- How the Wealth Management Industry Works
- Classic Approach to Wealth Management
- Strategic Wealth Management of Your Family Enterprise
- The Eight Principles
- The Family as a Cultural System
- Taking Control of the Wealth Management Process
- The Nature of the Wealth Strategist’s Role
- Chapter 1: Issues to Discuss with Your Family
“Solve your problems. Don’t let them lick you.”
- —E. A. Stuart
Over the past 30 years, I have learned that effective wealth management has little to do with how much money you have or how you accumulated it. Effective wealth management is much more about how well you manage than it is about how much you manage. The hard lessons that I’ve learned as a financial industry insider and from managing substantial wealth for my family and other wealthy families are the focus of this book. These lessons are applicable to anyone willing to meet the challenge of managing wealth.
Since the first edition of Wealth, I’ve also had the opportunity to design and teach an executive education program for wealth owners at the University of Chicago Booth School of Business. Over the past five years, more than 400 people from around the world, with wealth from millions to billions, have taken this four-day course. They have generously shared their wisdom in the classroom and in private with me. Many are first-generation entrepreneurs who often attend with their spouses, and sometimes their grown children, laying the groundwork for a multigenerational family legacy. Others are business owners who want to manage their excess cash flow more productively, or who’ve just sold and need to navigate the labyrinth of wealth management. Every class has a group of second-, third-, and fourth-generation inheritors (one Asian participant claimed more than 50 generations, and another Latin American family has lived continuously in the New World since before Cortez landed in 1519). These people have a different, equally valid, and often more informed perspective on multigenerational wealth than do the first-generation entrepreneurs. It gets rather complicated to manage a family business, financial assets, and multiple generations when your family numbers more than 100 people!
By sharing the lessons I’ve learned firsthand and from the wisdom of other wealth owners, and using real-life illustrations, I’m confident you can avoid many of the pitfalls inherent in managing your personal wealth, whether you’re a business-owning entrepreneur, in the aftermath of a liquidity event, or a fourth-generation heir.
Wealth management is about more than deploying capital effectively, though that is an important part. Money, business, family, and community are invariably bound together. People pay taxes, save, spend, support philanthropic causes, and transfer wealth to their heirs. Successful wealth management involves the integrated and effective management of all these components.
Some people build their wealth by saving money a little bit each month and managing it with the goal of having financial security in retirement. Even after years of accumulating financial assets, working with advisors, and experiencing the volatility of financial markets, they are still uncomfortable with how their assets are managed and are looking for better ways to achieve their goals.
Others focus on building equity capital in their business for years, decades, even generations. As the business matures, excess cash flow might be used to diversify into financial and other assets, requiring the development of new financial and investment skills. Most business owners are ill-prepared to deal with the abrupt and often stressful circumstances associated with managing their accumulated savings in the wake of selling their business. In the aftermath, their wealth takes on a completely new character.
The same can be said for those who work hard at their careers for many years and retire with a pension that they are now responsible for managing, or those who receive assets as a result of divorce or loss of a spouse. One of the biggest sudden and high-stress circumstances for coming into wealth is the death of a parent. Over the next 50 years, the United States will see the greatest transfer of wealth in its history. Boston College researchers John J. Havens and Paul G. Schervish estimate that, over this period, total bequests to heirs will total more than $41 trillion.1 In many of these circumstances, people will not be prepared to take on the responsibility of their new wealth, and the event itself will often come as a surprise.
Building and conserving wealth takes time, and it demands considered action. The key is to not do something prematurely that results in a significant loss of capital. For that reason, resist the impulse to act quickly or to retain outside wealth advisors before you are ready to act. Do your homework first and plan ahead. Carefully consider how you will continue to manage and grow your wealth and help your family to flourish, whether you are most concerned about managing in your golden years or you want to create and/or manage a multigenerational legacy of strong human and economic capital.