Issue 31: 2016

Family Wealth Services

Family Enterprise and the Rising Generation

More often, families of wealth are giving their children a say in the family portfolio and encouraging the entrepreneurial spirit.

Photograph by Eric McNatt

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For many wealthy families, passing on shared values can be as important to maintaining the fabric of their family as transferring wealth — perhaps even more so. Indeed, discussions with parents and grandparents on the true worth of wealth — including its human and social aspects — can prove a beacon throughout a child’s life.

In our role advising and supporting wealthy families, we’re seeing another notable aspect of this transfer: More often, families are asking us for help, and working with us to implement successful ways to encourage and help family members create and sustain a business or to develop entrepreneurial or innovative ideas.

Families, moreover, are employing various governance structures, such as a family bank, investment committee, family council, family operating committee or a number of other means. These structures can help create a consistent framework for how ideas and opportunities are encouraged, reviewed and implemented, which can help provide the rising generation with defined expectations and a framework for influencing and advocating on behalf of their concept.

The spectrum of innovation

Innovative ideas and business concepts can take many shapes. Here are some potential scenarios:

there is a growing awareness that it is possible to do things differently from the traditional practices
  • A family member may advocate for a change in strategy or direction within an existing family business for market or social reasons.
  • A junior-generation family member may advocate for an investment plan that focuses more on impact strategies, which typically involves investing with the intent of social and environmental good, as well as for profit.
  • A second-generation member of a family business may look to create a social enterprise or solely philanthropic opportunity related to the business.

In short, creating mechanisms and opportunities for the “non-controlling” generation to influence and enact innovation for the family can be a great way to give them a sense of ownership and help sustain the family’s financial and social fabric.

In the past, these ideas were generally focused on the strategic direction of the family business — often in tandem with leadership succession — or on managing an investment portfolio. In recent years, the growth of entrepreneurship training and education, as well as awareness of social enterprise, has changed the landscape.

Breaking with tradition

Among many wealthy families, there is a growing awareness that it is possible to do things differently from the traditional practices of the past — to focus not just on profit but also on doing good in the world. Still, it can take extra effort to “socialize” this idea among a family’s decision makers. “Catalyzing Wealth for Change,” a guide sponsored by U.S. Trust, may provide some understanding. 

To learn more about the guide, and about U.S. Trust’s family office capabilities, please contact your advisor.

Photograph of lightbulb by lovelyday12/Getty Images

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

For many wealthy families, passing on shared values can be as important to maintaining the fabric of their family as transferring wealth — perhaps even more so. Indeed, discussions with parents and grandparents on the true worth of wealth — including its human and social aspects — can prove a beacon throughout a child’s life.

In our role advising and supporting wealthy families, we’re seeing another notable aspect of this transfer: More often, families are asking us for help, and working with us to implement successful ways to encourage and help family members create and sustain a business or to develop entrepreneurial or innovative ideas.

Families, moreover, are employing various governance structures, such as a family bank, investment committee, family council, family operating committee or a number of other means. These structures can help create a consistent framework for how ideas and opportunities are encouraged, reviewed and implemented, which can help provide the rising generation with defined expectations and a framework for influencing and advocating on behalf of their concept.

The spectrum of innovation

Innovative ideas and business concepts can take many shapes. Here are some potential scenarios:

there is a growing awareness that it is possible to do things differently from the traditional practices
  • A family member may advocate for a change in strategy or direction within an existing family business for market or social reasons.
  • A junior-generation family member may advocate for an investment plan that focuses more on impact strategies, which typically involves investing with the intent of social and environmental good, as well as for profit.
  • A second-generation member of a family business may look to create a social enterprise or solely philanthropic opportunity related to the business.

In short, creating mechanisms and opportunities for the “non-controlling” generation to influence and enact innovation for the family can be a great way to give them a sense of ownership and help sustain the family’s financial and social fabric.

In the past, these ideas were generally focused on the strategic direction of the family business — often in tandem with leadership succession — or on managing an investment portfolio. In recent years, the growth of entrepreneurship training and education, as well as awareness of social enterprise, has changed the landscape.

Breaking with tradition

Among many wealthy families, there is a growing awareness that it is possible to do things differently from the traditional practices of the past — to focus not just on profit but also on doing good in the world. Still, it can take extra effort to “socialize” this idea among a family’s decision makers. “Catalyzing Wealth for Change,” a guide sponsored by U.S. Trust, may provide some understanding. 

To learn more about the guide, and about U.S. Trust’s family office capabilities, please contact your advisor.

Photograph of lightbulb by lovelyday12/Getty Images

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.