Every legacy – no matter its size – calls for astute governance and carefully chosen stewards.

To ensure a harmonious balance between assets, advisors, and family dynamics, a wealth owner must consider the principle of checks and balances.

After all, wealth plans may be drafted in the safety of an office, but are implemented in the complex tapestry of human relationships, where each relationship has its share of virtue and vice.

 

The missing piece

Wealth planning is a complex process, with many moving parts: assets, legal structures, family dynamics (and conflicts). But among these, there is one piece that is often overlooked: the system of checks and balances.

Executors, trustees, and other kinds of advisors are crucial to wealth planning. Their guidance can be invaluable to preserve and grow wealth, navigate legal complexities, and establish structures that will stand the test of time. What’s more, wealth owners often develop close relationships with these individuals, evolving in tandem as circumstances change.

But this responsibility – and intimacy – presents a potential risk: what if the trusted individual develops a bias, or narrow focus? What happens when the bond of trust clashes with the necessity of competency?

 

Everything in balance

In scenarios like these, a robust system of checks and balances becomes a critical safeguard. The system does more than just clearly define roles and responsibilities. It provides oversight, fosters accountability, and ensures power is not concentrated in one individual.

It is important to say that a system like this is not a declaration of mistrust, or indictment of any individual. It is a prudent safety measure, and a necessary response to the intricate nature of wealth planning.

If power concentrates within a single advisor or family member, insufficient oversight can create unwelcome scenarios. These could include conflicts of interest, lapses in transparency, or even individuals becoming “gatekeepers” of the estate.

Inherent blind spots or biases – in both advisors and family members – can unintentionally lead to decisions that do not serve the family’s best interests. As such, it is essential not to delegate excessively – and not to delegate the wrong elements. For example: if too much discretionary power is delegated to an advisor, they may take important decisions based on their own interests – without alignment to the family’s.

 

Responsibility and continuity

Wealth owners should understand the scope – and purpose – of their advisors’ roles. This will enable them to supervise and evaluate their advisors, and their performance. It will also enable them to – if necessary – replace their advisors, without disruption or turmoil. As such, a wealth owner can preserve the continuity that is vital to the family.

Wealth owners should also ensure that successors and spouses are adequately prepared to manage their advisors. They should understand their advisors’ roles, responsibilities, and limitations – and be equipped to manage potential conflicts within the family.

It is also critical to ensure there are no gaps between the various functions involved in wealth planning. A well-established protocol should be in place to manage and mitigate potential conflicts. This could include simulating potential scenarios during the settlor’s lifetime, so all parties are equipped for future outcomes.

 

A different approach

“There is no client better than a dead client.”

So says Philip Marcovici, wealth planning figurehead and Conduct board member. A slightly cynical perspective, perhaps, but one that reveals the harsh reality of the wealth planning industry – and the necessity of proper accountability.

At Conduct, we believe that, through rigorous checks and balances, advisors and trustees can be held accountable – ensuring their actions serve the family’s interests, even if the original wealth owner is no longer alive.

Our approach integrates a robust system of checks and balances within the wealth planning and trust ecosystem. We believe this system – complemented by a deep understanding of our clients, their values, and business models – is just as (if not more) important than the longevity of a trustee or long-standing relationship with an advisor.

Wealth planning is a journey with intricate relationships, complex decisions, and far-reaching implications. Inside this journey, a system of checks and balances is no mere safety net – but a cornerstone of harmonious, effective wealth planning.