By definition, a family dynasty is a cohesive economic entity that perpetuates family wealth, values and objectives for five or more generations.
More ultra-wealthy families than ever before are seriously interested in establishing family dynasties. If an ultra-wealthy family is seriously interested in establishing a family dynasty, the most critical question to answer is…
Why will the family members stay together?
There must be solid reasons for the family members to be together generations from now. A significant way this is operationalized revolves around managing the monies. One way to approach this matter is to ask:
- What are the advantages of investing together?
- What are the disadvantages of investing together?
- Which way does the scale tip? Does it tip to the benefits side or the disadvantages side?
Another critical question the family has to answer is…
How should the family use its wealth?
We often help ultra-wealthy families better define the purpose of their fortune. There are no inherent right or wrong answers. The goal of these conversations is to find areas of consensus and ways to keep different family members constructively involved. Along the same lines, the family must determine how it will empower future generations. For example, how will the family communicate its values and vision to heirs?
It is often a grave mistake to assume that family members will grow up and be able to take responsibility for the family fortune. A wise approach is constructing a clear path for heirs to become proficient and responsible.
Empowering inheritors to take over: According to Homer Smith, founder of Konvergent Wealth Partners and co-author of Making Smart Decisions: How Ultra-Wealth Families Get Superior Wealth Planning Results, “Inheritors must learn to take control of the processes that are core to sustaining and expanding their family dynasty. It’s commonly wise for the family to not completely rely on non-family members. While these various experts will do a top-notch job for the family, to them, it is just their job.”
Most of the time, the inheritors must learn to be stewards of their wealth and torchbearers of the family’s values and beliefs,” says Anthony Glomski, principal and founder of AG Asset Advisory Family Office and author of Liquidity and You: A Personal Guide for Tech and Business Entrepreneurs Approaching an Exit, “They need to learn to be responsible for themselves, their family, and their family legacy. This entails actively making key decisions and learning to oversee the family’s wealth and needs. In many families, responsibility also necessitates building strong and optimal business relationships and skillfully leveraging their and the family’s personal and business networks.”
Fostering capable: The requisite educational approach is geared intently around facilitating achievements. According to Andree Mohr, chief implementation officer for Integrated Partners, a leading financial advisory firm, “The focus of any viable educational program is to provide an extraordinary and highly actionable curriculum that will enable family members to excel. This very no-nonsense approach is what inheritors require and regularly demand. Education must translate into accomplishments as fast as reasonably possible.”
The following equation lays out the nature of the education dynamic inheritors require:
Applicable + Practical = Capable
Let’s consider each of the components:
- Applicable: The educational content must be pertinent, relevant, and exceedingly appropriate to the issues, resources and situations the family members are facing or will face. Hence, there must be foundational material and more targeted content as part of a customizable curriculum, such as issue-oriented material.
- Practical: The educational content must prepare the family members to efficiently handle complex and conflict-ridden vital matters and enable them to take on the mantle of stewardship. Furthermore, the educational content, where possible, should promote creativity and constructive cleverness. The world is dynamically changing, requiring that people quickly and meritoriously adapt.
- Capable: By adroitly ensuring the curriculum is applicable and practical, dedicated family members exit quite capable. They will have the knowledge, skills, insights, and proficiencies to achieve high degrees of success. They can make a significant positive difference in their families and whatever endeavors they pursue. They will be able to further the family dynasty.
The future of a family dynasty rests on the shoulders of each successive generation. By ensuring inheritors are indeed capable, the family is doing its best to perpetuate its legacy and a bright future for the current and future generations.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.