Family Dynamics

Question 1

Research suggests that most family wealth does not survive three generations.

Answer 1

70% of wealth is lost by the second generation

90% of wealth is lost by the third generation

Less than 10% survives to transfers to the fourth generation

Question 2

Failure and family wealth transfer is due to

Answer 2

60% due to breakdown in communication and trust within the family unit.

25% due to heirs is not being adequately prepared

15% due to other factors, including tax considerations and legal issues

Question 3

What percentage of parents (first generation) expressed a desire to meet and work with their children’s financial advisor?

Answer 3

70%

Question 4

What percentage of children (second generation) expressed a desire to meet and work with their parents financial advisor?

Answer 4

60%

Question 5

What percentage of wealthy individuals expressed a desire to engage in more consistent and meaningful communication regarding financial matters with her children?

Answer 5

2/3rds

Question 6

What percentage of wealthy individuals actually engage in consistent and meaningful communication regarding financial matters with their children?

Answer 6

1/3rd

Question 7

What are core techniques for affective client interviewing and communication?

Question 8

First generation, clients of wealth, often display resistance, receptiveness, or hesitancy, but not…

Answer 8

Apathy

Question 9

Who are considered immigrants to the land of wealth?

Answer 9

New to Wealth
80% of wealthy Americans
Receptive or resistant, but not apathetic

Question 10

Who are considered natives to the land of wealth?

Answer 10

The next generation who grew up, wealthy
20% of wealthy Americans
90% change advisors within 2 to 3 years of family wealth transfer

Question 11

What are challenges between first and second generation well

Answer 11

Parents often do not allow children enough freedom

Children often suffer from low self-esteem

Parents often the neglect their family relationships

Children often do not develop relationships out of their social circles. 

Question 12

What are family office core services?

Answer 12

Advisory
Financial planning
Strategy
Governance

Question 13

What are the three rules that exclude family offices from being included from the advisers at regulation?

Answer 13

The Family office can only provide advice to family clients

The family office is wholly owned and controlled by the family

The family office does not hold itself out to the public as an investment advisor

Question 14

What are the three family office structure models

Answer 14

Single-family office
Multi family office
Virtual family office

Question 15

What is a virtual family office?

Answer 15

For families looking to achieve the benefits of a family office, but who do not wish to set up an actual company to do so. They can ox to outsource all services to external providers of services and consultants.

Family office guy – EY credit Suisse family office, white paper.

Question 16

What are the risks concerns and challenges of setting up a family office?

Answer 16

The cost – typical $1 million plus office expense per year and 1% a family asset fee, would require 100 million assets under management to justify the cost.
- The greatest expenses personnel

Market, legal and tax infrastructure

Privacy

Trust and risk and professionals

Performance and risk management

Question 17

What are the four keys to successful families?

Answer 17

Engagement
Transparency
Learning
Developing

Question 18

What are the four aspects of a family education plan?

Answer 18

Financial capital
Intellectual capital
Social capital
Human capital

Question 19

This aspect of a family education plan is the 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 at Cell in the high net worth space

Answer 19

Social capital

Question 20

This aspect of a family education plan includes the knowledge skills, help motivation, endurance, effectiveness, character traits, and experience, unique to each individual.

Answer 20

Human capital

Question 21

What skills need to be learned in a family education plan

Answer 21

Earn, save, spend, invest and share

How to keep track of money
How to live on a budget
How to handle credit wisely
How to save effectively
How to spend prudently
How to invest to achieve goals and preserve wealth

Question 22

Effective measurement of outcome in family education plans is done in less than what percentage of formal programs?

Answer 22

20%

Question 23

What are the primary learning ages?

Answer 23

Ages 7 to 14
Most money related skills have been establish before age 30

Question 24

What percentage of students say they learn everything they know about money from their parents

Answer 24

90%

Question 25

What percentage of parents believe their children learn everything they need to know about money at school?

Answer 25

87%

Question 26

What is a family genogram?

Answer 26

It is visual tool that list:

family members

describes relationships within the family

may include important history

list those involved in the family business and their roles and responsibilities.

Question 27

What are the four family governance goals?

Answer 27

Defined the process for family decision making

Clarify, family roles, rights and responsibilities

Develop policies and procedures

Engage and empower the next generation

Question 28

Family governance establishes the process, whereby…

Answer 28

• Strategic goals are set
• Relationships are maintained
  -Family health is safe guarded
  -Accountability is maintained
  -Achievement and performance are recognized

Question 29

What are the six steps for an effective family meeting?

Answer 29

1. Obtain agreement.
2. Establish purpose and objectives.
3. Design collaboratively and create expectations.
4. Clarify expectations and format.
5. Obtain information and invite participants.
6. Create a safe environment.

Question 30

What is a family mission statement?

Answer 30

It is a combined unified expression from all family members of:
-What your family is all about
-What it is you really want to do and be
-The principles you choose to govern your family life

Question 31

Why is a family mission statement important?

Answer 31

-The act of creating a family mission statement helps to strengthen the family bond.

-To create the statement all family membership participate. These meetings, facilitate family discussion around personal concerns, goals, values, and priorities.

-Discussing intimate issues together work to unify the family and create a roadmap to keep the family headed in the same direction.

Question 32

What is a family value statement?

Answer 32

It’s often found inside the family mission statement.

It’s intended to create a shared and core set of principles and beliefs for the family.

All members of the family should participating and crafting the value statement

This document also defines actions that the family will take to sustain its legacy in the next generation

Question 33

What is a Family charter or constitution?

Answer 33

Typically includes:
-Formalization of the family structure and mission
-Defines roles and responsibilities
-Develops policies and procedures in line with family values and goals
-Determines process for resolving family disputes

Emphasis on structure, procedures, and organization.