The Greatest Risk Is Not Financial, It Is Emotional

Most families believe that their biggest risk and exposure is a financial one.

The truth is the risk is not financial, it’s emotional.

The emotional and human capital is what is most at risk and what could, if left unchecked, pose the greatest threat to the family and de-rail the succession plan and the legacy.

Placing focus and investing time, as a family, into supporting and protecting the relationships within the family, needs to be made as much, if not more, of a priority as protecting the financial wealth.

The human capital of a family legacy is often over-looked or deemed irrelevant or unimportant when planning and designing legacy and succession plans. Yet it is the one area of a family that can so easily pose the biggest threat to the successful outcome of well laid plans.

If the relationships within the family are unbalanced, unhealthy, toxic or fractured, then the likelihood of a successful legacy and succession or wealth transition to the next generation is unlikely.

The relationships between heirs, custodians and inheritors is what will have a direct, long lasting and deep impact on succession and legacy.

Communication is at the heart of relationships and not all conversations are comfortable to have and can be confronting and emotional. However, the alternative of leaving things unsaid, can be far worse, and if left to escalate, can even be catastrophic.

Engaging and inviting the next generation custodians into the family legacy and succession conversations is the first and best step to protecting the future of the family.

Enabling and empowering the family members is where the practice makes the master, you can’t learn everything from watching from the sidelines. At some point, stepping on to the field and taking on a role and being an active and supporting team member is required.

Learning requires two key elements, theory and practice, it’s a proven recipe for success and a necessary progression to improve and build confidence. Family offices and family businesses are excellent proving and training environments for family members to home their skills and develop experience in a safe environment.

Great teachers and experienced mentors and advisors play a crucial role in guiding and developing the next generation in preparedness for family succession. Roles and responsibilities must be clear, relevant and within the capabilities of the family members. Goals must be attainable and realistic not too ambitious to avoid disappointment and failure, yet challenging enough to achieve experience, growth and confidence.

Family alignment is an essential part of successful legacy and wealth transition, not just in aligned values, but aligned relationships and healthy communication. Next generation family alignment requires parents and children to have open and unencumbered conversations about the family relationships, the management of the family wealth and the rules and processes that go along with maintaining a healthy balance.

Having the right team of financial and investment advisors is essential, having the right emotional and family guidance is irreplaceable and priceless.

A family legacy without a family is no longer a family legacy, it’s a wasted opportunity and a preventable outcome given early intervention and the right advice.

Given the onset of the great wealth transfer facing families today, now is the right time to be paying focused attention on the family relationships and taking action to protect the legacy.

Protect the legacy by protecting the family relationships.

What are you waiting for?