When people think about wealth management, they often think about returns. How much has the portfolio increased by this year? That question is important, but it isn’t the only element. Families that keep their wealth for generations usually have something more: clear rules, a plan for the future, and people who are ready to carry it forward. Let’s take a deeper dive into the importance of governance and succession planning in your wealth plan.
Why Returns Are Only Part of the Story
Making money is good, but it can’t prevent confusion, conflict or bad timing in the family. Many advisors now see wealth as something to steward, not just grow. In a Q&A published on strixus.com, Antoine Souma, founder of Galliott Capital Advisors, explains that his view changed over time. During this early part of his career, his emphasis was on products and performance. Today he looks at the full family balance sheet, from operating businesses and real estate to succession and family governance. It is a good idea to borrow that wider perspective, as the greatest dangers are often to be found outside the investment portfolio.
What Governance Really Means
Governance may sound formal, but it’s really quite simple. It involves committing to ownership, decision-making, and resolution of conflict. In a family, this can include who sits on the board of a business, who manages the investments, and how money is shared among relatives. Once written down early in the negotiation process, it becomes easier to avoid arguments later on. It also makes everyone feel like they have an understanding of their role, fostering trust and ensuring that the family continues to work together.
Why Succession Planning Cannot Wait
Succession involves more than just the distribution of money. It covers who will lead the family business, who will manage the assets, and who will make decisions when you cannot. When an unexpected illness or death occurs, it can leave people wondering what to do. Think about a couple of basic questions. Who would step in tomorrow? Are they ready? Do they know what you want? Start early – training and trust take time to build.
Treat Your Estate Plan as a Living Strategy
A lot of individuals write a will, file it away, and forget it. It is better to think of your estate plan as something that is going to evolve and adapt to life. Borders are crossed, children are born and grow, laws change, and businesses are sold. An old plan can quickly become out of date with each change. Check documents periodically with your lawyer/advise and verify that your plan aligns with your values and goals.
Look at the Whole Balance Sheet
A frequent error is to only consider the return on investment and not consider other risks. If you have a lot of your money invested in just one business or just one property, your portfolio could be riskier than it needs to be. Loan guarantees and real estate exposure matter too. When viewed as a whole, you can make better decisions on the amount of risk you’re willing to take and how you store your cash in case of an emergency.
Bring Your Advisors Together
Most families already have an accountant, a lawyer, a banker, and an investment manager. The issue is that these individuals seldom converse with one another. Someone must be responsible for coordinating them, in order to get the tax, legal, investment, and family calls coming in one direction. Some families use an independent advisor, or create a family office for this position. Even a simple yearly meeting with all your professionals can close dangerous gaps.
Keep Communication Open
Surprises cause the most pain in families. Be open about your plans even if it’s uncomfortable, even during your lifetime. Communicate why, acknowledge concerns, and involve the next generation in an age-appropriate manner. Open communication makes a plan on paper a plan your family can understand and trust.
Conclusion
Governance and succession planning are essential to safeguarding investments and the wealth they create. Establish clear rules, designate and prepare heirs, periodically check your estate plan, and examine your complete balance sheet. Get all of your advisors on the same team and stay in touch with family. Start this month by listing three questions about your own plan that you cannot yet answer, then take them to your advisor.