Human Dynamics

Question 1

1st Generation Clients

Answer 1

often display resistance, receptiveness, hesitancy – but not apathy

Question 2

Immigrants to Wealth

Answer 2

newly wealthy, lead generation, 80% of wealthy Americans; receptive or resistant but not apathetic

Question 3

Natives to Wealth

Answer 3

grew up wealthy, next generation, 20% of wealth Americans, 90% change advisors w/i 2-3 years of wealth transfer

Question 4

Keys to Successful Families

Answer 4

1. Engagement
2. Transparency
3. Learning
4. Developing

Question 5

Family Education Plan

Answer 5

Financial Capital = financial/economic resources; assets and cash-flow

Intellectual Capital = intelligence, knowledge, creativity, ingenuity

Social Capital = opportunity to bring other elements together for greater good

Human Capital = skills, health, motivation, endurance, traits, experience

Question 6

Children Financial Education

Answer 6

• prime learning ages 7-13 years old
• most money skills established before 30 years old
• children must learn primary uses of money; earn, save, spend, invest, share

Question 7

Family Wealth Sustainability

Answer 7

most family wealth does not survive 3 generations
70% lost by 2nd generation
90% lost by 3rd generation
<10% survive 4th generation

60% lost due to communication and trust issues
25% lost due to heirs not being adequately prepared
15% lost due to other factors such as taxes, legal issues, etc.

Question 8

Family Governanace

Answer 8

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

Question 9

Steps for Effective Family Meetings

Answer 9

1. obtain agreement
2. establish purpose and goals
3. design collaboratively and create expectations
4. clarify expectations and format
5. obtain information and invite participants
6. create safe environment

Question 10

Family Mission Statement

Answer 10

combined expression from all members of what family is, wants to do/be, governing principles
• contains family goals, values, principles, and purpose
• often helps define priorities, strengths, and weaknesses
• helps describe qualities/characteristics it will encourage and help develop in family member

Question 11

Family Values Statement

Answer 11

less comprehensive, one set of principles/beliefs of family unit; all members contribute

Question 12

Family Charter/Constitution

Answer 12

formal family structure, roles/responsibilities, how to resolve disputes, operating procedures

Question 13

Wealth Purpose Statement

Answer 13

alignment of shares intention and core principles

Question 14

Family Office Core Services

Answer 14

• Advisory
• Financial Planning
• Strategy
• Governance

Question 15

Benefits of Establishing a Family Office

Answer 15

• centralized services
• performance
• privacy
• risk management
• governance

Question 16

Four Pillars of Legacy Planning

Answer 16

1. Values and Life Lessons
2. End of Life Instructions & Wishes
3. Distribution of Personal Possessions
4. General Discussion about Real/Financial Assets

Question 17

Communication Frames

Answer 17

High Control, Low Support – 38% communicating “to” = authoritarian; “dad tells us we’re to do this”

Low Control, Low Support – 24% “not” communicating = neglectful or irresponsive; “don’t talk about it”

High Control, High Support – 22% communicating “with” each other = restorative, curious, open, collaborative

Low Control, High Support – 14% communicating “for” = “we took care of it for you”

Question 18

Six Factors of Family Complexity

Answer 18

1. Level of Conflict
2. Communication Style
3. Level of Fairness
4. Governance & Decision Making
5. Presence of Addictions
6. Situational Factors

Question 19

Family Roles & Responsibility

Answer 19

immigrants to wealth; integration, avoidance, assimilation, marginalization

• Integration – adopt to new world, open mind, keep family heritage
• Avoidance – keep/cling on to gamily origin, don’t adopt at all
• Assimilation – ditch old world/heritage all together, tough to blend in, identity issues
• Marginalization – neither keeping old ways or adopting new ways

Question 20

Three Pathways of Estate Design

Answer 20

1. Division – set amount to kids, set amount to charity
2. Preservation – set up through structures, cared for by advisors = family gets benefits/distributions
3. Growth – assets managed actively by advisors and family; reinvested for growth

Question 21

Family Systems Theory

Answer 21

family viewed as one unit with rules/guidelines members operate within
• know which system family operates in and remain objective
• overlap of family, ownership, and business

Question 22

Family Education Planning

Answer 22

1. Financial – how to understand/manage finances (earn, save, spend, invest, share)
2. Wealth – how to plan for and structure wealth (four separate wallets)
3. Governance – how to make decisions (common visions, resolving conflict, process/policies)
4. Business – how to manage/own enterprise (management, successions, performance focus)
5. Philanthropic – how to give thoughtfully (developing mission, engagement, grant making)

Question 23

First & Second-Generation Dynamics

Answer 23

• Children often suffer from low self-esteem
• Parents often neglect family relationships
• 70% of parents expressed desire to meet and work with children’s advisors
• 60% of children expressed desire to meet and work with parent’s advisors
• 2/3 of wealthy individuals express desire to engage more regarding financial matters with their children
• only 1/3 actually engage in consistent and meaningful communication with their children regarding financial matters
• effective measurement of outcomes is performed <20% of all formal wealth education plans
• 90% of all students say they learn everything about money from parents
• 87% of parents believe their children learn everything about money from school (disconnect)