Financial Advisors

Don't Let Succession Planning Break up the Family

After my last Nasdaq article on how there could be diversity in a family, I was contacted by several family wealth consultants. A common question they had: How might they approach family succession planning with this notion of “behavioral diversity” in the family?

Perhaps it's because many families have been forced into spending long periods together – or apart – over the past 18 months that conversations have turned to succession planning. For one, many people report they are reexamining goals, habits, alternatives and, naturally, the future.

Whatever the reason, the time is ripe to talk further about the different needs and communication preferences of each family member.

Every transition is different, its challenges unique. Similarly, every individual, even within the same family, is different. So, pairing a family with transition – particularly a business or money transition – increases the variables involved. Yet they are not insurmountable and need not be mysterious.

Family diversity

Maybe the current generation realizes they need to plan but are having trouble facing the prospect of handing over the reins of a business or the family's wealth and assets. For that matter, maybe the next generation is not ready to take over and lead the next stage of this journey.

Whatever the roles and readiness, everyone needs to understand: Family succession planning is a process. It requires different generations working together. But more importantly, it must involve open, healthy conversations.

It is essential not to place huge responsibility onto shoulders yet unprepared to carry the burden. But, on the other hand, it is equally necessary for the current generation to be comfortable knowing they will pass everything to the next generation at some point. So, better to plan that journey…and to plan the conversation involved in preparing for that journey.

Surface tension areas upfront. Deal with them. It might be as simple as, “we'll get around to succession planning soon enough” to “we don't want to imagine a world without you, Mom and Dad” to “I've made my plans for the future and don't want to be part of your succession plan.”

All valid responses, but for everyone involved in the succession process, there will be complex questions (and emotions) to navigate.

Normalized, with a side of experience

I've found that families whose conversation around the dinner table included discussions about significant financial issues have far less trouble facing the succession planning process. Even when meetings become heated due to different perspectives, the fact that they were eating together kept the family unit safe. Plus, the ongoing dialogue normalized the discussion of money topics and money decisions.

Taking a step back and with the benefit of hindsight, every effective succession plan I've known began with an understanding that every person has a different financial personality. Again, there’s that family diversity rearing its head. Each individual’s approach to decision-making, on every level, is personal to that person and separate from their siblings and parents. Acknowledging this truth is a crucial first step.

Talking about money is an emotional subject. Talking about a time when the succession plan is activated raises further emotional responses.

Yet by uncovering the financial personality of each family member, understanding, acceptance and respect will be achieved for the group. These are critical factors to building trust toward maintaining precious family relationships and agreeing to the handover.

This will set the foundation for more robust communication and a more significant commitment to the common goals of the family. In addition, by following this approach, a higher level of trust will be developed in which everyone feels more connected and has clarity around one another's perspectives.

Perspectives on money, money decisions

Regardless of age, wealth, culture, position or other factors, behavior drives family relationships and money can get in the way of relationships. Especially familial ones. This is why it is so important to have a deep understanding and appreciation of each other's financial personalities. Our differences and the ways in which we all approach money and money decisions.

This is a complex subject, so I’ll be digging a little deeper as this journey continues, and hope it informs the journeys you are on with your clients. Among other things, we’ll look at the pros and cons of using an independent facilitator and at (gulp) succession planning fails.

In the meantime, if you don’t feel you quite have a handle on the very basics – discerning and managing different family member behavioral profiles, reach out. Let’s chat.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Leon Morales

Leon Morales is President & Chief Energy Officer of Atlanta-based DNA Behavior International, which leverages data and tech to enable individuals and organizations worldwide to manage talent, financial behavior and decisions – especially money decisions and what its founder calls Money Energy.

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