When British Prime Minister Harold MacMillan was asked what was most likely to upset a leader’s plans, his answer was brief. “Events,” he replied. 

The same can be said for families.  

After all, what family hasn’t suddenly found its long-term plans altered by an unexpected event? What family hasn’t considered its plans well-made, only to see them derailed by an unforeseen surprise? 

How, then, can families plan for the long-term? How can they build and maintain robust, adaptable wealth plans that will support their ambitions for years to come? And how can they rise above temporary events to focus on the future? 

These are the questions that Philip Marcovici – figurehead within the world of wealth planning and member of our board – has spent a lifetime considering.  

We spoke to him about the challenges families face in wealth planning – and why the first step is to fast forward to shaping the ultimate goal of the family and then work backwards to identify what it will take to get there. 

 

1. How should a family begin to think about its wealth and succession planning? 

That’s exactly the question they should start with: where should we begin? In my experience, wealth planning tends to be reactive, often designed to address an immediate event or crisis.  

But that isn’t necessarily the best place to start.   

The other challenge is to understand and accept that no plan is still a plan. If a family decides not to build a wealth plan, they are still making an active decision. And, like any decision, there will be inevitable consequences. 

For example: what if a wealth owner becomes suddenly incapacitated? What if there is a divorce? The list of what ifs is long, varied, and impossible to predict accurately. 

But whatever form it takes, a what if will have implications for a family’s wealth and relationships, based on how everything has been structured – and regardless of whether there is a formal wealth plan or not.  

 

2. And how should a family respond to such an event?  

Imagine a wealth-owning family in the UK. Now imagine that one of the younger generation decides to relocate to another country, like Switzerland. 

Such a move will have implications for the family’s wealth. It is natural for a family to respond by engaging advisors with expertise relevant to that country, or to build structures designed to address local regulations. 

Or let’s say there’s a divorce in the older generation. Suddenly, the discussion becomes centred around how to protect the family wealth for the younger generation. 

But focusing entirely on these events would be a mistake. Unless the family takes a step back to build a robust, adaptable wealth plan, they may find that soon enough everything is driven by this one particular issue. In other words: the tail wags the dog.  

It’s important to say that not all these what ifs may come from within the family. There are other events – like political instability or tax changes – which can appear unexpectedly, and derail a family’s plans.  

As such, a family should watch out for these “derailers” – and build “tunnels and bridges” into their wealth plan that can help navigate potential instability. 

 

3. What should a family do to avoid such reactive planning? 

Before a family commits to any structures, or any advisors, it’s important that they ask: where do we want to go? 

Think of it like pressing the fast forward button on a remote control: a family should imagine their destination, and then work out how to get there. In other words: they should design its own long-term future – a fascinating project for any family to undertake.  

It’s part of a theory I find particularly compelling and relevant to wealth planning called the theory of change.

Put simply, the theory of change recommends spending a lot of time discussing your destination before describing how to get there. What, at the end of the day, is the ultimate objective of your wealth plan?  

This question might seem obvious, but it’s surprising how much the destination is neglected in wealth planning.  

For most wealth owners, this objective will be to create happy children and grandchildren, build a thriving business, and feel satisfied that wealth has been a positive influence on their family.  

Those are admirable ambitions. But to achieve them, we must unpack them. What do those ambitions look like in twenty years? In fifty years, in a hundred years? I work with one family who now think in terms of a thousand years – which may sound like a long time, but can be transformative in helping build and maintain a robust, adaptable wealth plan. 

 

4. What does this mean for how a family should approach its business?  

As I mentioned, most families hold the same two objectives for their wealth: to create a happy family, and a thriving business. 

But to do so requires drawing a clear picture of the future family ecosystem. That means being clear on the respective roles of the family and the business, and the boundaries between the two. 

I’m borrowing this idea from Sammy Lee, of the Lee Kum Lee family in Hong Kong. Sammy is a friend of mine, and a serious thinker on the subject of family businesses. He’s someone for whom I have enormous respect. 

In one of Sammy’s books1, he sets out the idea of extreme balance – and the importance of ensuring extreme balance between family and business interests. As Sammy says: when it’s about family, then family comes first. When it’s about business, business comes first. 

What that means is that you should seek to minimize mixing business and family decisions. In my experience, when families try to mix these two areas, the result can be muddled, unfocused decision-making. This said, it is finding the right balance that is key – a family in business will always reflect “family” in its decision-making, and this is often a positive. 

1. We Are Greater Than I: The Path To A Happier Life, Sammy Lee
The Autopilot Leadership Model, Sammy Lee

 

5. How can a family maintain this future ecosystem? 

Firstly, this conversation needs to involve the different generations of a family – not just the figurehead or patriarch. For a wealth plan to work for years to come, you’re relying on the younger generation carrying it forward. 

So it’s essential that they’re part of the process. The more discussion that takes place within the family, the better. That’s why tools like family constitutions or family charters are so useful – not just because of the “product” they create, but the conversations they encourage. 

Secondly, a family needs to envision what this future ecosystem means not only for itself but for its employees, partners, and wider society. Once those questions have been answered, a family can then ask: how do we get there? And how do we watch out for all the possible distractions along the way?  

 

6. How does a family “watch out” for those distractions? 

It’s about remembering that the “nuts and bolts” considerations are not the starting point. 

The starting point is your destination: the ecosystem you want your planning to lead you to.  

Practically, the starting point is also your country of residence. If you’re based in Saudi Arabia, you shouldn’t base your planning around a child living in the UK. That’s an important consideration, of course, but shouldn’t dictate everything.  

Instead, you should start by looking at the home country of the person who owns the assets. Those regulations will be the ones to dictate the family’s flexibility and mobility, potentially for generations to come. 

That’s why a partner like Conduct can be so valuable.  

A tax advisor will – understandably – focus on tax concerns. A legal advisor will focus on legal ones.  

But a partner like Conduct, who is able to take a holistic view, can help the family take a step back, to move forwards. 

Such a partner can help co-ordinate your other advisors – who may all be experts in their field, but might lack the overview needed. They can also help a family really understand their own structures, and to prepare for the inevitable what ifs.

Because no family is free from unexpected events. The challenge is not to allow these events to lead the way. But instead, to develop a robust, adaptable wealth plan that is capable of supporting a family for generations to come. 

For more insights on the art of wealth planning, subscribe to Notes On Wealth Planning.