Five Steps for Establishing Family Governance

The purpose of this step is to determine your vision for your family, your value and what you want your wealth to do. Successful generational wealth transfer requires active participation by all, and this is often best accomplished by widening the path to engagement beyond financial topics. We, therefore, encourage families to take a step back from a strictly financial focus and, instead, reflect on what types of activities they prefer to do together and which they prefer to do separately. By doing so, they often uncover both financial and non-financial activities that provide opportunities for engagement across a wide range of skill sets, talents and financial acumen.

Family members such as life partners and grandchildren, who might be excluded from strictly financial discussions, often provide a fresh, additive perspective to such discussions. And this is also a critical time to consider the diverse perspectives of your family – not only of the circumstances and events that shape generational views, but communication styles. For instance, traditionalists and baby boomers are often accustomed to a top-down approach, which millennials are unlikely to embrace. Accustomed to easily accessing and verifying data, they will likely only feel comfortable if they understand the reasons behind the decisions and are included in the decision-making process.

When senior generations consider discussing family wealth management, they are often immediately wary of disclosing assets to younger generations. As discussed in Overcoming Common Obstacles to Financial Education, these concerns are not without merit. Instead of immediately delving into detailed financial discussions, begin with broad, inclusive conversations about the purpose of wealth that encourage family members to voice stories and concerns. Narrow the focus over time in tandem with financial education so that by the time the disclosure event happens, everyone is ready.

This step centers on creating a shared vision around common values. As your family members have reflected and shared, it is unlikely that they have come to complete agreement on what success looks like – yet it is likely that you have nonetheless discovered common ground. Build consensus on your shared vision and ensure your family’s values are represented across your wealth plan, investment portfolio and family engagement. We have found that when families align on a vision for the future, they have often also uncovered a binding purpose for wealth today.

While there is no single right way to engage across generations, we have found that lectures or overly prescriptive initiatives tend to fail. Conversely, inclusive initiatives such as encouraging the next generation’s participation in philanthropic vehicles or a committee structure that provides meaningful opportunities for decision-making are far more successful. Such activities can range in formality, from planning family vacations to complex family office structures. Be creative, and make this step your own.

A family vision is a journey, not a destination – and families evolve with each new generation. They grow in numbers, expand geographically and have diverse talents and viewpoints. In order to maintain a cohesive vision and effective governance, you will need to determine a cadence for discussions and incorporating new perspectives.