Hello Friends, and welcome back. Let’s spend ten minutes together on family wealth strategy. Sharpening our perspective on how to deploy our resources for better impact, well-being and flourishing of the people that we care about.

Hello Friends, and welcome back. As always, thank you for reading and emailing me with your thoughts!

I have not written for FO Perspective on perhaps the most consistent of topics I hear about, a topic that presents itself in families of all wealth scales. The concern about entitlement is two-fold from my perspective:

1. Entitled kids seem to have a hard time living the family values as well as finding their own moral code, making parents feel unsuccessful in the upbringing, and
2. Entitled kids are disinterested in long-term goals and finding the grit to achieve those goals, making it hard for parents to consider their childrens’ lives fulfilling.

A lack of fulfillment and a lack of success is quite the double whammy! And this is before considering the most-cited issue of entitlement amongst professionals which is that entitlement leads to weaker stewardship principles and then of course the financial resources deplete.

Entitlement is imbalance of privileges and responsibilities

Entitlement is often defined as an expectation of receipt of privileges without corresponding effort. This aligns with how I use the word. However, it was not until I was reading the Gift of Lift by David York that I realized that a lack of effort is not the entirety of the problem. York notes that entitlement exists when ones privileges and rights vastly exceed their duties and responsibilities.

I really like that. I picture the Scales of Justice and privileged stewards like us having a whole lot of weights piled into the rights and privileges side of the scale. Rightfully so, we carry more duties and responsibilities accordingly to maintain balance in our lives.

5G “technology” for overcoming entitlement

I was inspired to write this month’s blog and sharpen my perspective on entitlement as I have been working on a course with a fellow wealth steward.* I sent him my “5Gs for overcoming entitlement” which inspired the project. The 5Gs concept came to me as I was developing a list of tools for overcoming an entitlement mindset. The most important “G” is gratitude, as well as referencing two of the most important tools in strong family cultures which are growth and grit.**

But 3G technology is so last decade. So, with three “Gs” in hand and the world now heavily dependent on 5G technology, I got to brainstorming about other “Gs” that help families overcome entitlement mindsets.

Goodness is an important aspect for overcoming entitlement; the idea being that finding good, virtuous aspects of life and aligning your values with the good will certainly push entitlement out of your family culture.

I have two more great “Gs” and I’ll save the last “G” until 6G technology comes out. For now, the fifth “G” is: gone.

Gone as a tool for overcoming entitlement mindset is the only G that came to be a part of my advice for families from my own conversations. Most of my advice comes from the wisdom of the family wealth industry; I stand on the shoulders of mighty giants. But this nugget I’ll take credit for noticing as a recurring trend in the wealth stewards’ stories. This is why, dear Reader, I’m always so thankful when you share your stories!

Going, Going, Gone

Gone became a recurring theme amongst gritty rising generation wealth stewards when we got to storytelling about their work ethic. In their own minds, what made them work hard when many wealth stewards were less compelled. Surprisingly, many stewards, even from families where it would be remarkably hard to lose the money, told me stories about their being worried that the money could truly be gone in their lifetimes, so they had better develop skills to keep themselves afloat should the disastrous come to happen.

What a remarkable mindset to instil in your kids – that at any time all the good in our lives could be taken from us.

Family Wealth = Resources (Human Capital + Relational Capital)

All Issues of the FO Perspective relate the thought of the month to the wealth equation. Here, the relationship should be obvious. Family wealth, which over time is family legacy, is equal to the product of your resources multiplied by the sum of the quality of your people and their relationships. Your resources, principally your time and money, should be regularly assessed for how well they are being invested in your family.

In the case of entitlement, the key question is how can your resources be deployed to improve your family culture and better balance your family members’ rights and privileges on the one hand with their duties and responsibilities on the other.

I’m reminded of my favourite quote from Spider-Man: with great power comes great responsibility. With great wealth comes great responsibility as well.

Hello Friends, and welcome back to your favourite Newsletter.

Family Wealth = Resources (Human Capital + Relational Capital). A series of quick hits this month…

Professional Trustees

Personal trustees are friends and family typically. They agree to act as Trustee and bring great relationships with the beneficiaries to the table. Trust Companies are the exact opposite; they will have great professional acumen and built-in succession plans, but they lack the same depth of relationship.

