Family Dynamics Flashcards
What are the four main types of family capital in wealth management?
The four types are human capital (skills, knowledge), intellectual capital (creativity, intelligence), financial capital (assets, cash flow), and social capital (relationships and networks).
What is the “Immigrants and Natives to Wealth” metaphor in family dynamics?
“Immigrants” are first-generation wealth earners, often new to wealth, while “Natives” are those who grew up with wealth, typically second-generation or beyond, each bringing unique behaviors and needs.
What percentage of family wealth is typically lost by the third generation?
Approximately 90% of family wealth is lost by the third generation.
What are the primary reasons for failure in family wealth transfer?
Failures are largely due to a breakdown in family communication and trust (60%), unprepared heirs (25%), and other issues like tax and legal complications (15%).
What is the purpose of a family mission statement?
A family mission statement is a shared declaration of the family’s core values, goals, and guiding principles, created to align members and provide a cohesive vision for the family’s future.
Define “human capital” in family wealth management.
Human capital encompasses each family member’s unique knowledge, skills, health, character traits, and life experience.
What is a family genogram, and how is it used?
A genogram is a visual representation of family relationships and roles, similar to a family tree, used to illustrate family dynamics and histories.
Why is family governance important in wealth management?
Family governance sets out decision-making processes, roles, and responsibilities, helping maintain family cohesion, accountability, and smooth transitions across generations.
What are the core services provided by a family office?
Family office services often include financial planning, investment management, governance support, and sometimes concierge services.
Describe the structure and purpose of a multi-family office (MFO).
An MFO manages the financial affairs of multiple unrelated families, offering shared services and often achieving economies of scale.
What is a single-family office (SFO), and who typically uses one?
An SFO is a private entity dedicated to managing the wealth of a single family, typically used by ultra-high-net-worth families to handle comprehensive financial and personal services.
What are the benefits of establishing a family office?
Family offices offer centralized risk management, governance alignment, privacy, potentially higher returns, and tailored wealth and succession planning.
Define “financial capital” in the context of family wealth.
Financial capital includes the family’s economic resources, primarily its assets, cash flow, and other financial wealth.
What is “social capital,” and how does it impact family wealth planning?
Social capital refers to the family’s ability to leverage relationships and networks, often used to foster a sense of community within the family and support philanthropic efforts.
What is the Family Governance Pyramid?
The Family Governance Pyramid describes stages in governance development: chaos (initial unstructured phase), coordination (role clarity and planning), and cohesion (shared vision and emotional bonding).
Why are family meetings essential to governance?
Family meetings foster transparent communication, collective decision-making, and engagement, supporting effective governance and maintaining family unity.
What are the most critical elements in educating the next generation on financial matters?
Essential financial skills include budgeting, saving, investing, credit management, and philanthropy.
Describe the purpose of a family charter or constitution.
A family charter formalizes the family structure, defines roles, policies, and procedures, and establishes guidelines for managing family wealth and business.
What is the role of an advisor in managing multigenerational wealth?
Advisors facilitate communication, provide financial education, and align family goals across generations, helping ensure smooth wealth transitions.
What are common challenges in multigenerational wealth transfer?
Challenges include conflicting goals and values between generations, communication breakdowns, and differences in risk tolerance and financial literacy.
What behaviors are associated with “satisfied savers” and “status chasers” in family wealth?
Satisfied savers prioritize financial stability and modesty, while status chasers focus on lifestyle and prestige, often influencing their spending and investment choices.
What are effective strategies to engage “disengaged inheritors”?
Advisors can provide motivation through financial education, personal goal-setting, and aligning their involvement with family values and responsibilities.
Why is creating a family profile critical in wealth management?
A family profile helps advisors understand the family’s values, goals, roles, and dynamics, providing a foundation for tailored wealth management strategies.
What questions are essential when building a family profile?
Key questions include inquiries about family values, goals, individual roles, challenges, and strengths to develop a well-rounded profile.
