Note from Roy Williams: "Everything we do at The Williams Group is team oriented and the success of our continued growth and development is because of the extraordinary collaboration of our teamwork. Here is an example of such a paper with contributions from Amy Castoro, Diana Williams and Judy Kimmel."
Most estate plans are focused on strategy and structure, wrapped around governance, preservation, and tax reduction, techniques related to the assets and transfer of assets. On the other hand, our values, mission, and glossary are located in family values and the long-range purpose of the wealth and the family legacy. There will usually be some conflicts between these two areas of concentration, one being assets, the other the family. The great news is the two focuses have one objective. The synthesis of family unity and the focus of building the family team toward that unity. This requires more work on the trust and communication bridges within the family.
The often missed opportunity is the focus on the family. Without a strong foundation of family trust, the expert estate plans will lay on a shaky foundation. Family unity and the skill to navigate the complexities of living with wealth are vital to a true legacy for generations to come. The focus of control lies in building the skills required to manage trust with each other and communicate effectively.
As the bridges of wealth are built, we find more and more roles being identified which require someone to step up and assume different responsibilities. Yet, the wills and estate planning documents may not specifically identify many roles or actions that will be required, nor by whom they will be completed. What occurs, or what frequently unfolds, is a communication breakdown--that can be as simple as a perception breakdown, or a more complex breakdown around trust.
Let’s look closer. Fundamental to communication and coordination are two critical factors - perception and trust.
When viewed by people in North America, this picture is seen as a side of a building and 3 stick people either inside looking out or outside looking in through a window. In rural Kenya, they see a tree denuded by elephants and giraffes and a woman carrying a package to market with two others. The North American’s perception and the Kenyan’s perception are what they are, and based upon their histories. The key is that a breakdown of communication may be a perception issue.
The professional advisor perceives roles for a beneficiary, a trustee, executor, family asset manager, long-term health, etc. Their perception may be entirely different from the actual roles required by family members. Often the conversations necessary to define these roles are rarely had with the input of the entire family. The concept of qualification and performance standards required by these roles are not in the regular purview of the professional advisor’s training and are, therefore, assumed to be addressed over time by family members and those in roles such as executor, trustee, etc. Somehow, someway, the perception is that age and living will prepare the heirs to become good stewards.
A client of mine experienced this first hand. As I sat in his office, I noticed he had a 6-inch spindle on his desk full of messages. I asked him about it and he said it was various banks calling him regarding rolling his $100,000.00 CD over. He had sold his company and his share was $60 million. I jokingly said, "There is a better way of managing $60 million, other than putting $100k in every bank in the US."
He said at age 57, he was supposed to know how to manage $60 million. He was an M.B.A., he ran a large company and spent many years being a manager. However he had never managed money or been involved in stocks and bonds, and he was afraid of losing it all. He only knew how to manage people. He agreed he was unprepared to manage or even monitor a money manager. We encouraged him to declare himself a "beginner," and helped him interview and select a couple or money managers to use for managing his funds. This individual never had the opportunity to discuss the role of a money manager. He never developed a sensibility to be able to assess their competence, or had a standard to establish their success.
In another example, a 74-year-old man received a large inheritance in stages at ages 35, 40, 45, 50. His grandparents felt that by doing so, he would have acquired the wisdom and experience of living and would not dissipate his inheritance. His public persona and lifestyle placed him on both corporate boards of directors and charitable boards. He was generous in his philanthropy and at age 74 was considered a pillar in the community.
He had never been prepared to either manage the wealth nor monitor wealth managers. Everyone, including himself, had the perception that he did not need any help. He, in turn, trusted a man in his church and gave him all $500 million of his inheritance, which turned out to be a Ponzi scheme. All was lost. He had no way to pay his bills. He had never had a job and did not even know how to apply for a job at 74 years of age. All because no one had ever identified the roles, standards, or levels of competence that would be required of him. He had used savings banks and his board connections to invest his funds over the years and with $500 million-plus as a cushion, he never had any major cash flow issues.
Now let’s take a closer look at trust:
This leads us to the second breakdown that occurs in communication – one of trust.
Without trust, there is little to no authentic communication and in most cases even any desire or interest in communicating. Trust is the root in every relationship. It is the foundation that makes the estate plans, family business strategy, and family harmony possible.
Trust has three components that can be observed and managed:
Reliability – doing what we say we will do – when we say we will do so and managing our commitments.
Sincerity – is our public story the same as our private story? Gossip is an example of insincerity and one step away from betrayal.
Competence – do we have the capacity to do what we said we will do, when we say we will do it?
The three components of trust, wrapped with care, become authentic trust. Authentic trust is the care we use to apply the components of trust.
For trust to exist we must manage all three components and if one breaks down, trust in the relationship breaks down.
The resultant communication breakdown is the basis for the second primary reason for the communication failures we see.
Conclusion The key is to look again and see if the core issue is one of perception or trust. Both can be addressed and handled once you identify which of the two are behind the mischief. Depending upon the individuals, it takes a skilled professional coach trained in managing conversations to educate and navigate these conversations successfully. Parents and spouses are usually not the right people to coach their own family primarily due to the position of power and authority they typically hold in the family. All these processes take patience, time and skill.
These communication cornerstones, perception and trust, are fundamental to ensuring successful wealth transition. Together they create the alignment to move forward in establishing family values and mission, and the related, critical financial structures and roles.