In this short book, authors Williams and Pressier share a series of practical suggestions for how to successfully transmit family wealth and values through systematic preparation of family heirs. The authors developed a five-step model, calling first for the development of a family mission and then a transition plan, as well as the inclusion of all family members, effective coaching, and systematic post facto follow-up. The authors provide useful checklists for ensuring a successful transition of family wealth from one generation to another. Much of what is presented might appear rather self-evident. However, a key strength of the book is that it provides a set of comprehensive steps to check. Thus, it shall, of course, be up to each family itself to work through these checklists—that is, to put their own “meat on the bones.“
Before further reviewing the key messages of the book, I will point out what I see as a potentially major limitation, namely its implicit assumption that a family’s assets typically consist of one business or perhaps a few. Much of today’s family-based asset preservation is not based on the transfer of such monolithic operating business entities but rather intended to contain a family’s assets in a broader portfolio. Also, such a portfolio would typically lend itself more readily to be modified, say through partial sell-offs to compensate family members who might elect to exit. More importantly, such a carefully crafted portfolio typically allows for meaningful risk reduction when it comes to a wealth-transition process. Regrettably, the book does not discuss these issues and instead focuses solely on the transfer of a given business entity from one generation to the next.
In their introduction, Williams and Pressier point out the importance of relying on strong outside resources in this transition process. Effective coaching, research on various aspects of wealth transfers such as taxation issues, and family members’ education are all crucial elements for success. The trigger to initiate a wealth-transfer process would typically be the older generation’s age or declining health. Another trigger could be the heirs' coming of age, having gained education, work experience and competence, thus making them more ready to assume increased responsibility.
The authors identify several main considerations for achieving a successful wealth transfer:
Is the family’s mission sufficiently clear?
Based on this family mission, does the family have a clear estate plan?
Post facto monitoring and eventual modification are key.
According to the authors, outside persons can be critical. These persons typically come from academia or the psychology profession, or they may simply be experienced practitioners. The aim is to come up with an integrative process in which the entire family can be involved and through which trust can be built.
Williams and Pressier then thoroughly discuss their five-step model for the transition of wealth. To start with, a family’s mission and transition plan should be examined by everyone in the family with “fresh eyes.” Governance and taxation are especially important issues to focus on. Through this process, the required modifications might appear. The authors stress that such a change should be the norm but that many might find it too energy consuming, especially within larger families. A good coach would assuredly contribute in a constructive way, provided he or she is trusted by all family members. Thus, choosing a good coach is crucial but complex!
In addition to the stimulation of constructive changes mentioned above, another essential task for the coach is to prepare the family heirs, who typically have different strengths and weaknesses. Thus, a coach must identify a role for each heir, leveraging his or her strength. Various aspects of philanthropy could be particularly well suited for such role developments. However, actually running the family business is, of course, the most critical task. If none of the next-generation family members are qualified and ready for this, outside professionals should be brought in. The coach would be key to safeguard realism!
In the end, nothing would be better than the various next-generation family members’ self-preparation when it comes to shouldering responsibility. However, many potential challenges arise here. These challenges include the following:
Uninformed owners
Nonparticipating heirs
Uninterested next-generation members
The authors conclude that a systematic wealth-transition process from one generation to the next would typically benefit from following guidelines such as those outlined in their book. Wealth-transition failures might be avoided this way!
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