In the financial and estate planning industry a current rage is The Ultimate Gift by Jim Stovall, a book that recently was made into a movie.
The novel is about a very wealthy man who realized that his wealth could not buy what really matters. Throughout his life, he attempted to make his loved ones happy by giving them money and buying whatever they wanted. Too late, he realized this was not good for the loved ones. He decides to salvage his unspoiled grandson by promising a fortune to the youth if he completes a series of assignments designed to teach him values and impart key insights.
The book's themes are ones we address regularly in Retirement Watch. Wealth is merely a means to one or more ends. Leaving loved ones wealth without ensuring they also have values and purpose is not satisfying to many people. This holiday weekend is a good time to address those themes.
To avoid the unhappy end the book, movie, and various spin off products recommend giving heirs assignments similar to those in the book. A better approach for many families is one practiced for many decades by very wealthy families that have passed both wealth and values through several generations.
The annual family meeting is an important tool for teaching both values and ways to manage wealth or a business. It should be considered by families of almost any level of wealth. The meetings build relationships and communications among family members, especially extended families. They also lay the foundation for making good decisions when important decisions need to be made. After establishing relationships, the most important goal of an annual family meeting is to discuss the family's values, legacy, and lifestyle.
The regular, planned family meeting is especially important among wealthy families in which a business or a pool of assets is managed for or by the family. Yet, other families can use the meeting to maximize communications among members and to perpetuate shared values.
An annual family meeting usually is held at a neutral location, such as at a resort or on a cruise ship. The agenda depends on the family but usually is a combination of business and investment meetings, education sessions, recreational activities, and social events. The meeting can last one to four days, depending on the size and wealth of the family and what needs to be accomplished.
The first decision is whether the meetings will be organized and led by an outside facilitator or whether members of the family will be the leaders. Some people believe that family members will be intimidated and refrain from giving opinions or asking questions if the facilitator is not independent. Others believe their family members can handle the task for most issues.
Before the meeting, all family members should be allowed to give input on the meeting agenda. An outside facilitator might talk with as many members as possible in advance, or a task force of family members could gather suggestions.
At the first family meeting a governance structure and mission statement should be created. The more the family depends on shared wealth, the more important these are. The structure will determine which decisions should be made by a small group and which should be addressed by the larger family. It also determines who has a voice. (Should in-laws be involved? At what age are children involved in decisions?)
It is important for a family to begin annual meetings and establish the structure before there are problems or difficult decisions need to be made. It can take a while to set up a decision making process, and even then several meetings might be needed to make decisions on important matters. In addition, if a difficult problem needs to be addressed, the problem and how some people want it resolved could influence the decision making structure they favor.
The education sessions depend on the family. Some sessions ensure that everyone understands the family's assets and how they currently are managed. Others might discuss the current succession plan or educate family members on how to manage their own finances or on other issues.
Facilitators generally recommend that only about one third of the meetings be devoted to finances. The rest should help build family relationships, values, and interest in the family as a unit. That is why it is important the members believe they have input into planning the meetings, so they will be interested in the sessions.
A final point is not to set expectations too high. It is unlikely that anything major will be decided at most meetings. The goal is to stimulate members to communicate during the year and be willing to attend future meetings. A good 10-point checklist of goals for the meetings and their aftermath is at www.the-williamsgroup.org/wealthtran.html.