In our first article of Decoding Wealth, we explored the value of a mathematical formula in the wealth planning process.

Now, our attention shifts to another facet of planning: the complex interplay of human emotions and desires.

To the dreams and aspirations of wealth owners (and their families), who seek more than financial growth and security. And to the quest for personal prosperity, harmony, fulfilment, and most of all, purpose.

 

The ‘why’ of it all

Why is purpose so important? Because it is the ‘why’ of your planning. The beacon that provides direction, motivation, and meaning to your journey.

Purpose directs the technicalities of wealth planning, such as creating last wills and trusts, asset protection, and legal strategizing.

Without a clearly defined purpose – and the support of robust family bonds and relationships – wealth planning can seem like a car, driving perpetually around a roundabout. Moving, but going nowhere.

Indeed, many fortunes have been lost in transfer to subsequent generations, often because of the lack of purposeful planning.

This sense of purpose should form the core of your wealth planning strategy – influencing each decision, and shaping future action. It calls for introspection and honest conversations, demanding a clear understanding of your family’s values and visions. It’s about unearthing – and aligning – individual – and collective aspirations with your wealth planning.

To guide this introspection, and clarify what is most important, consider these questions:

• What is the primary purpose of your wealth?
• How do you hope it will impact your family and society (aside from providing material security)?
• What core values do you wish to pass on to future generations?

 

A complex tapestry

Once you have reflected on these questions, it’s important to acknowledge the pitfalls you might face in striving for a nurturing environment. If not created carefully, you might inadvertently foster complacency or entitlement.

This is where a wealth owner should be wary that inheritance doesn’t overcome the drive and ambition of the younger generation. After all, it can be hard for a young person to motivate themselves, if they perceive themselves to have a “lifetime of money”.

Families should cultivate ambitions beyond financial wealth, so money does not become stifling. What about individual growth, or serving others? The pursuit of personal purpose ensures wealth is a springboard, not a hammock.

Conversely, it’s just as important to avoid the opposite extreme – creating artificial scarcity, or withholding family wealth, can become counterproductive. It can lead to the grim spectacle of heirs clapping hands at funerals – not in celebration of a life well-lived, but in anticipation of a belated inheritance.

Legacy planning shouldn’t be about guarding wealth like a miserly dragon, or setting up your heirs to wait for an inheritance in the autumn of their heirs. Such delayed gratification can mean your wealth no longer impacts your heirs’ aspirations or personal growth.

So it’s important to acknowledge that inheritance isn’t about tangible assets received at the end of life. Throughout our lives, we inherit a myriad of things from our parents – to our benefit and, occasionally, our burden. Holding onto the benefits – and discarding the burdens – is essential. What’s more, as often happens, a child may find themselves struggling with issues their parents didn’t tackle themselves.

Legacy planning should be the art of calibrated generosity. The art of choosing the right amount – and time – to ensure that wealth helps, not hinders, personal growth and potential. Ultimately, wealth should serve as a catalyst for growth, not dependency.

 

Striking a balance

Of course, a thoughtful, well-structured legacy sets clear rules and incentives for accessing financial assets. It also cultivates values, and inspires a sense of responsibility and purpose.

But that isn’t all. In understanding our inheritance, its essential to view it as more than just money or assets. It represents everything we receive, whether its love, attention, encouragement, and a vast array of other intangibles. Emotions are inevitably intertwined with these gifts – and it’s possible for individuals to feel discontent, based on their perceptions of fairness.

To create and sustain a harmonious legacy, such sentiments need to be addressed. Clearly, those who make different contributions can receive different treatments. (For example: a family member who actively contributes to the family business, compared to one who pursues other interests.)

However, it is important to strike a balance that not only ensures a safety net – but also sparks the desire to go on the journey of personal growth and fulfilment.

In this context, questions of purpose might include:

• Is the goal of the plan to steward certain assets (like a business) for the long-term, while dividing the rest?
• If so, what is the role of such legacy assets?
• Is the aim to divide certain assets equally (and to foster a spirit of collaboration and support)?
• What should the ideal family “ecosystem” look like – and where do happiness and contentment fit in?

These questions can help envisage an environment where each member can engage in their interests and passions – with the support and stability of an accepting family.