Professional trustees are rare but combine elements of both personal trustees and trust companies. I am a professional trustee and so it was with great anticipation that I attended the Independent Trustee Alliance conference in Dallas last month.

It did not disappoint; what I had seen from Dennis Nerland’s professional trusteeship practice was mirrored by many other professionals. I posted my biggest takeaways here.

RipenQuest

I made what I call “pilgrimage” to Jay Hughes in October 2022 (if you don’t know Jay Hughes and you read these newsletters; email me ASAP. You need to know his work). He said so many profound things it is plainly ridiculous, but one statement really stuck with me: Family Wealth has a “medium is the message” issue.

By explaining all of his wisdom under the “medium” of family wealth, he felt like there was a gap in developing the wisdom for another key medium: the trustscape.

I took that guidance to heart and, knowing that there was no book on trusts that I would have enjoyed reading when I was 18 (a common age to be introduced to trusts particularly in the US) I set out to write it.

Well, my news is that the first draft is now complete! I am looking for early readers, please reach out. If you know great editors, I am picking an editor this month.

Family Enterprise Canada Symposium

What a week. It started off with Blackwood Family Enterprises Services’ one day seminar. It is clear that Dr. Moira Somers is a standout in tense family meeting facilitation (and is valuable in non-tense scenarios as well!)

Then, I attended FEC’s Symposium for the first time. This is such an exciting group serving Canadian family businesses. They are also known for elevating the family enterprise advisory industry with their FEA designation.

My favourite takeaway? It is quite possibly that all of the great work that advisors do will not land if it does not meet the family where it is. The range of ownership literacy in families is significant and I have felt the pain of my advice not meeting a family where they were; too focused on logical, complex outcomes in my case and not focused enough on actually helping the family with the big problem they were facing.

Taxes and Family Enterprise

I’m still a tax nerd, naturally. I’ve canvassed around 15 tax law and accounting professionals on Canada’s capital gains inclusion rate change. Without law to interpret at this time, the chances of June 24 being the final date is remote. Although we have seen worse retroactive law being imposed.

So in the efforts I’ve made with families to address this date, I have rediscovered the incessant issue that tax planning can really wag the family dog if left unchecked. Knowing your goals, knowing your family members and knowing your tax risk profile is absolutely critical before reviewing any tax strategies.

Hello once again. Financial resources can help or hurt your family wealth, your personal definition of success, and over time, your legacy in your family.

Family Wealth = Resources (Human Capital + Relational Capital)

Family Wealth = Success = Family Legacy

This month I’m sharing an article that I co-wrote with a close friend for decades who also works in family wealth wealth, Ari Fixler. We were given the opportunity by Olympia Trust to write something novel and interesting for their educateandexplore.ca website. We chose the area where our professional interests overlap; your financial goals.

Goals-based planning is absolutely central to the work I do and the way I see the world. As noted in the article, wealth accumulation of all scales must answer the question “so what is money good for?” and wealth of all scales is well-served by not ending that answer at the all-too obvious and trite “to retire”.

I hope you enjoy 🙂

Investment strategies are like those big cookbooks with countless recipes. You tend to pick the meals that are the most gourmet, but really, you should pick the meal best suited to your taste and ability.

When we sat down to co-write this article on goals-based planning, we came at the topic from our respective seats in the wealth management industry. Ari is a wealth management Investment Advisor and Financial Planner and has been in the trenches making retirement possible for Canadians for 17 years. Adam is a lawyer with a tax and estate planning focus that most recently ran a Single-Family Office for a fourth generation Canadian family and their wealth management firm. We have seen a lot of aspects of wealth for families of all sizes and at all stages. There is no doubt that one topic binds us all: planning.

As two born and raised Calgarians, we have seen the growth of this incredible city and the personal wealth that has been gained as a result. The amount of wealth the Baby Boomers have created is truly astounding. Yet, a large percentage of those successful Boomers did not consider themselves happy, successful, fulfilled or even wealthy!

Their relationship with their financial success was not well-formed, not clearly articulated, and without a clear reason for the wealth creation, some of those “success stories” became legitimately unsuccessful.

When we get together and talk about success, we try to clarify our “wealth purpose”. Good fortune comes to those that know why they seek wealth. This good fortune is available to everyone intentional enough to discover it.

