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Wealth of Wisdom

The Top 50 Questions Wealthy Families Ask

TOM McCULLOUGH | KEITH WHITAKER

Section 2 - Planning Thoughtfully

Introduction

In principle, nobody is ever really against planning, but few of us do it. And fewer of us do it well. In a famous study, Roy Williams and Vic Preisser suggest that almost 70% of family wealth transference and business succession plans fail.1 Reasons include lack of planning, poor follow-through, and insufficient communication. It’s a common problem, but it is preventable.

Planning can mean many things to many people, but there are likely three core benefits to consider.

  1. Thoughtful decisions. Planning can help you think through and express what you really want and how you might get there. A few well-crafted questions from an experienced guide (like some of the ones in this book) can help you make better, more thoughtful decisions, and think through the consequences of your choices. Founders, in particular, tend to be more doers than planners (given their past entrepreneurial successes) and may have to work a little harder at stepping back to think about what is most important, but you may see it as worthwhile with all that is now at stake.
  2. A roadmap. Planning can also help you create a set of key priorities and a to-do list of the critical things that need to happen to ensure success (whatever the definition is). There is a very high correlation between writing down what you want to do and doing it (or delegating it!). Vague wishes, hopes, and intentions won’t do the trick.
  3. Conversations with others. A good plan also includes conservations with and involvement of other people in your world – spouse, children, partners, co-workers, and advisors. They can’t read your mind. A good plan helps bring clarity, communication, and hopefully even buy-in to the family plan.

Scott Hayman writes the opening article, asking “Is it worth having a financial plan?” In it he lays out the reasons to have a plan, including a higher probability of meeting goals, improved confidence in decision-making, and lower stress, not to mention better outcomes. He also provides suggestions on how to make the plan realistic and valuable. As usual, the inputs and assumptions make all the difference.

Meir Statman takes on the question “What is the right balance between spending and saving in retirement?” He comes at it from the perspective of behavioral finance – a field that combines finance and human behavior. In his research interviews with couples in retirement age, he finds that many have more than enough money to pay for whatever they need, without risk of running out of money before running out of life. Yet they resist, insisting that they cannot afford these services. Why do people behave this way? Can they change? Should they change?

When your children tell you they’re getting married, it is usually good news. But for families of wealth, there are often other issues and complications that come up as well, including concerns about protecting family assets in a world of marriage break down. Charlie Collier answers the question “What is the best way to think through the prenuptial process?” and shares his many years of wisdom and experience. In fact, he turns the question on its head and suggests a conversation about how you can help the couple in their lives together.

An increasingly common phenomenon in today’s era is extended human longevity. Living longer seems like a good thing but it can have negative and even surprising implications. Patricia Annino answers the question “How can you prepare for longevity and mental incapacity among family members?” She tackles the tricky issues of assessing mental competence, but also the other side of that coin when patriarchs and matriarchs are still so sharp in their later years that they don’t step aside from family and business leadership and frustrate the next generation.

And finally, Kathy Wiseman looks at the issue of “How can you plan for a good goodbye?” In many families and cultures, people don’t like to talk about death. It’s not comfortable. In addition, many hard-driving entrepreneurs want to believe they’re never going to die. But in families of wealth, it is critical to plan for your goodbye and prepare for it – financially, emotionally, and relationally.

Planning is worthwhile exercise for all families, particular those with significant wealth and complexity. In any planning, remember to use good inputs and conservative assumptions, frequent communication with key stakeholders, and lots of flexibility to accommodate the inevitable surprises!

1Williams and Preisser, Preparing Heirs (San Francisco: Robert D. Reed Publishers, 2011).

Preview Section 3

Chapter 7 – Is It Worth Having a Financial Plan?
Scott Hayman

Chapter 8 – What Is the Right Balance Between Saving and Spending in Retirement?
Meir Statman

Chapter 9 – How Do You Start a Family Conversation About Prenuptial Arrangements?
Charles Collier

Chapter 10 – How Can You Preserve a Beloved Family Vacation Home or Estate?
Jamie Forbes

Chapter 11 – How Can You Prepare for Longevity and Mental Incapacity Among Family Members?
Patricia Annino

Chapter 12 – How Do You Prepare for a Good Goodbye?
Kathy Wiseman

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