The importance of family meetings
As the proverb goes, “Shirtsleeves to shirtsleeves in three generations.” Many variations of this theme exist throughout the world, but all describe the same thing; The tendency of a family’s third generation to squander the wealth created by the first.
In a 2003 study of 3,250 wealthy families, Williams and Preisser discovered even substantial fortunes had disappeared by the end of the second generation in 70 percent of the families surveyed. The number rose to 90 percent after the third generation, and 98 percent by the end of the fourth.
“Entropy to entropy in three generations” is a similar concept from the field of science. Entropy refers to the tendency of systems to go from a state of maximum order to a state of maximum disorder. According to Jay Hughes, author of Family Wealth-Keeping it in the Family, systems tend to become increasingly disorganized over time, and families are subject to this phenomenon as well.
Several factors contribute to disorganization in families and prevent them from being as strong as possible. When this happens, families are at risk of losing what they have worked so hard to build. One of the factors of disorganization can be money, but the legal structures that create different classes in the family can also play a role.
Financially diligent families usually have advisors to help them navigate the technical areas of wealth planning. Many people protect and preserve family wealth through business succession planning, prenuptial agreements, and multigenerational wealth transfer techniques.
But when it comes to building strong families, relying solely on a technical approach doesn't guarantee success or strong emotional connections. Healthy family dynamics and family cohesion are important to long-term preservation of family wealth.
What factors are needed to build a strong, cohesive family? Again, money is one of them. It can foster cohesion as families strive to understand and clarify their values, or when they practice and teach philanthropy. How does a family come together to define and understand their values? A family meeting is a perfect way to address these questions.
Family meetings can be facilitated by a third party to build and improve a family's communication culture. Through enhanced communication, families can identify and focus on their values through family mission statements, preparing the next generation to carry on the legacy, and, most importantly, build trust. Family meeting topics can be as unique as the families themselves, but some discussion areas include:
- The family heritage and legacy
- Family unity and connection
- The family mission
- Values that guide the spending, saving and sharing of the wealth
- Raising productive, motivated, and compassionate children
- Stewardship of wealth
- Governance, succession, transition planning, bloodline and leadership
- Family philanthropy
Family meetings can be fun, and a healthy family culture builds unity. One of the best ways to open up lines of communication between family members can be through well planned and regularly scheduled family meetings.
The Central Trust Company team is experienced in facilitating family meetings and is ready to help. Our technical knowledge, combined with years of working with families in various stages of building or transferring wealth, brings a valuable perspective. Moreover, we understand the importance of family dynamics, generational relationships, and the ways to build upon the connectedness already established within the family.
Contributed by Andrea McKinney
Vice President & Wealth Management Consultant, Central Trust Company
Products and services offered by Central Trust Company are not insured by the FDIC, are not deposits of or guaranteed by any depository institution or affiliate bank and are subject to investment risks, including possible loss of the principal amount invested. Insurance products are available through and underwritten by non-affiliated insurance companies.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.