5. “ It has left me with nothing to hope for, with nothing definite to seek or strive for. Inherited wealth is a real handicap to happiness.” William K. Vanderbilt, grandson of Cornelius Vanderbilt
6. “ The Vanderbilts over several generations united two notable talents, those being the acquisition of money and the later the dispensing of it in unparalleled volume, and for frequent and unparalleled self-gratification and, very often, rather forthright stupidity.” John Kenneth Galbraith
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8. “ 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.” Nathan Rothschild
9. “ 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.” Nathan Rothschild
10. Alphonse James de Rothschild (1827-1905) Bethsabée de Rothschild (1914-1999) Charles Rothschild (1877-1923), banker and entomologist Edmond James de Rothschild (1845-1934) Elie de Rothschild (born 1917) Emma Rothschild (born 1948) Guy de Rothschild (1909-) Baron Ferdinand de Rothschild (1839-1898) Hannah Primrose, Countess of Rosebery nee Hannah Rothschild (1851-1890) Henri James de Rothschild (1872-1946) Henriette Rothschild (1791-1866) married Sir Moses Montefiore (1784-1885) James Mayer Rothschild (1792-1868) Jean-Pierre de Rothschild ("JP") (born 1960) Josef Rothschild Kathleen Annie Pannonica Rothschild (Baroness Nica de Koenigswarter) (1913-1990) Leopold de Rothschild (1845-1917) Lionel Nathan Rothschild (1808-1879) Miriam Louisa Rothschild (1908-2005) Lionel Walter Rothschild, 2nd Baron Rothschild of the United Kingdom (1868-1937) Nathaniel de Rothschild (1812-1870) Nathan Mayer Rothschild (1777-1836) Nathan Mayer Rothschild, 1st Baron Rothschild of the United Kingdom (1840-1915) Nathaniel Charles Jacob Rothschild, 4th Baron Rothschild of the United Kingdom (born 1936) Nathaniel Mayer Victor Rothschild, 3rd Baron Rothschild of the United Kingdom (1910-1990) Philippe de Rothschild (1902-88)
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12. 70% of wealth is gone by the end of the second generation 90% is gone by the end of the third 98% is gone by the end of the fourth
33. How a family defines wealth is critical to its long term success:
34. How a family defines wealth is critical to its long term success: Net worth = $ [Fill in the Blank]
35. How a family defines wealth is critical to its long term success: Net worth = $ [Fill in the Blank] Most families with this definition loose their wealth in a few generations.
39. The Focus: Four Types of Family Capital Each generation is maximizing its potential.
40. The Focus: Four Types of Family Capital Assets are protected and wisely used.
41. The Focus: Four Types of Family Capital The family has a healthy and productive culture.
42. The Focus: Four Types of Family Capital The family is well-advised and well-connected.
43. The Focus: New Model of Estate Planning Investment of some financial capital in structures that will foster human, cultural and social capital of the family
44. Mile 1: The Stages of Family Development Mile 2: Understanding a Family’s Core Wealth Mile 3: Developing a Family’s Core Competencies
45. Core Competencies 1. Alignment & Identity 2. Communication 3. Autonomy and Belonging 4. Performance & accountability 5. Sound financial management 6. Effective structures 7. Robust networks and ecosystems 8. Leadership and governance 9. Education & mentoring Cultural agility & adaptive capacity
48. Family Systems Diagram People Patterns Psychology Education Experience Honesty Engagement Commitment Communication Stories Scripts Now Outcome History Functions Structures Situation Family Type Roles Coalitions Patterns Belonging Individuation Trust Power Developmental Stage
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53. Family Systems Diagram People Patterns Psychology Education Experience Honesty Engagement Commitment Communication Stories Scripts Now Outcome History Functions Structures Situation Family Type Roles Coalitions Patterns Belonging Individuation Trust Power Developmental Stage
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56. “ Every man takes the limits of his own field of vision for the limits of the world." Arthur Schopenhauer
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59. Family Systems Diagram People Patterns Psychology Education Experience Honesty Engagement Commitment Communication Stories Scripts Now Outcome History Functions Structures Situation Family Type Roles Coalitions Patterns Belonging Individuation Trust Power Developmental Stage
60. Family Systems Diagram People Patterns Psychology Education Experience Honesty Engagement Commitment Communication Stories Scripts Now Outcome History Functions Structures Situation Family Type Roles Coalitions Patterns Belonging Individuation Trust Power Developmental Stage
61. Scripts A script is a series of transactions with multiple actors which often has ulterior or hidden motives and proceeds towards a predictable outcome.
