Family Dynamics

Question 1

Research suggests that most family wealth does/does not survive 3 generations?

Answer 1

NOT

Question 2

% of wealth is lost by the 2nd generation

Answer 2

70%

Question 3

% of wealth is lost by the end of the 3rd generation

Answer 3

90%

Question 4

% due to breakdown in communication and trust within the family unit

Answer 4

60%

Question 5

% due to heirs not being adequately prepared

Answer 5

25%

Question 6

% due to other factors including tax considerations, legal issues, etc.

Answer 6

15%

Question 7

2/3rds of wealthy individuals expressed a desire to engage in more consistent and meaningful communication regarding financial matters with their children, how many actually did?

Answer 7

1/3rd

Question 8

Immigrants to the Land of Wealth

Answer 8

–New to wealth (lead generation)
–80% of wealthy Americans
–Receptive or resistant but not apathetic

Question 9

Natives to the Land of Wealth

Answer 9

–Grew up with wealth (next generation)
–20% of wealthy Americans
–90% change advisors with 2-3 years of family wealth transfer

Question 10

Challenges between 1st and 2nd Generation Wealth

Answer 10

• Parents often do not allow children enough freedom.
• Children often suffer from low self-esteem.
• Parents often neglect their family relationships.
• Children often do not develop relationships outside their social circles.

Question 11

Keys to Successful Families

Answer 11

• Engagement
• Transparency
• Learning
• Developing

Question 12

Family Education Plan

Answer 12

Financial capital
Intellectual capital
Social capital
Human capital

Question 13

Financial Capital

Answer 13

financial and/or economic resources; primarily assets and cash flow

Question 14

Intellectual Capital

Answer 14

individual or collective capital that comes from intelligence, knowledge, creativity or ingenuity

Question 15

Social Capital

Answer 15

potential, opportunity or ability to bring the other capital elements (particularly human) together for the benefit of the greater good; often thought of inside the framework of the family itself in the HNW space

Question 16

Human Capital

Answer 16

includes one’s knowledge, skills, health, motivation, endurance, effectiveness, character traits, experience, etc. (unique to each individual)

Question 17

Age and station in life

Answer 17

–prime learning ages 7 to 13 years old

–most money related skills have been established before one turns 30

Question 18

% of students say they learn everything they know about money from their parents.
% of parents believe their children learn everything they need to know about money at school. .

Answer 18

90%
87%
Common misconception!

Question 19

Competency - Children must learn the primary sources and uses of money (funds):

Answer 19

• Earn
• Save
• Spend
• Invest
• Share

Question 20

Family Governance Goals:

Answer 20

• Define process for family decision making
• Clarify family roles, rights and responsibilities
• Develop policies and procedures
• Engage and empower the next generation

Question 21

Family Governance establishes the processes whereby:

Answer 21

• strategic goals are set,
• key relationships are maintained,
• the health of the family is safeguarded,
• accountability is maintained and
• achievement and performance are recognized.

Question 22

Family Values Statement

Answer 22

Document intended to create or develop a shared and core set of principles and beliefs of the family unit.

Question 23

Family Charter or Constitution

Answer 23

• formalization of the family structure and mission of the family business
• defines roles and responsibilities
• develops policies and procedures in line with family values and goals
• determines the process for resolving family business disputes