“When I have enough money, I want to learn the intricacies of tax, estate, investment, and insurance planning.“
— Said Nobody, Ever
The number of high net worth (“HNW”) families is growing rapidly. Traditionally, HNW families have included successful business owners, entrepreneurs, and high income earners who have achieved success in fields such as medicine, legal, dental, and real estate. The ranks of these HNW families have been greatly expanded by those who have participated directly in the rapid advancement of technological innovation that has swept the globe during the first 20 years of the twenty-first century.
Whether their wealth has been created by developing their own businesses, professional practices, or senior executive management skills, there is often a distinct contrast between how many HNW individuals mange their business or professional activities and how they manage their wealth. Despite having spent years working tirelessly focusing upon their business and professional activities to generate income, they often pay considerably less attention to ensuring that their personal income results in the growth, protection, administration, and transfer of wealth.
Numerous factors, both internal and external, can play a role in the destruction of family wealth. The lack of strategic planning and a long-term multi-generational vision are frequently the major causes of wealth erosion. Excessive risk taking, poor investment decisions, and unresolved family divisions and disputes can also play a role. Adding to these the corrosive effects of inflation and taxation resulting from adverse changes in governmental policy choices, the often cited “Three Generation Wealth Rule” axiom (a total loss of wealth by the third generation) all too often becomes a reality.
Managing Wealth Like A Business
High income individuals and families that own a business are usually deeply engaged both physically and emotionally in their professional and business activities. However, once significant financial rewards result from their professional careers or the successful operation of the family business, HNW individuals and families encounter challenges that can differ remarkably from those faced during their professional careers or years of business ownership.
Making the transition requires the development of processes and procedures to manage wealth, acquire investment knowledge, and implement a dedicated and structured approach. Objectives of this process can include defining clear objectives, organizing proper budgeting, devising strategies, holding regular meetings, obtaining advice from high quality advisors, professionally monitoring performance, and maintaining control over critical aspects of wealth management.
Become the CEO of You, Inc.
The professionalization of wealth management does not have to wait until family wealth reaches the magnitude worthy of a virtual family office (“VFO”) or a single family office. Begin the journey today by allocating time to the subject and defining your family wealth objectives. Take the time to gain insights into best practices for the growth, protection, administration, and transfer of wealth.
Based upon the insights you gain during this process, strategies can be identified and developed leading to wealth management decisions that are tailored to the achievement of your family’s goals and objectives. Obtaining an appropriate level of knowledge, implementing a structured approach, practicing discipline, dedicating time, and ensuring open communication between family members, “learning by losing” can be avoided.
Engage the Services of a Personal CFO
Managing wealth like a business is an ongoing process that is continually evolving as internal and external facts and circumstances change. Engaging the services of an experienced, qualified professional to assist in this effort as your Personal CFO can greatly accelerate your efforts toward the growth, protection, administration, and transfer of wealth.
