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The Northwood Perspective

Strategies to Promote Next-Gen Success

Victoria Luongo

How much of our wealth should we pass on to our children?  When is the right time to transition the wealth?  How can we prevent them from feeling entitled and unmotivated? When should we tell them about the magnitude of the family wealth and our transition plans?

These questions are often fraught with stress and uncertainty among families. In our experience working with client families, it can be a struggle to find balance between providing for the next generation and ensuring that their children still achieve a sense of independence and purpose in life. Rising generation planning is complex, and there is no one-size-fits-all model that families can follow. Rather, it involves a journey of exploring and identifying family values and building a framework from which family decisions can be made.

In Tom McCullough and Keith Whitaker’s book, Wealth of Wisdom: The Top 50 Questions Wealth Families Ask, contributing author Dennis Jaffe discusses the question: ‘How Can You Engage Your Children in the Management of Your Family Wealth or Business?’ which offers insightful best practices that families and their advisors can pursue in rising gen planning.

Jaffe discusses the strategies of ‘generative families’, which he defines as families that have sustained family wealth or a family enterprise across more than three generations. He notes that these families are not only invested in financial resources to sustain the family wealth, but they prioritize the development of capabilities and leadership amongst the rising gen. These families are active in discussions of expectations, values, and responsibilities from early on in their children’s lives.

So, how do generative families develop and prepare the new generation? Preparing the next generation, Jaffe says, is no easy task, but he has observed that successful families often prioritize these four strategies:

1.    Connection

Generative families have recurring family meetings that begin when the children are very young. Parents take this opportunity to share their family history, values, and principles with the next gen. These meetings present opportunities for the children to learn from their parents and explore their own values as it relates to the family as a whole. The recurrence of these family meetings provides formality and routine to family planning, which engages the rising gen to continue to develop their involvement and shared purpose in the family wealth.

At Northwood, we regularly coordinate and host family meetings on behalf of our clients. We help families define what their family goals and values are by providing resources and exercises to engage in. Clients often find this very useful, as it provides an opportunity for the next gen to get involved in the family strategy early on and allows for parents to share their hopes in an organized and recurring manner.

In our experience, simple values exercises are a great way to find out what’s important to each family member, where everyone is aligned, and where there is potential for conflict.  This provides a foundation to build from when making family decisions in the future. The use of meeting agendas as well as meeting minutes and post-meeting action items for each family member ensures that the family values and planning items are captured and available for future discussions and follow-up. This helps keep family members accountable and promotes ongoing communication across generations.

2.    Transparency

Generative families are transparent in sharing the nature of the family wealth and teaching their children strategies that led to their own success (and failure!). This fosters a culture of openness and encourages children to remain engaged and ask thoughtful questions. Having a better understanding of family wealth across generations reduces uncertainty and the possibility of conflict.

Northwood encourages transparency among the generations through the use of a family playbook, or a family constitution. We work with our client families to develop this playbook as a helpful tool for them to identify their family values and establish agreed-upon support policies for the next-gen (i.e., education support, marriage support, housing support). This document is drafted with the input of each family member, which in itself reinforces an open culture and encourages the rising gens to become active leaders early on. Parents find it helpful for their children to feel a sense of responsibility in helping develop the family constitution. Likewise, the family playbook provides transparency to the next gens regarding future financial support so that they may be better positioned in their own financial planning.

3.    Capability

Generative families are focused on building financial and business skills in their children, regardless of the career path they may pursue. They understand that with significant wealth comes the need for practical competencies to inherit and responsibly manage their family wealth. This can be formal or informal educational and learning opportunities for younger family members.

We work with closely with our clients to encourage the competency building of the rising gen family members. We offer rising gen education sessions, focused on building the financial and technical skills that they may otherwise not have an opportunity to learn. Families often find this very helpful, as the  sessions are tailored towards the individual’s competency gaps and foster a collaborative atmosphere, where children are encouraged to build on their technical skills(budgeting, accounting, investing, tax, insurance, home ownership, etc.). Learning can take the form of tutorials for technical concepts like tax or basic portfolio concepts, to more hands-on exercises like building out personalized budgets. Through education and experience, the next gens develop a sense of mastery in these areas, which can help bridge some of the uncertainty and fear that they may experience as they look to get more involved in the management of their family wealth.

4.    Commitment

Lastly, generative families stay committed to providing opportunities for their children to become involved in family decision-making. They recognize that roles can vary based on individual interests and capabilities but aim to ensure that everyone feels a sense of connection to the family planning in some manner. Oftentimes, we see varying commitment levels and interests of family members in family planning. It’s important to recognize the age and stage of children, and their varying degrees of capacity to get more involved.

At Northwood, we take the time at family meetings to consider everyone’s individual interests, and assist families in defining a clear role for their children that is suitable based on their interests and capacities at the time. For example, one child may come from a technical background and choose to be involved in family wealth planning decisions (i.e., portfolio planning, estate planning), while another child may find more enjoyment and fulfillment in taking a leadership role in family philanthropy planning. We’ve also worked directly with families across generations on building out goal exercises, which opens up the dialogue to share individual interests. These exercises have proven to be helpful in determining individual roles and responsibilities for each family member. Recognizing the individual competencies and interests of the next gen is important in ensuring that the family is committed in forging their own paths in a matter that is productive and promotes independence.

Path to Success

Engaging the rising generation and fostering an environment that promotes opportunity can be challenging. As we learn from generative families, there is no one strategy that maximizes engagement or success across generations. Instead, families should consider setting up a dialogue early on and providing the appropriate resources to their children as they begin to get more involved. As the rising gen develops both technical competencies and a shared sense of family values, they will be better positioned to transition into the management of their family wealth.


Victoria Luongo

Victoria is a member Northwood’s family office advisory team, working with families in the areas of financial planning, investment management, and taxation. Victoria is a candidate for the Chartered Professional Accountant (CPA) designation. Prior to joining Northwood, Victoria worked at KPMG LLP within their assurance services group as a Senior Accountant, where she specialized in serving public and private clients within the Financial Institutions & Real Estate industries.

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