FAMILY MEETING MATTERS

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When our children take up an instrument, we take them to their lessons and ensure that they practice. When we want our children to get good grades, we ensure that they study. If they take up sports, we ensure they get the proper skills and training. As parents, we provide our children with the tools to succeed. Accordingly, if we want our children to be successful in managing wealth, they will need training, practice, and the tools to succeed.

A well-known proverb is, “shirtsleeves to shirtsleeves in three generations.” 1 It refers to the stunning phenomenon that 90% of families lose their wealth by the third generation.2 This remarkable struggle that families have in sustaining wealth over multiple generations can be for a variety of reasons. One of the common reasons that families fail to sustain wealth is due to a lack of communication within the family.3 Improved communication, including regular family meetings may mean the difference between falling within the 10% versus the 90%.

It is common for parents to feel uncomfortable talking about money. Hesitation might come from a natural fear that telling their heirs about the wealth may result in demotivation and possibly destructive behavior. However, not communicating the purpose of the wealth or teaching heirs to manage the wealth can be detrimental. Ralph Waldo Emerson once said, “It requires a great deal of boldness and a great deal of caution to make a great fortune, and when you have got it, it requires ten times as

much wit to keep it.”4 Preparing and educating the next generation to manage the wealth is critical to increasing the likelihood of successfully transferring wealth and making it last for future heirs.

The decision to invite next generation members into a family meeting is an important one. However, family meetings are the perfect training ground to cultivate the next generation. There is no right or wrong formula for the perfect family meeting. Meetings can be formal or informal. Topics discussed can be as simple as planning family vacations to reviewing the complexities of an estate plan. The objective is to encourage family members to work together and to establish an effective decision making body.

Used as a forum to communicate expectations, to educate, and to share information, family meetings can yield long-term benefits, including:

» Building a stronger and unified family with a shared sense of commitment by finding a common ground; identifying shared values; working towards same goals

» Promoting personal development of family members by building leadership skills such as: mastering conflict resolution; developing listening, speaking, and teaching skills; managing and conducting meetings

FAMILY MEETING MATTERS

1 https://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/shirtsleeves-shirtsleeves-three-generations 2 http://www.powreport.com/2018/01/digging-deeper-into-why-90-of-3rd.html 3 http://time.com/money/3925308/rich-families-lose-wealth/ 4 www.searchquotes.com

KIM LLUMIQUINGA SENIOR WEALTH ADVISOR

TFO PHOENIX | FAMILY MEETING MATTERS

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» Supporting family sustainability by giving family members a voice which instills in them a sense of importance and identity, keeping them engaged in the family

» Strengthening family relationships across generations as the family connects through telling of stories; connecting future heirs to the wealth by celebrating family history

» Learning to appreciate and value each other’s differentness; leveraging those differences to make better decisions

» Providing a better understanding of the family’s financial wealth and cultivating a sense of responsibility and stewardship; help family members navigate and deal with the pressures of wealth

» Developing responsible owners of wealth as they increase their skills to manage and sustain the wealth

Initially, family meetings are an opportunity for the older generation to mentor the next generation. The communication and sharing of the family’s financial picture should be an educational process. In this educational process, heirs should understand the expectations for the use of wealth; learn how the wealth is invested; and develop their own financial fluency.

As heirs grow into responsible owners of wealth, their roles in the family meetings should also evolve. They should engage in conversations about family issues and participate in development of family policies. Over time, the heirs should take on active roles in the meeting by taking responsibility for agenda items where their skills and interests can best be utilized.

Family meetings are an important tool to enable families to sustain the wealth over multiple generations by growing their heirs into future leadership roles and encouraging their family to work together. It is the training ground for the next generation to become skilled owners of wealth.

Family Meeting Structure Considerations on next page.

References:

1. Family Meetings, Craig E. Aronoff and John L. Ward2. Family Wealth: Keeping It in the Family, James E. Hughes, Jr.3. Wealth In Families, Charles W. Collier

Disclosures

Advisory services are provided by TFO Phoenix, Inc., an SEC registered investment advisor. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. The firm is not engaged in the practice of law. TFO Phoenix will not act upon family governance decisions unless it is fully authorized to do so in accordance with its advisory agreement.

The legal and estate planning information provided in connection with family governance is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable for a client’s portfolio. There are no assurances that a portfolio will match or outperform any particular benchmark.

Provided for informational purposes only. This information is confidential and may not be reproduced or used for any other purpose, or transmitted, in whole or in part, to any third parties without the prior written consent of TFO Phoenix, Inc.

TFO PHOENIX | FAMILY MEETING MATTERS

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5060 North 40th Street Ste. 200 Phoenix, AZ 85018Main: 602.466.2611 Fax: 602.466.2601

www.tfophoenix.com

FAMILY MEETING STRUCTURE CONSIDERATIONS

Level of Interest in Regular Family Meetings

» Require Time Commitment

» Possible Financial Commitment

Attendees (None, All or Some)

» Who?

» Immediate Family Members

» Extended Family Members

» Spouses

» Advisors

» Outside Speakers

» Other

» Requirements of Attendees

Location of Meeting

» In Person or Teleconference/Web

» Rotate Locations

Agenda

» Who Should Own the Agenda?

» Structure: Financial (Business), Education, Social (Fun)

» Topics of Interest

Frequency of Meetings

Time of Meeting

Setting Expectations and Rules for Engagement

» Openness and Honesty

» Privacy and Confidentiality

» Respect

» Conflict

» Accountability

Objectives and Purpose of Family Meetings

» Family Economics: Understanding the Family’s Wealth

» Financial Updates

» Estate Plan Overview

» Succession Planning: Preparing the Next Generation

» Family Cohesiveness: Staying Connected and Sharing Stories

» Financial Education and Mentoring

» Identification of Shared Values and Goals

» Enhanced Family Communication

» Focus on the Future

» Information Sharing

» Training Ground for Money Management and Financial Fluency

» Joint Decision Making

» Family Updates