Cultivating Legacy: Strengthening Family Wealth Through Trust and Governance

This is a revised reproduction of the article published on August 4, 2024 in Grayhawk Wealth Sunday Reads

All parents strive to raise independent, motivated, and responsible children. In enterprising families, the complexities of intersections between family, business, ownership and wealth priorities make this goal even more challenging.

To address these unique challenges, families must ask: How can they prepare a new generation of empowered and responsible owners? How can they equip them to achieve personal fulfillment, growth, and independence?

A familiar predicament

They are driven by a desire to do what is “right,” but defining what is “right” is rarely straightforward —especially when navigating the unique challenges and blessings that come with abundance.

In this pursuit, enterprising families often find themselves balancing a series of paradoxical dilemmas as they aim to:

• Instill a sense of responsibility and stewardship while granting the freedom to choose an individual path.
• Cultivate a strong work ethic and appreciation for the value of money without imposing overwhelming pressure.
• Provide financial security and shield their children from hardship, yet ensure they grow into independent, self-sufficient adults.
• Educate the rising generation about the family’s assets and how to sustain and grow them, without revealing “too much, too soon.”

Wrestling with these polarities and articulating multi-faceted hopes clearly and concisely can quickly become a daunting task. With an abundance of horror stories, clichés, and disaster scenarios, it may feel easier to define aspirations by focusing on what must be avoided.

While this approach can help simplify a complex issue, stopping at vivid descriptions of undesirable outcomes can be a dangerous shortcut. It risks framing the family’s development in terms of “if we don’t succeed, we fail,” rather than adopting a “failure is a learning opportunity” mindset. This shift in perspective can increase pressure, magnifying the perceived stakes and creating a sense that any mistake could have lasting, significant consequences.

In high-pressure situations like this, common coping mechanisms often emerge. Some individuals may seek to regain control, which is reflected in the implementation of complex, restrictive measures intended to protect the family. Others may freeze, adhering to the status quo and playing “not to lose.” This mindset can result in prolonged avoidance, with successors left on the sidelines as passive “next generation” players—just as we saw with King Charles.

Though these reactions are understandable and often easy to rationalize, they can lead to self-fulfilling prophecies. They inadvertently encourage the very outcomes families hope to avoid in their efforts to prepare the next generation.

Adopting new perspectives

To help families prepare a new generation of empowered and responsible owners, we invite family members and their advisors to consider adopting and integrating 3 powerful perspectives as first steps.

Step 1: Define your family’s goals positively, not negatively

Cognitive science has shown that what we focus on directs our attention, shapes our efforts, and ultimately influences our outcomes. In life, just as in sports or while driving, “where we look is where we go.”

Positive parenting emphasizes pursuing positive, meaningful goals to cultivate a flourishing life. In Wealth 3.0: The Future of Family Wealth Advising, Dr. James Grubman, Dr. Dennis T. Jaffe & Kristin Keffeler clearly identified the criticality of moving from a fear-driven perspective to positive framing and goal setting.

By defining goals in terms of what the family aims to achieve, they create a clear vision of success and establish a sense of direction for their efforts. To begin this process, consider asking yourself:

• What attitude toward wealth do we want to encourage?
• What behaviors should family members demonstrate to reflect our values?
• How should our family’s wealth and resources be used; what exceptions might be made and why?

Step 2: Give a voice to the rising generation sooner rather than later

While there is no perfect approach or ideal timing for addressing sensitive topics, at Crysalia, we believe it’s never too early to begin age-appropriate conversations.

Parents may feel uncomfortable discussing delicate subjects with their children, and it’s normal to feel ill-prepared, vulnerable, biased, or easily triggered during these sensitive conversations. It’s also common to feel unsure of where to begin or to think they don’t have all the answers.

Instead of waiting for the perfect moment or angle, parents can ask their children open-ended questions, using their responses as a springboard for meaningful dialogue. Here are some proven examples to inspire such conversations:

• What would you like your life to look like in the future? How can the family support you in achieving that vision?
• What do you know about [insert sensitive topic]?
• One day, I hope you [insert aspiration]. What do you think about that?

Step 3: Strive to continuously learn, not perform, together

Every family’s journey to prepare empowered and responsible owners will likely follow a non-linear path. What is considered “right” may change over time, and stepping out of the comfort zone is often necessary before growth occurs.

Seth Godin famously said, “The cost of being wrong is less than the cost of doing nothing.” Nelson Mandela is often quoted as saying, “I never lose. I either win or learn.” Carol Dweck’s research has shown that individuals who embrace a growth mindset tend to achieve more than those with a fixed mindset.

Promoting a learning culture can help families reduce discomfort and embrace the awkwardness of change. For parents, this means transferring knowledge and valuing learning experiences. It involves encouraging appropriate risk-taking and providing enough space to view challenges as teaching moments. It also requires demonstrating their own desire to learn and grow at any life stage. 

To put these ideas into action, consider exploring what the following means for your family:

• What knowledge, skills, and abilities does a family member need to acquire to be an empowered owner?
• Who is motivated to learn what among us, and how can we complement each other to achieve our individual and collective goals?
• How much time, resources, and energy are we willing to invest in developing our people to grow our human, intellectual, and social capital?

A bright future ahead

Ultimately, we hope to see more proactive families dedicated to equipping future generations to become empowered and responsible owners. By embracing positive goal setting, engaging early with the rising generation, and fostering a culture of learning, they ensure the continuity and growth of their wealth, values, and well-being.

This work extends beyond wealth preservation – above all, it’s about nurturing a legacy of responsibility, adaptability, and shared purpose. By instilling a sense of resilience and equipping future generations with the tools and wisdom to navigate challenges, these families set the stage for a vibrant future. Their efforts cultivate a dynamic, evolving legacy that inspires and empowers generations to thrive in an ever-changing world.