Family Wealth Dynamics Flashcards
What percentage of wealth is lost by the second generation?
- Wealth is created in the first generation.
- 70% of wealth is lost by the second generation
- 90% of wealth is lost by the 3rd generation.
What is the reason that wealth transfers fail?
60% due to a breakdown of communication
25% is from heirs being inadequately prepared.
15% is from other causes such as tax and other legal issues.
What percentage of parents say that want to work with their childs advisor?
70% of parents (think G1) expressed a desire to meet and work with their children’s financial advisor
60% of children express what to their parents?
60% of children (think G2) expressed a desire to meet and work with their parent’s financial advisor
How many people express a desire to engage and how many actually engage?
2/3rd express the desire to engage
only 1/3rd actually enageages
what is typical of 1st generation clients?
1st Generation clients of wealth often display resistance, receptiveness, or hesitancy – but not apathy
What is the Immigrants and Natives metaphor?
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
What are 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.
What are 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.
What are 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.
What are 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.
What percentage of wealthy Americans are immigrants to wealth
80%
What percentage of Americans change advisors within 2-3 years of family wealth transfer
90%
What are 4 core family office services?
- Advisory
- Financial Planning
- Strategy
- Governance
What are Family Office Structures and Models?
Single Family Office
Multi Family Office
Virtual Family Office
What is a Family Education Plan
Financial capital
Intellectual capital
Social capital
Human capital
What is Intellectual Capital
individual or collective capital that comes from intelligence, knowledge, creativity or ingenuity
What is 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
What is Human Capital
includes one’s knowledge, skills, health, motivation, endurance, effectiveness, character traits, experience, etc. (unique to each individual)
What are the keys to a successful family
Engagement
transparency
education
development
What is the most opportune time to learn about financial education
7/8 to 13/14 years old.
What are the primary sources and uses of money (funds)
- Earn
- Save
- Spend
- Invest
- Share
What is a good visual tool to list family members?
Family Genogram
What are Governance Goals:
Define process for family decision making
• Clarify family roles, rights and responsibilities
• Develop policies and procedures
• Engage and empower the next generation
Governance establishes the processes for what?
- strategic goals are set,
- key relationships are maintained,
- the health of the family is safeguarded,
- accountability is maintained and
- achievement and performance are recognized.
What does family governance do?
create frameworks, policies and traditions that determine how a family will operate.
What is a Family Mission Statement?
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 — and the principles you choose to govern your family life.
Define your family’s Goals, Priorities, Values, Strengths, and Weaknesses
What is a Family Values statement
Document intended to create or develop a shared and core set of principles and beliefs of the family unit.
Often found inside (a part) of the family mission statement.
What is a family charter or constitution?
emphasis on structure, procedures and organization.
- 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 disputes
