Eight Principles of Strategic Wealth Management
To protect your family’s assets and make them grow, follow these guidelines:
- “Take charge and do it early” – Determine the values that will guide the family’s wealth management. This means digging into the details of the family’s financial condition, structuring goals that complement each other and devising a long-term strategy.
- “Align family and business interests around wealth-building goals and strategies” – Unified families can achieve some economies of scale, but that depends on both shared history and a shared view of the future. Aligning business and family interests will help ensure that any hired financial advisors work to advance the family’s common goal.
- “Create a culture of accountability” – Carefully define the wealth strategist’s responsibilities. Establish metrics to guide and assess the strategist’s performance. Objective metrics help take the sting out of criticism and keep peace in the family.
- “Capitalize on your family’s combined resources” – Pooling funds allows the family to access investment opportunities that would not be available if people managed their money in smaller bundles. Nepotism isn’t all bad because members of a family may have resources, networks and influence that can benefit everyone.
- “Delegate, empower and respect independence” – Insist that younger relatives take opportunities to grow outside the family, so they will be able to stand on their own feet and add value to the family through what they learn and accomplish. Empowerment helps members of the wealth management team and family office do a better job. Make expectations, goals and strategy clear – but don’t micromanage.
- “Diversify but focus” – Diversification is a prudent risk management strategy. Because most family fortunes began in one business, and such concentration is extremely risky, it is crucial to diversify. The family’s wealth managers should focus on money management so they become more competent than the professionals they might otherwise hire.
- “Err on the side of simplicity where possible” – Keep a strategy simple to make its strengths and weaknesses more understandable. When families opt for complex strategies, at least keep everything transparent and visible to everyone so no one has doubts about anyone else’s motives or performance.
- “Develop future family leaders with strong wealth management skills” -Pursue a multigenerational approach to wealth management. Nourishing and developing successors takes time and effort. Anyone entering the family business should have at least 10 years of successful performance outside so they add something of value to the family firm.
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