How advisors can bring families together and ease conflicts over wealth.
For years, financial advisors to the wealthy have focused-quite successfully-on creating technically complex structures that help families grow, manage and transfer wealth. Now their clients' affluence is breeding problems of its own.
Conflict over control of the family business, sibling resentment over inheritances, branches of the tree that won't speak because of money squabbles-these symptoms of dysfunctional behavior have become commonplace, particularly when a client's plan is a surprise to those affected. Psychologically, high-net-worth individuals struggle with how to prevent the wealth from spoiling heirs' motivation, and hence their development in life. Socially, parents are conditioned to talk about their kids, not with them, and certainly not about money, which stands as perhaps the final taboo topic.
Faced with such dilemmas, wealth advisors are increasingly turning to the family meeting, a communication/educational tool that when managed correctly (take that as a warning), helps moneyed clients define and achieve their vision while staying healthy and whole. These meetings are structured as clan dialogues about wealth: How does the money relate to our lives' purposes? How are we using our money, and what does that say about us?
"It's difficult for families to put their values in perspective and use their money (accordingly). Family meetings are a process for the family to discover what's right for them," says David Lansky, a consultant with a background in clinical psychology who facilitates family meetings. Typical meeting topics include business succession, philanthropy and the estate plan.
Such confabs necessarily bring out issues of fairness and may touch deep-seated emotions. Conflict is likely. "The goal is to teach the family skills for communicating
with each other," says Lansky, founder of Family Business Innovations in Deerfield, Ill.
A process as much as an event, the family meeting never ends. Periodic roundtables tackle wealth issues as they arise, marshaling the intellectual and social capital of all members. As a practical matter, the tete-a-tetes preclude surprises and maximize buy-in of the parents' plan, improving the likelihood that the family unit won't unglue when they pass. Advisors who employ this process-consulting tool believe that family should remain connected and that their values should drive the details of their plans (e,g., when heirs inherit, whether to use incentive trusts). The process also aids in the socialization of younger generations about wealth's responsibility.
Whether planners can, or should, conduct family meetings on their own is debatable. You weren't trained to be Dr. Phil, after all. Sans schooling in counseling methodology-such as how to broach a sensitive topic, or handle a burst into tears (produce a box of tissues kept conveniently at hand for this purpose, nothing said)-odds are that something you say will be ill-timed or misconstrued. "You can mess up a 15-year (client) relationship quickly. I have," says veteran advisor David Diesslin of Fort Worth, Texas. "Good intentions don't necessarily count when it comes to family politics, and you never know, in dealing with family and money, what the real relationship is until you actually walk through the process."
Diesslin and other advisors who hold family meetings often bring in an experienced consulting facilitator, especially for the first few get-togethers. Lansky recommends that financial professionals visualize three categories: cases they can clearly handle alone, those they clearly can't (such as a high-conflict family in crisis), and those in between.
Family meetings may be the latest fashion in advising, but they're not for every house, says John Jeffrey Scroggin, a business and estate-planning attorney in Roswell, Ga. Those prone to fisticuffs or screaming or families whose members despise each other too much to convene are not good candidates. Even when appropriate, clients may be initially cool to the idea, since the meetings can be costly and threatening. To overcome the objection to expense, sometimes you have to ask the client, "How much do you spend on strategic consultants for the business? For family?" explains Andrew Keyt, executive director of the Family Business Center at Chicago's Loyola University.