The Most Essential Ingredients for Family Wealth Preservation
At this dawn of a new decade I can look back having lived and worked through three heady decades of tech booms, credit booms and catastrophic market crashes with the wisdom of hindsight. I have poured through reams of financial reports, index figures and market predictions. I have seen fortunes made and lost and through it all I have come to focus my attention on helping families develop sensible strategies to preserve their wealth in order to fulfil their own lifelong goals and dreams and to preserve their wealth for future generations. What I have come to learn from my 30 years in the finance industry was summed up beautifully in a book I have been re-reading over the holidays (its that good).
In his book Family Wealth, James E. Hughes Jr explains that real wealth lies in the human capital of families, in the individuals who make up the whole and in the intellectual, emotional and social values that define them. The nurturing of character, self confidence and respect for hard work is just as important to preserving wealth as making profitable investment decisions.
What struck me most about Hughes’ reflections is that the things he considers most essential for family wealth preservation are the things that are so often overlooked by the financial planning profession. He explains,
Every family I have observed that is successfully preserving its wealth is a reflection of the five virtues of truth, beauty, goodness, community and compassion. Transcending all of these is its reflection of love. Families who preserve their wealth successfully reflect these virtues in their relationships both with family members and with all persons outside the family. I am convinced that without these components, a family cannot succeed in preserving itself, since its value system will fail and with that failure will come disintegration.
In the many families I have worked with I can confirm this to be true. Those who respect and care for each other, and those who have a high regard for work and education do better over time.
Moving into the new decade we will be looking to focus as much attention on human capital as we do monetary capital. For us, wealth is a holistic concept, it is not only reflected in a family's balance sheet but also in their satisfaction with life. True family wealth requires the creation of an environment in which all members can thrive and our job as advisers is to form true lasting connections with our clients that provide us with the insights to help direct you on your Private Wealth Pathway towards long term family prosperity.