Susan R. Schoenfeld, CEO and Founder of Wealth Legacy Advisors LLC, serves as a ‘thought partner’ to families of wealth through personal attention and human spirit. Susan is an award-winning Thought Leader; she provides guidance on legacy, next-generation, stewardship, governance, leadership succession, and philanthropy. She recently spoke on Family Governance and The Family Office: Planning for the Next Generation at Opal Group’s Family Office Forum in Newport, RI.
What does good family governance look like?
The foundational question is, what is family governance? To me, governance in the family context is simply a fancy way of saying, “How are we as a family going to make decisions, especially when the chips are down, when it gets difficult, when there is a divisive family conflict?” The best family governance structure is the one that is thought about and agreed upon ahead of time, when the family is still in harmony.
As to what a good family governance structure looks like, it’s not a one-size-fits-all approach. What might be the perfect approach for one family might be completely inappropriate for another.
It is not beneficial for a family advisor to do some reading on the subject and then to suggest that a family establish a family assembly, and a family council, and a mission statement and a vision statement and maybe a family constitution, and just throw everything at the wall and see what sticks.
I worked with a family a number of years ago whose primary trusted advisor took that very approach. It was a relatively small family; G1 had just died, G2 were the 2 adult children, and G3 were young adults.
Their trusted long-time employee who now headed their single-family office had convinced the family to adopt each and every governance technique that he had ever read about, and the family ended up with a bloated governance structure that frustrated and disengaged everyone.
Why wasn’t that appropriate for this family? A Family Council is a representative government, along the lines of the U.S. Congress, where someone from each branch of the family represents their branch within the Council. With such a small family, representative government wasn’t necessary, at least at this generational level; perhaps in another generation or two as the family continues to grow, it might become more relevant.
By contrast, the Family Assembly is everyone. Using the same analogy, a Family Assembly would be the full U.S. electorate. In that client family, a Family Assembly would have been the appropriate governance body. In larger families where a Family Assembly might be unwieldy as a decision-making group, each member might not get a vote because it’s often a more passive situation, but they do have the opportunity to learn about the family enterprise.
Very often, family assemblies are positioned as an annual family gathering. One aspect of family governance that I particularly like to suggest is to have G1 endow a fund to pay for the expenses of the annual family reunion, including travel and hotel. I recently worked with a family where we organized annual family meetings, and I had to struggle to convince the patriarch to pay the travel expenses for his family members to attend this gathering.
What makes a good family governance system is as unique as your individual family, but I suggest that you embrace the notions of multi-directional communication and transparency, and demonstrate the foresight to establish a considered governance framework before the inevitable conflicts happen.
Susan Schoenfeld, a public speaker & thought partner to families of wealth and their advisors, is an award-winning thought leader. Susan’s switch from successful estate planning attorney and CPA to a trusted family advisor and thought partner was inspired by families of wealth asking her searching questions beyond estate tax planning. As a conflict-free advisor who provides no investment, tax, or legal advice and sells no product, Susan shares her insights directly with wealthy families and with financial services experts. She is active as a keynote speaker and a leader of break-out sessions and workshops at conferences throughout the US.
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