Family Wealth Management Theory - BWY #3
A Proven System to Preserve Family Heritage and Wealth
Introduction
Institutions and families that have held wealth and knowledge passed through difficult times to reach their current position. It was a difficult task to pass on the legacy over their generations. This caused them to create principles and structures that aided the carrying out these objectives.
I will not be surprised when most of the billionaire’s wealth will end as soon they are gone. Most of the wealthy people in Africa, will also not pass on their wealth to the third generation due to selfish interests. It’s shocking but it’s the honest truth. It is said that for wealth to survive through generations there must exist strong principles and structures that enforce the smooth transition of family wealth and knowledge across generations. I’m Marvin a Kid from Africa, and I’m here to tell you why and how!
The Human Nature
Humans are selfish beings, we tend to behave ill or out of order if no regulation is made. lack of law, order and structures has fallen down strongholds. This catastrophe can occur in a family or even a country or continent. We’ve seen empires & kingdom fall because brothers could not acknowledge and work together. We’ve seen business empires and multinational corporations fail because of family dispute. One way or the other selfish interest is a huge part of these falls but with laid down regulations and structures its occurrence is almost impossible.
The reason why these wealth will fail is simple, the creators or pioneers who built the wealth was building it for themselves, this is same for Empires or Kingdoms. Three things to take out:
No one else understands the existing structures apart from him/her.
All entity in the structures are loyal to or are in alliance with only him/her.
Their families are reluctant to join in or are ignorant to consequential changes that will result when the monarch or tycoon dies.
Understanding The Problem
Keep in mind that something that was made for you alone cannot be sustained when everyone else gets involved.
After the key individual is gone, they leave so much wealth and fame behind, things that only them can manage or understand. Family members are now thrown around by greed, hatred, obsession and frustration as they seek to control, manage and possess the wealth. Most people will recommend a will that split the wealth across all beneficiaries but I doubt if the wealth will even exist after it has been divided as this concept only hastens the wealth decline as most beneficiaries will go on to spend or mismanage the accrued wealth. Remember the saying; “United we Stand Divided we Fall”, it very much implies here.
Well if the family is united and no form of regulation or structures are made to govern or control the happenings among them, failing or falling is almost inevitable. This is because of internal power struggle among the family members and lack of purpose and destination for the wealth developed. To me, “A mission without purpose is bound to fail from the start.” You must be wondering how then do we make, control and sustain family wealth and knowledge across generations?
A Proposed and Proven Solution
I recommend that after an individual has obtained wealth, he or she should put the following structures in place to assure that the wealth and financial knowledge stays with their family as long as possible. There are listed below:
Family wealth/financial education or mentoring from older generation to the younger generation.
Funds and Ventures that belongs to Family and not an individual.
Family Constitution to regulate and control the movement of funds, wealth and knowledge the family owns.
How It is Done
It has worked for many families that I will mention in the course of this discussion. I will discuss each of the three points in details below:
Educating the younger generation gives them an understanding and responsibility that the wealth must be maintained and developed in their own time. This allows each member to contribute their own quota in the development of the family knowledge and wealth. It also gives them awareness of all structures, subordinates, and allies in the family business, hence making control easy when the older generation are gone.
Family owned venture implies creating an investment funds that belongs to the family. This funds enables the family to undertake new ventures or to make investment in profitable & futuristic idea. In some extreme cases the family owns more than 50% of all the family ventures. All these wealth obtained are collectively owned and managed by the family members.
Family constitution regulates how they manage the wealth, how they invest, how the relate with outsiders, how they relate among themselves. It also states the benefits and punishment of an action by a member, and makes clear the hierarchy and mode of succession in the family leadership. This is a very important criteria because it holds the other two structures (family financial knowledge & wealth/ventures) together.
Notable Families
The Walton Family, they are known for WalMart chain of retail stores and have an estimated net worth of $289.8Bn currently.
The Hermés Family, they are known for the Hermés luxury brand and have an estimated net worth of $94.6Bn currently.
The Mars Family, they are known for the Mars Candy company and have an estimated net worth of $115.4Bn currently.
The Thomson Family, they are known for the Thomson Reuters Media Company and have an estimated net worth of $67.8Bn currently.
Conclusion
It is painful to experience wealth and then go down to being poor again. Having this in mind should allow you to put structures and regulations in place to safeguard your descendants and wealth from social and financial decline. This is an expository for everyone who seeks to be great.
It is easy to get to the top but it’s more difficult for you and your descendants to stay there.
Till We Meet Again Friends, Sayonara 🚀✨
This is an extract from my Medium Article here.
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