{"id":3860,"date":"2020-03-01T14:07:00","date_gmt":"2020-03-01T14:07:00","guid":{"rendered":"https:\/\/fusionwm.com\/?p=3860"},"modified":"2022-10-12T14:13:05","modified_gmt":"2022-10-12T14:13:05","slug":"family-governance-keeping-family-wealth-and-relationships-in-good-shape","status":"publish","type":"post","link":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/","title":{"rendered":"Family Governance: Keeping Family Wealth and Relationships in Good Shape"},"content":{"rendered":"\n
\"Family<\/figure>\n\n\n\n
<\/div>\n\n\n\n

\u201cShirtsleeves to shirtsleeves in three generations\u201d is a well-known saying among many affluent families. It means family wealth that\u2019s built by the first generation is eroded or even destroyed by the third generation, which squanders the assets it inherits through reckless spending, poor investment decisions and other mistakes.<\/p>\n\n\n\n

The result: The family ends up back where it started, with the same amount of wealth (or less than) it began with generations ago.<\/p>\n\n\n\n

Unfortunately, it\u2019s not just an adage. We\u2019ve often seen this type of wealth destruction play out among affluent families, whose members tend to have conflicting agendas. They have (to varying degrees) different expectations, wants and preferences. When there is significant family wealth, the possibilities available to family members often multiply. Moreover, there are commonly clashing perspectives on how best to manage and spend the family wealth. Within an accomplished wealthy family, there may be business interests that are family owned and managed, and different family members may have differing ideas about the future of the company.   <\/p>\n\n\n\n

The good news: You can take steps right now that can potentially help you avoid watching your family\u2019s wealth diminish over time\u2014or stop you from being part of the problem. The key is to implement a process known as family governance.<\/p>\n\n\n\n

Here\u2019s how family governance works\u2014and how it may help your family preserve, protect and grow its assets for generations to come.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Formalizing family governance<\/h1>\n\n\n\n

Family governance at its core seeks to balance the competing needs of family members when there is substantial family wealth (and possibly business interests). But how family governance is structured can make a big difference. For example, addressing competing family members\u2019 needs can happen by default without any real planning or formal structures. In such instances, control of the wealth is often concentrated in the hands of a matriarch or patriarch, or it changes as alliances among various family members shift.<\/p>\n\n\n\n

Or it can be done formally, by setting up approaches and controls designed to actively promote the betterment of the family overall. The very wealthy tend to take this approach: In a Family Office Association survey of 176 single-family offices, three-quarters said they have (or are instituting) formality in their approach to family governance (see Exhibit 6).\u00a0<\/p>\n\n\n

\n
\"\"<\/figure><\/div>\n\n\n

The rationale for doing so is to inject some stability into the family\u2019s wealth and potentially head off conflicts that might otherwise arise over money (see Exhibit 7).<\/p>\n\n\n

\n
\"\"<\/figure><\/div>\n\n\n
<\/div>\n\n\n\n

The nature of formal family governance<\/h1>\n\n\n\n

Formal family governance has two core components: the human side and the technical side (see Exhibit 8).<\/p>\n\n\n

\n
\"\"<\/figure><\/div>\n\n\n

The human side tends to involve the steps taken to identify and create documents like mission and value statements and family constitutions. It is about developing a strong understanding of what the family is all about\u2014including the roles and responsibilities of family members as a group and as individuals. Another aspect of the human side is specifying how family conflicts are to be resolved. The objective is to avoid litigation and all the associated detriments (such as bad publicity). The aim is also to make conflicts less intense and more manageable.<\/p>\n\n\n\n

The technical side of family governance involves legal structures such as trusts, partnerships and corporate entities, as well as contracts (such as prenuptial agreements) that officially codify the way family governance will work. Obviously the human side can strongly influence the technical side. In our experience, family dynamics almost always impact the types of legal structures a family chooses to implement for governance purposes.<\/p>\n\n\n\n

Various professionals\u2014including wealth managers, attorneys and even family counselors\u2014are often instrumental in helping families develop a formal family governance plan and help keep it on track during good times and bad.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Challenges in implementing family governance<\/h1>\n\n\n\n

With family governance, the biggest challenge is often following through on the plan and getting whatever model of governance you choose to work.<\/p>\n\n\n\n

