Family legacies don’t just happen.
Building generational wealth itself is a painstaking task – one that generally requires decades of sweat equity, inspiration and discipline.
However, once you have accumulated that wealth, you’ll encounter new challenges: managing that wealth, continuing to grow it and dispersing it among a few or many family members in a way that allows them to pass it down to future generations.
This is where family governance comes in.
Family governance is a structured framework and set of practices implemented by affluent families that enables them to optimally manage their wealth and assets. It involves processes, rules and communication channels that help the family make decisions, determine who is responsible for what, and – when done correctly – fosters an environment of transparency and collaboration.
The goal: Prepare your family not just to manage money now, but navigate potentially complex issues, such as succession planning, wealth transfer, philanthropy and the preservation of family values and legacies.
Establishing Decision-Making Processes
While the family head might make many key choices throughout the process, one aspect of family governance is establishing family-wide decision-making processes. This typically will involve creating regular family meetings or councils to discuss (and agree upon) financial decisions. It also helps establish exactly who will be involved in certain matters – for instance, some decisions might be open to a wider number of family members, while others might only involve the nuclear family.Defining Roles and Responsibilities
Family governance also defines the roles and responsibilities of each family member within the wealth management framework. A few examples of these responsibilities include:- Overseeing investments
- Managing day-to-day family enterprise operations
- Philanthropic activities
Mitigating Risks and Ensuring Continuity
A family governance plan also needs to focus on mitigating risks and ensuring that the wealth is appropriately transferred across generations. Naturally, succession planning plays a central role. Families will need to determine their path on issues such as:- Estate planning
- Family governance leadership transition
- Business leadership transition (if applicable)