The key to a successful investment strategy

The key to a successful investment strategy happens prior to the strategy creation. The goals are the foundation of your investment house. Without a solid base, your investment strategy is bound to crumble under the weight of uncertainty.

Sure, there are many other critical topics in investment strategy (risk tolerance, liquidity tolerance, geographic and industry specifics come to mind) but families that have laser-focused, strong answers to the key question, described below, meet their investment goals far more often than families that don’t.

The key to your investment strategy is your goals. What is your investment strategy driving towards? To frame the question as simply as we can: what is the wealth good for?

We all feel the urge to answer this question simply, as it relates to our basic human needs, and leave our inquiry at that. This might sound like the answer currently in your head: “I want money so that I can work less, or not at all, and still have the lifestyle I aspire to have.” This is a strong enough answer for your investment advisors to develop a strong financial plan and get to work, like the work Ari does with his clients.

This is a good answer. However, the best plans go deeper. The best plans require that you explore your emotional relationship with wealth. The best plans contain very careful detail about your lifestyle goals to avoid lifestyle-creep (the idea that your lifestyle spending seems to always increase in correlation with your income).

Wealth creators that have solved your basic human needs have even more responsibility to work out clear answers for your investment goals. We slightly alter the question for these individuals to “what is all this money actually good for?” and whenever wealthy people align their investment strategies to their evolving answer, they find greater contentment and satisfaction. They find their wealth purpose.

Back when we first started hanging out together as friends in the early 90’s, if we weren’t listening to music, we were reading comic books. It’s not surprising that we reference Spider-Man for some life philosophy. Uncle Ben’s key advice to Peter Parker applies to your wealth. Wealth is an incredible resource, a type of superpower, and it can be harnessed to fulfill your life, improve your well-being, and impact the lives of those you care about. Wealth is power and as Uncle Ben pointed out: With great power comes great responsibility.

By building effective goals, you clarify your wealth purpose (the point of creating the wealth in the first place). Without goals, the chances increase that comfort and luxury overstep their boundaries. Without goals, unnecessary investment risks are way too easy to take.

If planning is where all wealthy individuals must excel, it is probably clear that the key step in the planning is to answer and understand what your goals are. What are you trying to achieve? Sometimes the most important questions to ask are the most obvious ones.

We hope this obvious question is not just left as a mild curiosity. Attack it! Get the notepad out and start exploring your answers. As Uncle Ben would advise, take responsibility! The pursuit of clarity of your wealth’s purpose will be valuable, we assure you. Success as you alone can define it.

Spending your money on your people and their relationships should have no end. The result of all of that spending will be the most educated, wholesome, actualized, effective wealth stewards that family wealth has ever known. April Fools 😉… if only it were that easy!

The Wealth Equation:
FW = R (HC + RC)

Let’s talk spending; specifically distribution policies.

I have noticed that distribution policies are the battle line of family wealth strategy. To whatever degree that cash flow is reinvested in historical family investments, most commonly the family business, the decision is always seen as sound.

This is the root discipline of financially successful families (foreshadowing warning!)

Multiple activities converged this month to make distribution policies top-of-mind for me. It started with my work on the Family Bank; I’m excited that in the near future Daniel Trimarchi and I will have a STEP Journal article on the topic published.

The Family Bank establishes a formal distribution policy for families that desire governance discipline for their investment decisions in their human and relational capital pools. Going from an informal ad-hoc “bank of mum and dad” to a formal Family Bank is my favourite governance tactic as it combines family values, family goals, policy/procedure and strategy all towards my favourite aim; family flourishing.

Here are my Family Bank articles for Canadian Family Offices.

Another recent distribution task: I was asked about ownership strategy and how it relates to family wealth strategy. Family wealth strategy covers spending at all levels of the family enterprise. Ownership strategy is the shareholders of the holding company that must balance the business’ capital reinvestment strategy with dividends.

All owners are wealth stewards but not all wealth stewards are owners.

Once the complication of reinvestment versus dividends is settled, the use of the dividends requires some consensus: what is the budget for family-centric spending from the dividends? How will the family spend on matters like family retreat and shared property expenses before the owners receive money for their independent spending plans.