Example: Addressing only the human side of family governance can lead to disaster. Consider one billionaire family that spent hundreds of thousands of dollars on advisors to help them understand the wishes of family members and (through mediation and family group activities) produce a mission statement, a values statement and a comprehensive family constitution. All the family members formally signed on to these documents. A well-articulated and robust process for dispute resolution within the family was also put in place. The aim was to create a family dynasty that would grow continually wealthier over the generations.<\/p>\n\n\n\n

Everything went fine for nearly a decade. Family members through their words and actions validated the statements and family constitution. But when the parents passed away, the heirs ended up at odds with each other. The agreed-upon approach to dispute resolution was jettisoned, replaced with vicious litigation.<\/p>\n\n\n\n

In retrospect, it appears that many family members supported the values and mission of the family simply to appease their parents. Once the parents were gone, the values changed\u2014and there were no formal, legal documents in place to help ensure decisions in line with the agreed-upon values were made.<\/p>\n\n\n\n

Likewise, addressing only the technical side can result in problems down the line. Consider a self-made billionaire who was not comfortable leaving his wealth and his companies to his children and other relatives, fearing they would fight over the assets. He also questioned their ability to effectively manage the assets and the companies.<\/p>\n\n\n\n

To deal with his concerns, he established a series of trusts that tightly specified how the family members were to govern themselves and benefit from the fortune and businesses he created. For example, there were values the family members had to embrace to be able to access the assets. A mediation process was also set up to deal with conflict.<\/p>\n\n\n\n

In this case, after the passing of the self-made billionaire, the family went to war\u2014not against each other, but rather against a common enemy: the trustees of the trusts. Because the trusts relied on only technical solutions, they were quite rigid. Their lack of flexibility generated problems for the family members, motivating them to sue.<\/p>\n\n\n\n

These two extreme and opposite family governance cases produced results that family governance is actually intended to avoid. That\u2019s because in each case the family dealt with only one aspect of governance, instead of addressing the full range of issues needed to establish effective family policy.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Building a solid plan<\/h1>\n\n\n\n

Family governance can be quite advantageous for family members. It can result in the further creation of wealth and the wise transfer of wealth from generation to generation. But to achieve these outcomes, family governance should be done thoughtfully and carefully\u2014by both making a formal plan and then ensuring that the plan adroitly combines the human and technical aspects involved.<\/p>\n\n\n\n

Next step:<\/strong> Contact your financial and legal professionals to discuss the various goals and objectives of your family members\u2014and how a family governance plan could potentially help address family wealth and family harmony for years to come.<\/p>\n\n\n\n

\n\n\n\n
<\/div>\n\n\n\n

This report was prepared by, and is reprinted with permission from, VFO Inner Circle.  AES Nation, LLC is the creator and publisher of VFO Inner Circle reports.<\/p>\n\n\n\n

Disclosure: The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA\/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS.<\/p>\n\n\n\n

Fusion Wealth Management is not affiliated with Kestra IS or Kestra AS. https:\/\/www.kestrafinancial.com\/disclosures<\/a><\/p>\n\n\n\n

VFO Inner Circle Special Report
By Russ Alan Prince and John J. Bowen Jr.
\u00a9 Copyright 2021 by AES Nation, LLC. All rights reserved.<\/p>\n\n\n\n

No part of this publication may be reproduced or retransmitted in any form or by any means, includ- ing, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys\u2019 fees.<\/p>\n\n\n\n

This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.<\/p>\n\n\n\n

The authors will make recommendations for solutions for you to explore that are not our own. Any recommendation is always based on the authors\u2019 research and experience.<\/p>\n\n\n\n

The information contained herein is accurate to the best of the publisher\u2019s and authors\u2019 knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.<\/p>\n\n\n\n

