Considering what you’re trying to achieve before simply buying into the family office concept is important. Undoubtedly, an affluent individual or family must contend with many issues. However, the best place to start is with what’s important to your circumstances and family. Then, utilise those advisors with experience in the area to provide perspectives, and from there, let a structure emerge that’s designed for your circumstances.
What are you trying to achieve?
Families who sustain their success pursue a compelling family mission emphasising Value Creation. This includes financial and the value of the family know-how, reputation, relational & societal impact and development of talent throughout.
To build longevity in the family enterprise, stepping outside, above the business focus, and thinking like an owner with an owner strategy is imperative. A long time in business is a short time in family!
For a future that positions the family to continue in their success, it’s imperative that upcoming family members contribute in some way or another. This is basic maths:
Wealth attributed or shared between two siblings = $ X
Siblings go on to have children, say 2 each
Now, the wealth $X is shared amongst 6 people.
Put another generation or two into the mix and recognise that the basic cost of income and cost of living increases decade after decade, and very quickly, what seemed a lot initially is diluted to significantly less.
This is one of the key contributors to the often quoted phrase “shirtsleeves to shirtsleeves”, where the first generation creates wealth, the second grows it, and throughout the third /fourth, the money disappears.
With choice comes responsibility!
Having money, wealth & affluence can make many things easier, but it comes with its own dynamics, responsibilities and levels of required planning & decision-making. Don’t be fooled that money makes things easier; it creates different opportunities and requires decision-making.
In these contexts, the family governance structures are developed individually to suit a family’s situation. The underlying driver is robust coordination of the assets, investments & activities in a way that endures, helps motivate people to participate & aids them to get good at continuing to grow the accumulation. All while still living fulfilled & content lives with a strong sense of personal identity and passion.
This may mean that, over time, the future accumulation may look quite different and be fuelled by a different set of activities, investments, etc. This is good evolution at play. For example, we don’t tend to think about or celebrate Edison's light bulb on a daily basis. Still, we remain grateful that he invented it and created a platform for innovations to continue. Just as what we see today as outstanding & state of the art now will be a far cry to that in just 50 years' time.
In Summary, what’s required is the construction of an overall structure designed to maintain & continue to build, which needs to consider multiple facets, as outlined in the diagram below. Personalisation of an individual family occurs by recognising their driving forces and founder desires.
In our next article, we look into the specifics of different components & structures.
To discuss what level of Family Governance and various options could be right for your circumstances, contact Kimpton & Co. for a confidential chat.