PREPARING PHILANTHROPIC HEIRS
Managing Family Dynamics and Philanthropic Legacies For high-net-worth families, big money and strong personalities often collide when it comes to financial matters – especially around charitable initiatives. By coaching heirs in the art of trust and care, advisors can transform strife into collective purpose. Amy Castoro is the President and Chief Executive Officer of The Williams Group, which prepares families for the smooth transfer of wealth across generations. Amy and her colleagues equip families with effective communication and leadership skills, which are crucial for successful wealth management, intergenerational wealth transfer and family philanthropy. Amy and I recently discussed the link between preparing heirs for wealth transition and high-net-worth philanthropic initiatives. Read on for Amy’s insights on preparing heirs. Amy Castoro: Our firm, The Williams Group, was started by Roy Williams sixty years ago. Roy is also co-author of the book, “Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values.” He had witnessed the devastating consequences that wealth can have on unprepared heirs. He was struck by the fact that only 30% of families retained control of assets and harmony by the third generation, post wealth transfer. Roy’s research found that the biggest problems occurred with the breakdown of trust, communication, lack of prepared heirs, and lack of alignment regarding family values. The Williams Group doesn't manage money, we focus on the other side of the equation, making sure the relationships are intact to support the governance structure and estate plan. Legacies are built on relationships, and relationships are built on trust and communication. We are committed to keeping families together through wealth transition so their wealth can be a force for good in their families and the world. We help them manage their wealth as opposed to the wealth managing them by learning new communication and trust tools so they can work better together as a family. We also help advisors to make sure that families are being proactive and teach them how to spot and respond to red flags that can divide a family. You will have a legacy no matter what, how you intentionally shape it requires taking proactive action to ensure it is the one you want.
We are a learning program, focused on how families can strengthen trust, move through conflict more effectively, and design a path forward that works for the individuals as well as the family. Learning more . We’re looking at where a family is today and where they want to go and teaching them the skills they need to get there.
In the center of trust and communication is care. Family members inevitably ask: “Do I feel like I matter”, or “Is my voice is heard?” “Do I feel like my family really cares about me?” Often a new skill for better listening, coordinating, and managing trust are required. Most advisors feel this kind of work is just outside of their wheelhouse. We know that estate plans are designed to take care of assets, not relationships. We suggest, first, looking at the relationship foundation. Once the family can rebuild trust more quickly, they are then able to make better decisions more quickly and freeing up the advisor to move forward with estate planning. Building Understanding
Building understanding across the family begins early. Most of our clients will bring their kids into discussions with us when they're around 20 years old. But that's not to say we can't work with the little ones, too. We recently worked with a mom and her three kids - who were just 6, 9 and 11 - to articulate their family values and mission statement. The conversations were about building trust, communication, and alignment very early. A key question was, “Who are you being for each other?” We help show the kids that what's important about living well or being responsible with wealth was, in part, who they were being for each other. So, we would say to the smaller son, “What's important to you about your sister? What does she mean to you? What are the qualities that you love about her?” That helps them begin to understand what their values are based on the relationships that are closest to them. More importantly, we get them thinking about who they're being for each other as opposed to what they're doing for each other.
Finding Alignment The work we do has a direct impact on a family’s philanthropic intent and charitable giving. One thing we know for sure is that when great families stay together, their philanthropy really can change the world. But when these families break apart - because they don't have solid trust, or they don't know how to navigate a difficult conversation - that whole space of possibilities disappears because the wealth is divided. The HBO series, Succession, demonstrated in a highly dramatized way that lack of trust and communication can be the downfall of a family. So, when we look at philanthropy, the whole potential to make a difference really rests on the family's ability to be aligned. We worked with a family with two adult children in their mid-thirties. The daughter and the son didn't see eye to eye on many things and they didn't spend a lot of time together, yet their mom thought they could run a $600 million foundation together. We called the kids and they said, “Probably not.” So, we got them in a room took them through our process. Sure enough, they really couldn't have had more difference in their interests or lifestyles. Yet, when they really understood who they were being for each other, when they understood why they mattered to each other, they were able to reestablish a healthy bond. They were able to make more space for each other and found a level at which they could align their values. Now they run the foundation together. The daughter has since gotten married and had a child and asked her brother to be the godfather. And they give money. But the shared umbrella is for the young people of the world where he donates to missionaries, she to the LGBTQ community, but there's no longer a divide there. The common theme is that they're all God's children and we're supporting them together in that way.
Empowering Women By 2030 women are projected to control 30 trillion in financial assets. Cerulli Associates states that by 2045, 74.6 trillion will transition to the next generation and, increasingly, women are the largest beneficiaries. More women are also earning more wealth than they have in the past.
Studies by groups like The Women’s Philanthropy Institute show that women are actively involved in their family’s charitable giving. The research demonstrated that among married couples, a $10,000 increase in the wife’s income raises total household giving by over 5%, while the same increase in a husband’s income leads to a 3% increase. Female-headed households were not only more likely to give, but also tended to give nearly twice as much.
Wealth advisors need to turn the conversation more towards women and start looking at charitable giving and purpose. Doing so is a great way for advisors to not only retain the relationship but also to access the next generation. In short, if advisors aren't talking to the women in their client families, they're leaving money on the table.
If I could leave the advisors reading this with one idea, it’s to see that they're doing a great job preparing the assets for the family. Now, it's time to prepare the family for the assets.
Whether it is family offices or advisors, the focus is more often on the assets and the governance of assets rather than on relationships. They're bumping into the relationship breakdowns, but they don't necessarily have the skills to navigate them. They'll come up with a governance fix, but family itself isn't working through the issue. Governance is usually designed to take care of the assets, not the relationships. Our role is to teach new skills around relationship building, and then the governance is off to the races with even more confidence that what it was intended to produce, it will produce. Statistics show that something like 70% to 95% of clients will change advisors when their wealth transfers. Even if that number is 50%, even if it's 40%, it's too high. When we work with families, our goal is to keep that advisor connected. Very often we become a vehicle for advisors to access that next generation because we don’t manage money and deeply committed to the quality of the relationships. We partner with the advisor for that to work. What usually happens is the advisor will bring us in, we'll work with the family to strengthen the relationships, and have more alignment so that the planning is resting on a more solid foundation. What we are doing is what we want to see advisors do regularly: foster communication, find alignment and cultivate relationships within and across the family. Ask questions that improve relationships like, “Who are you being for each other?” Besides discussions like that which bring people together, there are three questions advisors should be asking:
In what ways do you spouses see eye to eye and in what areas do you see things differently when it comes to wealth transfer?
What are you doing other than hoping to ensure that your kids will be prepared as most of them are just hoping?
What are the conversations that you know you should be having but that you don't trust yourself to have?
Advisor conversations must include the topic of philanthropic giving - an essential tool for successful wealth transition. Those discussions must honor the large and increasing role that women are having as inheritors of wealth and champions of family philanthropy.
Taking this approach, we can ensure that wealth transfer is more than just a financial transaction but also a positive family process that promotes harmony and philanthropic impact.