Unless otherwise noted, the source for all data cited regarding financial advisors in this report is CEG Worldwide, LLC. The source for all data cited regarding business owners and other professionals is AES Nation, LLC.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cShirtsleeves to shirtsleeves in three generations\u201d is a well-known saying among many affluent families. It means family wealth that\u2019s built by the first generation is eroded or even destroyed by the third generation, which squanders the assets it inherits through reckless spending, poor investment decisions and other mistakes. The result: The family ends up back […]<\/p>\n","protected":false},"author":21,"featured_media":3864,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"acf":[],"yoast_head":"\nFamily Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Family Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management\" \/>\n<meta property=\"og:description\" content=\"\u201cShirtsleeves to shirtsleeves in three generations\u201d is a well-known saying among many affluent families. It means family wealth that\u2019s built by the first generation is eroded or even destroyed by the third generation, which squanders the assets it inherits through reckless spending, poor investment decisions and other mistakes. The result: The family ends up back […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/\" \/>\n<meta property=\"og:site_name\" content=\"Fusion Wealth Management\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-01T14:07:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-10-12T14:13:05+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1524\" \/>\n\t<meta property=\"og:image:height\" content=\"1174\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/\",\"url\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/\",\"name\":\"Family Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management\",\"isPartOf\":{\"@id\":\"https:\/\/fusionwm.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg\",\"datePublished\":\"2020-03-01T14:07:00+00:00\",\"dateModified\":\"2022-10-12T14:13:05+00:00\",\"author\":{\"@id\":\"https:\/\/fusionwm.com\/#\/schema\/person\/3ecd6a98a6e9fa9c4200d83417372128\"},\"breadcrumb\":{\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage\",\"url\":\"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg\",\"contentUrl\":\"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg\",\"width\":1524,\"height\":1174,\"caption\":\"Family Governance: Keeping Family Wealth and Relationships in Good Shape\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/fusionwm.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Family Governance: Keeping Family Wealth and Relationships in Good Shape\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/fusionwm.com\/#website\",\"url\":\"https:\/\/fusionwm.com\/\",\"name\":\"Fusion Wealth Management\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/fusionwm.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/fusionwm.com\/#\/schema\/person\/3ecd6a98a6e9fa9c4200d83417372128\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/fusionwm.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/4bd0e5605b4aec952fd9c7a655eb4abe?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/4bd0e5605b4aec952fd9c7a655eb4abe?s=96&d=mm&r=g\",\"caption\":\"admin\"},\"url\":\"https:\/\/fusionwm.com\/author\/smsadmin\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Family Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/","og_locale":"en_US","og_type":"article","og_title":"Family Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management","og_description":"\u201cShirtsleeves to shirtsleeves in three generations\u201d is a well-known saying among many affluent families. It means family wealth that\u2019s built by the first generation is eroded or even destroyed by the third generation, which squanders the assets it inherits through reckless spending, poor investment decisions and other mistakes. The result: The family ends up back […]","og_url":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/","og_site_name":"Fusion Wealth Management","article_published_time":"2020-03-01T14:07:00+00:00","article_modified_time":"2022-10-12T14:13:05+00:00","og_image":[{"width":1524,"height":1174,"url":"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg","type":"image\/jpeg"}],"author":"admin","twitter_card":"summary_large_image","twitter_misc":{"Written by":"admin","Est. reading time":"8 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/","url":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/","name":"Family Governance: Keeping Family Wealth and Relationships in Good Shape - Fusion Wealth Management","isPartOf":{"@id":"https:\/\/fusionwm.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage"},"image":{"@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage"},"thumbnailUrl":"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg","datePublished":"2020-03-01T14:07:00+00:00","dateModified":"2022-10-12T14:13:05+00:00","author":{"@id":"https:\/\/fusionwm.com\/#\/schema\/person\/3ecd6a98a6e9fa9c4200d83417372128"},"breadcrumb":{"@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#primaryimage","url":"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg","contentUrl":"https:\/\/fusionwm.com\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-12-at-8.11.56-AM.jpg","width":1524,"height":1174,"caption":"Family Governance: Keeping Family Wealth and Relationships in Good Shape"},{"@type":"BreadcrumbList","@id":"https:\/\/fusionwm.com\/family-governance-keeping-family-wealth-and-relationships-in-good-shape\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/fusionwm.com\/"},{"@type":"ListItem","position":2,"name":"Family Governance: Keeping Family Wealth and Relationships in Good Shape"}]},{"@type":"WebSite","@id":"https:\/\/fusionwm.com\/#website","url":"https:\/\/fusionwm.com\/","name":"Fusion Wealth Management","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/fusionwm.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/fusionwm.com\/#\/schema\/person\/3ecd6a98a6e9fa9c4200d83417372128","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/fusionwm.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/4bd0e5605b4aec952fd9c7a655eb4abe?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/4bd0e5605b4aec952fd9c7a655eb4abe?s=96&d=mm&r=g","caption":"admin"},"url":"https:\/\/fusionwm.com\/author\/smsadmin\/"}]}},"_links":{"self":[{"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/posts\/3860"}],"collection":[{"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/comments?post=3860"}],"version-history":[{"count":0,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/posts\/3860\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/media\/3864"}],"wp:attachment":[{"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/media?parent=3860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/categories?post=3860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fusionwm.com\/wp-json\/wp\/v2\/tags?post=3860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}