Lastly, a podcast interview of John Warwick included a story of a family with a remarkable distribution strategy: none! Over three generations, not a single dividend had been paid from this real estate family. Everyone lived within the means that their employment could support… and the cash flow of the business was entirely reinvested for decades!

The role modelling that each successive generation of this family showed within their stewardship is certainly admirable. Although I would not recommend it to any families myself, at least now I had a perfect example for an important metaphor in distribution policy:

The oak tree metaphor: when families focus on building the strongest of trees with the deepest of roots.

I love using trees as metaphors in distribution policy design, going back to the beginning of my trust law courses from law school.

In trust law, there is a distinction between income and capital beneficiaries. When we explain the difference, we use the “fruit and tree” analogy: income beneficiaries receive the fruit of the trust’s property and capital beneficiaries are entitled to cut down parts (or all) of the tree.

That real estate family with no distributions? They represent the deepest of roots. They invest in whatever it takes to make that tree stronger and stronger. They do not even have to consider seeds at this point; they are entirely focused on one big tree. Certainly no fruit!

But what happens when, despite the strength of that tree and it’s roots, it comes falling down? Where is the family then? There are always tradeoffs in family wealth strategy.

Families that diversify and invest in multiple areas address this risk by caring about populating the future of the family with new seeds. This diversification is valuable to the family long-term. Innovation (which begets family enterprise resilience) arises from the highs and lows of investing in new ideas. This carries more risk in the short term but as noted by Nassim Taleb, an anti-fragile goal requires these exposures to risks to grow stronger long-term.

Taking the tree metaphor to it’s anti-fragile extreme, a family might make their distribution policy metaphor to be that of a dandelion! They invest entirely in the distribution of the seeds and don’t set roots down anywhere. Now, that would be some chaotic capital investment strategy indeed!

I’m still waiting to hear of the family deploying the dandelion metaphor in their distribution policy; please let me know if you’ve heard of one marvellous Reader!

Family Office Perspectives uses the family wealth equation above, described in writing as: your family wealth (which, over time, is your family legacy) is equal to the product of your resources multiplied by the sum of your capital pools.

The Wealth Equation:
FW = R (HC + RC)

Investing for impact is a key strategic element in finding the right ways to deploy your financial resources.

The Wealth Equation:
FW = R (HC + RC)

In designing my family wealth strategic review, I distilled all of a family’s potential financial capital deployment goals to three categories. Two of those categories are moreso about each family member: well-being and flourishing. The third category is moreso about others and yet below I focus on how helping others is symbiotic for family cultures.

Today, I want to talk about investing for impact.

The term “impact investing” has become synonymous with ESG investing in some circles (not for me!) So I will stick to “investing for impact” to distinguish what I am driving at.

Investing for impact has a significant positive boost to family culture in my experience. Helping others helps you to.

Investing for impact will significantly improve your family culture.

I challenge families to articulate their “why”, their unique answer to the tricky question “so what is all this money actually good for?”.

Answers that relate to well-being and flourishing, I often compare to deploying financial resources in hopes of fulfilling the needs on Maslow’s hierarchy.

With impact, Abraham Maslow’s work is still illustrative but this time, it is his concept of transcendence. *** Transcendence is the stage where spiritual needs really shine. Transcendence occurs when putting others’ needs ahead of your own. I believe impact investing fulfills transcendent needs.

Yet capital deployment for impact can go beyond philanthropic endeavours. Families will thrive for generations if they can find ways for the money to support their family members’ transcendence.

Counterpoints to investing with impact 

For some, an investment policy statement that includes a concept like “impact” does not resonate. I certainly do not want you, dear Reader, to hear “ESG” when I talk about the role of investing with impact in family wealth strategy. **** So, from that view’s skepticism, I say:

• Purely altruistic investment ideas that do not materially grow your human capital are not what I’m talking about… I call that “missing the script” of investing for impact. Capitalism is an incredible tool for progress in our world, and applying capitalism to key human and environmental benefits is certainly worthy of us capitalists’ efforts.

Another skepticism of impact investing is the notion that non-financial goals should never be included in investment strategy. To those skeptics I say:

• Impact does not have to be a straight line to the most altruistic of investment goals. But if there is no line between investment goals and the non-financial values of the family, the family’s investment discipline (and commitment to core values) is far more likely to weaken through time. Consider the addition of non-financial goals to your investment strategy as still an investment; it is an investment in the quality of your Human Capital and Relational Capital.

