As I’ve noted elsewhere [link to post titled Four Misconceptions Advisors Have about Family Governance], family governance and allied services are misunderstood by many advisors to high net worth (HNW) individuals.
This misunderstanding, along with the costs associated with on-site family meetings and retreats, has confined services related to family governance, family dynamics, and family financial education mainly to large family businesses and ultra-high net worth (UHNW) individuals.
Yet many more families of wealth—and advisors—could benefit.
So in this post, I suggest that you consider the role that family governance, family dynamics, and family financial education services might play in your trust company, private bank, multifamily office, or wealth management firm. I am not suggesting that you start offering these services; rather, I am suggesting that you think about your clients’ needs and the kind of relationships you want to cultivate with them.
Then you might consider ways in which offering either some level of these services or referrals to these services could help you better meet your clients’ needs and cultivate deeper relationships with them.
As an advisor, you can stake a position between eschewing these services on the one hand or, on the other, only referring clients in distress to practitioners.
With reasonable levels of interest, knowledge, and skill, trust officers, private bankers, family office executives, and wealth advisors can introduce clients to family governance, increase clients’ readiness for governance, and offer low-cost, entry-level services.
Family governance services are an essential tool of family business and wealth management.
(In this post, I’ll use “family governance services” to include family wealth dynamics, family financial education, and related services.)
These services help a family to professionalize the management of a business or other source of wealth, such as a ranch, farm, real estate portfolio, or copyrights or patents. They help family members to put their financial capital—and human capital—to optimal uses.
They establish mechanisms for a family wealth enterprise, family bank, financial education program, and similar initiatives. They set the stage for sound succession and estate planning. And they help families to discuss business matters rationally while accounting for the emotional dimensions of family life.
If you see family governance services as an intervention rather than a best practice, or you see it as an area where you have little to offer your clients, consider this:
- Your clients may need family governance, but may be unaware of it and its potential benefits.
- You may, as a trusted advisor, be the person best suited to introduce them to family governance.
- You may benefit your clients in memorable, profitable ways by engaging them in family governance, as appropriate to their (and your) situation.
In other words—in keeping with your current advisory role, but with the goal of enhancing that role and your relationships—you may be able to assist clients who find themselves grappling with problems of wealth at moments that matter.
Four steps to considering family governance services
Here are four steps I suggest:
Step 1. Start with your goals, clients, and business model
If all of your strategic and performance goals are being met, if you have the number and type of clients you want, if you believe you won’t lose them upon an intergenerational asset transfer, then why consider something new?
If, however, family governance could help your organization to reach more ambitious goals, strengthen your client relationships, accelerate your growth, and increase your market footprint, might it be worth considering?
The potential benefits depend on your business, but in general these services can:
- Move trust companies and wealth managers toward providing truly holistic services, with the goal of building and retaining AUM in structures such as a family bank
- Help law, accounting, and consulting firms and MFOs to provide more and better services—and drive demand for services tailored to clients’ specific needs
- Create business opportunities for insurance professionals, particularly in designing, structuring, and funding trusts and providing liquidity
- Enable industry associations and dealer networks to provide valuable knowledge and services to members
If the growth of your firm depends on long-term relationships, client intimacy, cross selling, and value delivered, some level of family governance services may have a place in your business model.
Step 2. Familiarize yourself with these services
The principles, practices, and structures of family governance services are fairly straightforward. To be sure, family governance practitioners add significant value, including deep listening skills, sensitivity to clients’ familial needs, and expertise in helping them to address those needs.
These professionals are usually skilled at using personality assessments, such as the Myers Briggs Type Indicator (MBTI), and other tools. Many understand the psychological dimensions of family life and how to foster change. They bring a lot to the table.
Yet many advisors, particularly attorneys and trust officers, have proven adept at listening to clients, drawing out their concerns, chairing family meetings, and developing governance practices and structures.
These advisors often begin by reading books on the subject and articles and papers from MFOs, major accounting firms, and family governance/family dynamics practitioners. In addition, most practitioners will discuss their ways of working and fee structures with interested inquirers.
Of course, reading and research is no substitute for experience, and wealth advisors must understand their limitations as well as their clients’ real needs. True familiarity with governance will enable you to understand these limitations and needs, and position you to provide appropriate assistance, either directly or via referral.
Step 3. Analyze what you might offer
When clients express concerns or you become aware of difficult dynamics around a key decision, you should, as an advisor, at least be able to inform them about family governance services and direct them to resources or provide a referral.
This requires sharpening your observation and listening skills, as well as your awareness of family issues in business and wealth management.
For example, you should have prepared responses for clients who express concerns about health, marriage, divorce, death, and other life events, as well as keep-or-sell, succession, or inheritance decisions.
You don’t have to be an expert to offer a sympathetic ear or act as a sounding board. In that way you can help your client to start thinking things through and, at a minimum, avoid common mistakes.
You may decide to offer entry-level services, such as family surveys, needs assessments, and assistance with family mission statements, family meetings, and governance charters. Or you might hire a practitioner or facilitator (part time, full time, or as a contractor) or provide referrals to practitioners.
As an advisor, you should be able to discuss governance mechanisms directly related to your business; for example:
- If you design or oversee trusts, understand the governance aspects of trust provisions, entity structures, and choice of trustee.
- If your clients have businesses and beneficiaries, know the role governance can play in keep-or-sell or succession decisions (which are too-often based mainly on familial emotions and tribal motivations).
- If you are a trust officer or wealth manager, understand how family governance, preparing heirs, and long-term wealth preservation can complement one another.
The presence or absence of family governance will affect most areas of a client’s business and financial life. As an advisor you can play a valuable (and valued) role in establishing its presence.
Step 4. Make the business case
If you advise family businesses or HNW individuals, the case for becoming familiar enough with family governance to discuss it with curious clients is clear: It is simply sensible to be informed about your field.
Offering a client more than observations and reading matter requires more thought. You don’t want to recommend family governance when mediation, mental health, or addiction recovery services are needed. Nor do you want to misrepresent family governance services.
Arguably, every trusted advisor should be able to refer an interested or needy client to a family governance practitioner. The business case and the humanitarian case for doing so is strong.
The case for actually offering some level of governance services depends on your business model, client base, and approach to clients (for example, product-driven versus relationship-oriented). It also depends on the availability of resources, willingness to invest time and effort, and competitive considerations.
On that latter point, you might start by researching your competitors’ offerings or by surveying your clients on their awareness of family governance and desire to learn about it. Or you could launch a pilot project offering a complementary family survey or discovery process to specific clients.
If you decide to establish a level of awareness of family governance in your firm, you can readily develop that awareness through formal or informal means. If you decide there’s a business case for engaging clients in family governance, then you have marketing and delivery issues to address.
If you are new to family governance, family dynamics, and family financial education services, I would urge you to learn more.
Of course I would, given that I am an evangelist for these services and have written a highly accessible book on the topic [link to Book Landing Page].
But I have done that, and launched this site, because I see tremendous opportunities for practitioners who offer these services, for advisors who understand these services, and for families of wealth who use these services.
A trust officer who is highly conversant with family governance and related services told me, “Right now, this entire area is a cottage industry—at best. But it is developing rapidly, and there’s a real desire among families for this type of education around wealth. It’s just a matter of who’s going to satisfy that desire.”
For a primer on the essence of these services, get your copy of my book Family-Proof Your Wealth [link to Book Landing Page].