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Wealth Optimization Consulting

Case Study 1

The attitudes of various generations toward wealth have been shown to be a critical determinant of how the wealth is preserved during the controlling owner’s lifetime and subsequently distributed to future generations. Considerations involving the family business and the family wealth are becoming immensely more complicated based on the number of generational influences involved, the success in keeping the founder’s legacy intact, and the plethora of investment, communication, and lifestyle choices.

A wealth manager meets with a prospective client that has $35 million to invest. Today is the third meeting with the prospect and the manager has been asked to get all the necessary paperwork together. The time for the meeting arrives and in walks not only the prospective client, but also his wife and their two children. Ten minutes after the meeting commences, the wife and children are in conflict with the prospect about the way this money should be invested. The wife wants to put $12 million in trust for the grandchildren; the daughter wants $6 million to go to a charity in which she feels the entire family’s involvement is important; the son wants $8 million for a new business venture. The original prospect wants to invest the entire pool of money in a tax-efficient manner with a variety of money managers in a good, sound investment program to ensure his legacy. With so many seemingly disparate objectives for the money, nothing gets signed and all four prospects walk out the door without having made any productive decisions.

This example may seem far-fetched, but it is indeed illustrative of the effects of family dynamics on wealth management decisions. As illustrated by the case study above, we can easily conclude that wealth management decisions are highly influenced by family dynamics and by the manner in which the wealth is controlled (governance). With an unprecedented transfer of wealth looming, the question of learning the values of the family and how a wealth advisor can facilitate the propagation of those values to future generations, fulfilling the legacy of the original founder, should be rhetorical.

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