Family Dynamics Flashcards
Research suggests that most family wealth does/does not survive 3 generations?
NOT
% of wealth is lost by the 2nd generation
70%
% of wealth is lost by the end of the 3rd generation
90%
% due to breakdown in communication and trust within the family unit
60%
% due to heirs not being adequately prepared
25%
% due to other factors including tax considerations, legal issues, etc.
15%
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?
1/3rd
Immigrants to the Land of Wealth
–New to wealth (lead generation)
–80% of wealthy Americans
–Receptive or resistant but not apathetic
Natives to the Land of Wealth
–Grew up with wealth (next generation)
–20% of wealthy Americans
–90% change advisors with 2-3 years of family wealth transfer
Challenges between 1st and 2nd Generation Wealth
- 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.
Keys to Successful Families
- Engagement
- Transparency
- Learning
- Developing
Family Education Plan
Financial capital
Intellectual capital
Social capital
Human capital
Financial Capital
financial and/or economic resources; primarily assets and cash flow
Intellectual Capital
individual or collective capital that comes from intelligence, knowledge, creativity or ingenuity
Social Capital
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
Human Capital
includes one’s knowledge, skills, health, motivation, endurance, effectiveness, character traits, experience, etc. (unique to each individual)
Age and station in life
–prime learning ages 7 to 13 years old
–most money related skills have been established before one turns 30
% 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. .
90%
87%
Common misconception!
Competency - Children must learn the primary sources and uses of money (funds):
- Earn
- Save
- Spend
- Invest
- Share
Family Governance Goals:
- Define process for family decision making
- Clarify family roles, rights and responsibilities
- Develop policies and procedures
- Engage and empower the next generation
Family Governance establishes the processes whereby:
- strategic goals are set,
- key relationships are maintained,
- the health of the family is safeguarded,
- accountability is maintained and
- achievement and performance are recognized.
Family Values Statement
Document intended to create or develop a shared and core set of principles and beliefs of the family unit.
Family Charter or Constitution
- 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