But wealth can’t create this environment alone. So, as we set out at the beginning, wealth owners must also consider relationships in their planning, alongside the technicalities.

Such planning involves decisions around suitable structuring tools, jurisdiction choices, or legal implications, as well as deliberate actions to foster and maintain healthy relationships and emotional well-being. Incorporating these human elements gives families a better chance of creating a meaningful, responsible transition of wealth.

 

The Conduct Formula: a bridge to the future

This is why we believe in the power of the Conduct Formula: as a bridge between purpose and action in wealth planning, from aspirations to realities. Not only can the Conduct Formula help ensure a logical sound, financially strategic plan, but one that facilitates a transfer of both wealth and values, promising enduring bonds that echo across generations.

 

The Conduct Formula: in practice

Let us return to the case study of the Robinsons.

It is our aim to use this fictionalised example to showcase the transformative potential of the Conduct Formula for legacy planning. Through the Robinsons’ journey, we will highlight the peace that comes from confident, purpose-driven decisions.

In our last issue, the Robinsons were at a crossroads: how can they build a legacy that not only preserves their wealth but also embodies their family values and aspirations?

 

Family perspectives

The family comprises of five key individuals:

• John and Emma Robinson, in their late 60s and at the head of a successful family business
• Michelle and Daniel, their eldest children
• Sophie, their youngest

How can the Robinsons unite around a shared purpose? How can they integrate this purpose into their wealth plan, ensuring it resonates throughout their legacy?

The first step comes in identifying their individual perspectives, and expectations.

 

John and Emma Robinson

The family business is at the heart of John and Emma’s wealth planning. Not just as a financial asset, but a platform for their entrepreneurial legacy.

They want to maintain their business, pass down the entrepreneurial spirit, and give future generations a chance to learn, grow, and contribute.

The couple expect their eldest daughter Michelle – with strong academic skills and practical knowledge – to lead the family business as a shareholder.

They expect Daniel to play a major role too, giving up on his academic career to focus exclusively on the business.

Finally, they respect their youngest daughter Sophie’s choice of a different path – and do not see her as a shareholder or member of the management team. They are considering a mechanism to provide her family with moderate financial support (as most of their income comes from Sophie’s husband, Eric).

At the same time, John and Emma have reservations about interweaving family and business in legacy planning. They have seen how other family fabrics have been destroyed by their wealth. They want to avoid blurred boundaries, where family decisions may influence business ones.

They are also wary of nepotism, and the damaging effect this might have on other employees. They know that, if not handled properly, a leadership transition could lead to family discord. And they know, financially speaking, a downturn in the business could also strain family assets.

Essentially, John and Emma appreciate the bonds of a family business, but are acutely aware of the dangers that come with intertwining family and business too closely.

 

Michelle Robinson

A future business leader, who consistently refines her professional skills and makes sacrifices to achieve her goal.

Michelle does not want to share the leadership position with her brother, who she sees as a threat and competitor. What’s more, she also feels her parents may have favoured him in the past – as when they paid for this luxury wedding.

 

Daniel Robinson

Daniel is at a crossroads: he understands the importance of the family business, and the need for robust family involvement as his parents consider their transition.

But he is not ready to give up on his academic career – particularly when he sits on the board of a start-up lead by a university friend, an invaluable source of experience from fellow entrepreneurs.

He is also expecting an offer from a prestigious university – a prospect that will involve relocating and dedicating himself entirely to academia for the next few years.

 

Sophie Robinson

Sophie is not involved in the family business. And nor does she want to be. At the same time, she believes herself entitled to the same distribution of assets and wealth as her siblings.

 

The way forward

Now that they have mapped out the various perspectives, it is clear to John and Emma that a top-down, patriarchal, controlling approach to wealth planning may foster conflicts.

How can they solve these differences – particularly when family members find less time to come together, and reflect on their shared values and purpose?

It becomes clear to John and Emma that they need to organise a comprehensive family retreat. Through this, they hope to address the intricate emotional dynamics and complexities of their family – and start to build a wealth plan to give them true peace of mind.

In our next article, we’ll explore how the Robinsons organise a successful, productive family retreat as a platform to find alignment, define the shared purpose, and work towards crafting a family constitution as a cornerstone to the Robinson legacy.