I attended this presentation by Dr. Lee Hausner at the Annual FFI Conference. She has co-authored with Douglas K. Freeman, J.D., L.LM, their latest book, "Legacy Families...The Definitive Guide to Creating a Successful Multi-generational Family".
Dr. Hausner defines a Legacy Family as one which is in the 4th or 5th Generation and has shared assets. She has found that these families have four characteristics:
- Capacity: they have the capacity to add value to our society;
- Competency: they have the necessary skills and education;
- Connection: they have a connection to their ancestors, current and future descendants; and
- Compassion: they are generous of their time, talent and treasure.
Generally, the Legacy Family has four balanced "capital deposit accounts":
- Human Capital: this is general parenting and grandparenting skills, communication skills, values, morals, ethics, collaborative decision making, conflict resolution skills, leadership training and team building.
- Intellectual Capital: education, career choices, mentoring/coaching, governance - how rules are made for future generations, rights and responsibilities of fiduciary and beneficiary roles.
- Financial Capital: earn money, manage and invest assets, wealth transfer strategies, family business, financial parenting, understand the psychology of money.
- Social Capital: philanthropy, donor-advised funds, family foundation.
The family should be engaging in activities that build each of the 4 capital accounts so that they maintain balance. The following are suggesions that families can input to help keep balance in their capital accounts:
- Effective communication among the family and the stakeholders;
- Adopted a process for collaborative decision-making;
- Develop conflict resolution skills;
- An example was the creation of a board to resolve conflicts among family members. Each party chooses someone and then those selected choose a third member. That panel then hears from both parties and submits proposed resolutions.
- Shared values: articulate the behaviors that are acceptable;
- Diversity: acceptance of non-bloodline family members and partner choices for family members;
- Manage expectations: clarity of expectations from future generations; clarity of financial support that will be provided to future generation;
- Financial competency;
- Generational leadership and governance;
- Rotate the chairmanship of family meetings among all generations, including children, have an agenda, everyone participates
- Focused achievement: model of "work" ethic, focused on doing something everyday
- Dr. Hausner suggested that even if the parent plays golf everyday, that the person leaves the house dressed for work, hides the golf clubs in the trunk and goes to the course at the same time everyday to demonstrate to young children the "work ethic" of doing something productive everyday.
- Accountability: specific behaviors that can be counted and measured,
- Being "nicer" to my siblings is not something that can be counted and measured, but I will have lunch with my sibling once a month and we will not talk about business is something that can be measured.
- Heritage and Traditions: choose dates for family meetings that are not holidays, be sensitive to diversity (eg: in-laws being able to see their families of origins on holidays).
We as advisors can use these suggestions and work with our clients to help them keep balance in their capital accounts.