Review of: Family Wealth – Keeping It in the Family
Family Wealth – Keeping It in the Family – How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations by James E. Hughes Jr. Copyright 2004 Published by Bloomberg Press.
James Hughes, a sixth generation lawyer, was invited to visit a wealthy Singapore businessman in 1974. The reason for the visit? It was so that Mr Hughes could apply the techniques of American families help the businessman’s family avoid going from rice paddy to rice paddy in three generations. This, along with the tutelage of his father (also a lawyer) on the importance of business succession planning contributed to the experiences that led to this book.
“A family’s ability to remain in business over a long period of time always comes down to excellent long-term succession planning, regardless of how successful the family is financially. Families attempting long-term wealth preservation often don’t understand that they are businesses….”. P5
This book offers theory, practical tips and examples on what can be done to keep a family’s wealth together across generations. Hughes’ main theory is that retaining family wealth centers on building the intellectual and human capacity of each family member so that each can find their own pursuit of happiness. He offers ideas on: techniques to define a 100 year family mission; uses of family rituals to enhance passages from one stage of life to the next; explanations on why investor allocation across generations of family members is important and uses of a family bank to further the family mission. He also discusses roles and responsibilities of beneficiaries vs. trustees, defines mentoring and explains a method of family governance.
Read this book to understand and address:
- What a family should do for it’s members (physical well being, basic necessities, family governance, work’s contribution to self-worth of members, geographic diversification of members as a risk avoidance measure, focus on family vision and values).
- How to grow the intellectual capital of the family members.
- How to develop a family mission statement.
- The importance of family ritual and rites of passage such as welcoming new family members, coming of age, moving to the position of elder in the family and etc.
- Allocation of assets across generations of family to maximize the long term plan results (younger members should have growth assets, elders should pass assets to the younger generations).
- Utilizing a family bank (making loans within the family to other members).
- How to understand and work with the many roles each of us play in a family.
- Ways to involve the Elder generation in family matters, while allowing the next generation to be the active managing family members.
- Roles played by protectors, advisers, mentors and Hommes d’Affaires.
- How beneficiaries and trustees can better work with one another.
- Utilizing philanthropy to shape family values and give practice to governance techniques.
- How to evaluate the family progress in all (not just financial) aspects of wealth preservation.
- What a private trust company is, who might have one and what benefit that family might derive.
What I liked:
Specific steps for various tasks – such as agreeing to rules for conducting family meetings as step one of preparing a mission statement.
Summary on p 4 stating 1) The question he poses in the book (Can a family successfully preserve its wealth for more than one hundred years or for at least four generations?) 2) the problem involved with his question 3) his theory on the factors behind the question 4) his solution and 5) a general practice for family success in resolving the problem.
- Suggestion that aunts and uncles should play a primary role in the transition of nieces and nephews from one stage of life to the next.
- Tips on how to mentor and the differences between mentoring, teaching, coaching, being a friend and being an elder.
What I wished for:
An intro to each of the 4 parts of the book ( his philosophy, family practices, roles and responsibilities and reflections) would have tied the pieces more firmly together.
Examples from families that are in a lower category of wealth.
- Specific suggestions on how to involve members from the larger family in life stage transitions of the younger generation .
- “Wealth: The human, intellectual, and financial capital of a family” p 6.
- “Families fail to understand that wealth preservation is a dynamic, not a static, process and that each generation of the family must be a first generation – a wealth creating generation” p 8.
- “These [family] stories are the glue that binds together the individual members of the family. Family stories give members a sense of the unique history and values they share, their ‘differentness’”. p12.
- “To embark on long-term wealth preservation is an act of extraordinary courage for a family…..since the family members who initiate the process will never know whether they were ultimately successful.” p 13.
- “A families financial capital is a tool to support the growth of the family’s human and intellectual capital” p 17.
- “There’s a family in Europe, now in its tenth, eleventh, and twelfth generations, with many hundreds of members, that reaffirms and readopts its family constitution every year at a family meeting. The meeting takes place in the village where the family began. Although the meeting has an extended agenda, its acknowledged main purpose is to remind family members who they are, where they come from, and in what way they are ‘different’”. P 19.