At the Alchemia Group we are helping our clients think & act differently in regards to their wealth and its impact on thier family - because we know it is more than just numbers and plans, it's the Balance of Art & Science with Pragmatism and Vision.
My friend and colleague Matt Wesley is a very thoughtful writer and very willing to shine the light in some pretty dark corners. His most recent post (you can find it here) addresses the issue of advisors attempting to force structures (governance, trust, etc.) on families without taking into account the culture of the family. In the best case, the structure will be ignored by the family and slowly disappear as it gathers dust on a shelf. This is the fate of many attempts by families to ‘jump into’ creating a Family Mission Statement. At the other end are structures that are effectively time bombs. This occurs mainly when the full operation of the structure, such as a trust, isn’t going to come about for years if not decades. In one case I’ve seen a trust established for solid tax reasons but when Mom passes away the six siblings, already almost at war with each other over various financial issues, are going to have to work together making some very difficult and complicated decisions. The culture of the family was never discussed in ‘designing’ the strategy.
The problem, as Matt sees it, is
“In my experience, the overwhelming majority of professionals are fundamentally structuralists. I know because I was one for many years and my eventual conversion was a slow, hard-fought battle of awakening to a different, revolutionary perspective. Structuralists come armed with plans, strategies, solutions, best practices, and tactics. Trusts are established by lawyers. Financial plans are created by wealth managers. Tax strategies are developed by accountants. Business plans are promulgated by business consultants. Governance consultants help families draft constitutions. Family councils are established. Mission statements are drafted. Values are clarified and codified. Educational workshops for the “next gen” are held. All of it designed with the hope that these interventions at the level of structure will shape the future of the client’s life and trajectory of the client’s family. Entire industries are premised on this notion that the right structure, skillfully applied, will yield the right result.
Yet family culture all too often eats all this expensive structure for breakfast – and then spits out the bones.
Trusts fail and litigation ensues. Family behavior undoes financial plans. Tax strategies sit on the shelf because of lack of political will. Family feuds destroy otherwise healthy businesses. And the structural work of family governance specialists is a hollow shell that does not begin to address the family dynamics that, as it were, stand back, smirk, and then eviscerate all of this good work.
To make matters worse, family leaders are barraged by messages from these same structuralists that if only they adopt some new structure (a new form), their most pressing problems will be solved. The financial media reinforces this mainstream point of view with how people can fix problems through structural solutions. A brief survey of posts on Linked-in groups devoted to service professionals shows overwhelming advocacy for structuralist solutions. It is what sells. There is a lot of money to be spent in this land of structural solutions.”
So, the next time you are considering any recommendation that involves a ’structure’ of the sort described by Matt above be sure you and your advisors discuss how it will fit with your family culture.