Wealth and Its Responsibilities
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Normally, wealth is considered, in financial terms, placing a value on investments, real estate, business ventures, luxury items, and other assets that have appreciation and growth. However, many ultra-high net worth families are realizing that having the best advice and management of these assets is not enough to insure they will find their way to the next generation. These families must broaden their outlook on what are also assets, namely the human, intellectual, and social capital of the family.
Over the past decade much has been written regarding financially successful families and the challenges they face to preserve wealth for future generations. Focusing solely on financial wealth will almost guarantee that this wealth will evaporate over future generations.
“Most families are only aware that they have one form of capital: financial capital,” says Jay Hughes, Jr. an estate planning attorney and a family governance specialist, author of Family Wealth, Keeping It in the Family. Hughes identifies four forms of family wealth: “A family must know whether all its forms of capital are growing. Rarely in my experience do families measure their human, intellectual and social capital. Frequently members do not even recognize that they own these forms of capital”.
When looked at in this context, the definition of family wealth takes on a much broader meaning. The measurement of this wealth also becomes more challenging. Charles Collier in his book, Wealth in Families, does an excellent job of articulating ten best practices for families to consider. Collier finds that these practices are:
- Focus on the human, intellectual, and social capital of the family.
- Stress the priority of each family member’s individual pursuit of happiness.
- Work on enhancing intra family communication.
- Their time frame for determining success is long term.
- They tell and retell the family’s most important stories.
- They create mentor like relationships when establishing family trusts.
- They collaboratively define the family vision statement. (the Shared Dream)
- They teach children and grandchildren the competencies that come with financial wealth.
- They work at getting to really know each family member.
- They give their younger family members as much responsibility as they can manage as soon as possible.
“Shirtsleeves to shirtsleeves in three generations” is a saying that has proven to have a great deal of validity. The stewardship and management of family wealth is a process that requires both expertise and commitment to keep both the family and its wealth preserved for generations to come.