Family Wealth = Resources (Human Capital + Relational Capital)

How the family perceives their investments counts for a lot 

I’m reminded of a conversation I had with a real estate family that did not like low-income housing (the financial models are difficult and usually require government intervention for the returns to work). The patriarch was clear; “we build homes to make money. We use philanthropy to do good. They do not overlap.”

One of the family’s Rising Gen stewards simply could not agree; if the financial capital did not do good, it was bad. You can’t just want to make money.

And as a loving family with space for diversity of opinions, they dove right in.

It was a little messy and a lot confrontive. And that was only while I was still in the room.

The report back to me was that they indeed ended the discussion with complete alignment; consensus amongst the generations. Huzzah!

And the kicker? There was no change to the business. What they found was alignment of values around growing the local economy. They agreed on the role that real estate development has on economic progress, which pulls forward educational progress for the local citizens, and ultimately builds a stronger society. That alignment was more than strong enough for both generations to support the home building business.

Over to you, dear Reader; a challenge and request

Does your family know the “why” of your investment goals?

I’m very much looking forward to your description. Maybe you have specific non-financial goals written into your Investment Policy Statement. Maybe you have a Vision Statement that relates. Perhaps you, like many families, can tell me exactly what you do upon reflection, but do not have anything written down yet.

Well then why don’t you write it down in an email to me and then send it to your family members  😉

I’m learning from all the great (and varied!) answers that you incredible wealth stewards have to offer. Thanks as always for sharing.

It has been an absolute treat to write this Newsletter for two years now; I treasure your feedback (and referrals are the absolute best form of gratitude!)

We have used a family wealth equation in every Newsletter to add perspective to your definition of family wealth. Getting clear on your family’s why, your family’s unique answer to the tricky question “so what is all this money actually good for?”

The Wealth Equation:
FW = R (HC + RC)

I hope you have asked yourself at some point in this Newsletter’s journey, “ok! I get that my family wealth, my definition of success, requires utilizing my resources well to build stronger people and relationships, so now what?!”

“Now what” is my focus professional this coming year. Goals for the money naturally arise from your vision of family wealth success and aligned tactics should be deployed to accomplish those goals.

The task therefore turns to family wealth strategy. 

Most tactical advice is rightfully specific to key topics (investments, finances, tax and insurance) and yet those specific topics are tricky to optimize if it is unclear how they fit within your goals.

Goal setting for families with generational wealth is not given enough focus.

Family wealth strategic questions: where is the world heading, where is your world heading, and what do you want your family to become in that world? Similar to business strategy, these are tricky questions with unclear answers, yet thinking strategically is oh so valuable.

Family wealth strategy is where all great family wealth stewards operate from.  

Your family wealth goals will relate to three overarching topics:

1. well-being (principally, physical and mental health),
2. flourishing (principally, self-actualizing and taking meaningful action), and/or
3. impact (supporting others).

Here is my current working definition of family wealth strategy: 

Family wealth strategy aligns tactics with your ‘why’ (your family wealth goals) to ensure family wealth stewardship includes profound meaning, genuine affinity, and actualizes your ability to make a difference. 

Please let me know your thoughts on this definition…

While there are at least 50 tactical topic areas worth addressing within your family wealth strategy, none are as effective as they could be without clearly identifying your Why, then setting your goals and only then working on tactics.

Cheers to your calm, cool and collected wealth stewardship future! 

What is the value of effective family wealth strategy? I love the added meaning the wealth has for the family, I am astounded when families use their resources to build stronger people and relationships leading to more love, and I am impressed when families find their unique ways to make a difference but for me, the value of effective family wealth strategy: reduced stress.

Stress is a killer!

Sure, it is also eustress, but stress derived from family wealth is typically counterproductive. The money (and time) spent on wealth stewardship should be, to as great an extent as possible rewarding. That is my mission!

What’s next for me

In 2024, I embark on a year full of family wealth consultation. It is going to be an exciting year for me! To end 2023, I built a Family Wealth Strategic Review process and plan to complete it with 30 families this year. I hope you are one of them; building your family wealth strategy and aligning it with effective tactics is a fantastic journey.