:32against their own ideology and then try to come to a, a conclusion or concession that allows everybody

07:42to work toward a common goal. And if, if you're doing that, then the, the wealth will last a long

07:50time. It can transcend multiple generations. Uh, we've all seen, you know, I heard the expression,

07:56uh, the first generation makes it, the second generation maintains it, and then it's lost by

08:00the third generation. If, if you don't have a lot of what we discussed here written down,

08:07established for the family to refer back to, you haven't built these habits, you're not meeting on an

08:12annual basis. Uh, you're not involved in the partner selection. Um, if, if you're dragging out

08:18the transition, like we talked about, there could be tensions. There's just a lot of pitfalls that I've

08:22seen families go through and experienced, um, in my time in family office space that I want to make

08:31sure that, you know, others that are stepping into this area and establishing a family office

08:35don't have to deal with. So here's the deal. It's not just about building wealth. It's about building

08:43up emotional wealth and relationships too. When the patriarch or the matriarch step down,

08:50somebody's got to step up. And when they're running a business and a family at the same time,

08:56those roles are vital to the family and its continued success. During times of transition,

09:01emotions can run high and having someone that can help mitigate that with the family is important.

09:06So you might consider having that on board. And so that's going to be it folks.

09:09Managing family wealth isn't just about money. It's about relationships, values, and a shared journey.

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