67. Family Systems Diagram People Patterns Psychology Education Experience Honesty Engagement Commitment Communication Stories Scripts Now Outcome History Functions Structures Situation Family Type Roles Coalitions Patterns Belonging Individuation Trust Power Developmental Stage
68. Challenge the sense the family is making of itself… Reframing Moving Boundaries Shifting Focus Disrupting Cadence Altering Structure Disturbing Balance
69. It’s simple in theory…. Help the family tell a larger story about itself and thereby create a new identity.
100M. Approximately $143B in today’s dollars. Very concerned with legacy – left modest amounts of equivalent to 5 – 10 million to his daughters and 5 to Cornelius (son) and $2M to his other 3 sons), His son William nearly doubled the fortune to $194 in 9 years before he died, but he was desparatelyunhapppy. He died the richest man in the country. 30 years later not one descendant among the richest in America (this was after the doubling of the fortune in 9 years – the staggering amount of roughly $280B in todays dollars)48 years later one descendent died pennliless70 years all the mansions had been soldWithin 100 years 120 gathered and not one millionaire among them
Amassed a huge fortune – 193B in todays dollars – 3x Bill Gate’s fortuneLeft the bulk to William - 90M to
Sustaining wealth is difficult to do – the failure rates are massive. We are all familiar with heirs who receive substantial sums and it is gone within a few years. We all know families that were not able to sustain wealth past the second generation and even more that weren’t able to preserve it for the 3rd. What studies have been done are rather sobering.
Good news for advisors / Neutral news / Bad newsGood – we are doing a good job on the technical sideNeutral – not our jobBad – may be failing our clients by not alerting them to the dangers
What constitutes successful wealth transfer?Passing on the most possible – keeping it from the IRSPassing on the “right” amount – Warren Buffet approachGetting the right amounts of money to the right people at the right time…not bad…But… all of this views money as the object of the planning process….When you dig deep, most of my clients aren’t really concerned about the money…they could actually care less – what they are concerned about is people. This is not to say that the money isn’t important, but it is not about the money itself, it is about that that money can do, for both good and ill, in the lives of the people they love and care about. The money is simply a means to an end…So…I would suggest that a new definition of success in wealth transition planning might be:How can I best invest my financial wealth in the lives of the people I care about better?
This notion of success moving from simply preparing the money for the family through techniques to preparing the family for the money in far more strategic ways changes the game.
The new game is about sustaining wealth across generations – it is about using the money wisely to create well-adjusted and productive people. Creating this kind of sustainable impact in the lives of your client’s children, and your children’s children and their children is powerful vision and it is truly possible in many families. It is also not as difficult as many people seem to think, though it does require a certain kind of attention and deeper vision at the outset. Unfortunately, we in the professional services industry have done a remarkable job of focusing all of you on exactly the wrong things…as it turns out very few families are able to sustain wealth for 3 of 4 generations…
Once you begin to look at how you would invest your wealth in your family, the entire game changes. You start asking questions like: what is important to you and your family? What is likely to support the success (however you define it) of the people you love and the people they love? How long could this investment last and what would sustain it? What structures need to be in place to support this investment? How do I prepare my family to manage and steward this investment not only for themselves, but for their children and their children’s children. What is at stake if this fails? What am I doing that is getting in the way? Where do I need to let go and where do I need to retain control. In short, it turns family leaders from passive players in a tax game to active participants in wealth stewardship plans.
So how does this happen? It requires a change of mindset – what I call new maps. How families create common maps has everything to do with how they communicate and how they communicate has a lot to do with mindsets and their capacity to create common maps.The interesting thing is that almost anything can become the subject of these maps – an estate plan, philanthropy, a business – the real question is whether the family is working on some map together…
In this talk we are going to take a 3 mile journey on this roadmap….
Family communication is fraught with hidden rules
Mixed signals
In some families there is a kind of civility that prevents robust conversations
And above all there is rampant complexity…
NeedsMemoryLanguageSocial networks
And above all there is rampant complexity…
There has been quite a bit of work done on the relationship between values and philanthropic worldviews. Going back to the notion of reality tunnels for a moment – people see the world through their own eyes and act from the way they have put their worlds together. These world views result in actions in the world that grow out of the logic that underlies the world view. This connection between the logic system and the behavior is what we might call “values”. And the reality tunnel is shaped by the life condition we find ourselves in. One of the easiest ways to explain this is to look at Maslow’s hierarchy of needs.
Maslow said that we have a series of needs and have a very difficult time paying attention to higher needs until we have resolved the lower needs issues. If I am hungry, I will probably not be spending a lot of time doing self-acutalizing. Each level builds on the level before and each level creates behavior and values associated with that level. If I am part of a street gang where safety and security is key issue, then love and belonging are inconsistent with the values I need to simply meet these basic needs. Maslow suggested that once needs at lower levels were fundamentally met, these values werer “locked in” and it would take a lot to undo them. Now lets tie this to philanthropy.
