Advisor Blog

I attended a presentation last week by Clint Haggard and Byron Gossett that discussed creating a 100 year plan for sustaining family wealth and unity.  As most people know, creating wealth is one thing - sustaining it over many generations is a completely different challenge.  While the discussion was centered around high net worth families, many of the points are quite valid for most of us.

Here is the top ten list, in reverse order - David Letterman style:

10.  Have a shared vision with the next generation about management of assets (investment philosophy, charitable giving guidelines, disbursements, voting control, leadership).

9.  Have a scheduled meeting with beneficiaries of family wealth on a regular basis.  Seek to develop a culture that includes holding productive meetings.

8.  Create lasting memories and traditions with the next generation that do not necessarily revolve around material things.

7.  Encourage the next generation to "ride in the truck", allowing them to observe the older generation's approach to both business and relationships.  Be very intentional in training the next generation in effective communication skills.  [If "ride in the truck" is a confusing phrase, you're probably not from Texas or another area with a ranching or agricultural history.  It simply means to spend time together - working, playing, observing. - JBE]

6.  Support and encourage individualism in the next generation.  Learn to accept each person and their uniqueness.  Make it a priority to invest in the development of each family member so that they may reach their full potential.

5.  Create and follow a written Living Master Plan (LMP) that considers future generations, not just the next generation.

4.  Develop a standardized system to address such things as employing family members, compensation levels, levels of authority, and succession.

3.  Develop a system for addressing and resolving conflict in the family and/or the family business.

2.  Explore the possibility of using charitable foundations as a training ground or "laboratory" for teaching stewardship and philanthropy to the next generation(s).

And, finally...

1.  Utilize the services of objective and creative advisors who are trained and experienced in assisting with the above activities.

Dave Smith recently read this book and thought that it was quite worthwhile.  The author, Charles Farrell, is an attorney and investment advisor who has written for CBS Moneywatch and Investment News. 

The book presents a series of simple formulas for managing most important aspects of your personal finances by calculating ratios related to savings, debt, investments, and insurance.  Following this methodology provides an objective view of the health of a financial plan.  The Wall Street Journal described these formulas as "some of the best tools we have seen for gauging where you stand."

The author also understands investing and wisely suggests ignoring Wall Street, the financial press and commissioned salesmen.  There is a well written chapter that discusses what to look for in a financial advisor, the "alphabet soup" of designations in the financial world, and the importance of working with a fiduciary.

The book is written in an approachable and easy to read style that is appropriate for most individuals. 

We all are guilty of saying that “it can wait until another day” about way too many things. I was so harshly reminded of that when a great man and friend that I know passed away from heart failure while skiing exactly one week ago today. David was 48 and lived a life that most of us would envy. He lead a life with few regrets, but his passing came way too soon and served as a vivid reminder to me to take an inventory of my life and make sure I can say the same thing if I had been the one in David’s position last week. Of course our firm is an Investment Advisory firm, but finances are really just one segment of the items on my checklist of things to review and should be for you as well.

David was in much better shape than most typical 48 year olds, but in all likelihood, I would not even be writing this today if David had made a yearly visit to the doctor this past year. I am so often guilty of saying, “I can wait to get my annual physical NEXT year which pretty much contradicts the meaning of an “annual” physical. This really hit close to home for me because my father, another great man who passed away too early, suffered a similar fate from being too busy and/or stubborn to see a doctor on an annual basis. Nobody is as guilty of this as me, so I am going to stop being a hypocrite and a finger-pointer, and will schedule my physical which has been not so annual, today.

We each have our items to inventory and some of us are better about doing this than others, but please reflect on your own checklist. David was a great family man. His life was lived with a real purpose and his funeral was a very inspiring testament to that. If we overlook one important item on our checklist, we may overlook something very important that could make a big difference to us and/or to our family. In addition to your health, your list might include your spiritual standing, your relationships with your spouse and/or children, among other things.

If you are a client or if you are someone who only reads our blogs, I hope I can get you to focus on at least one area (hopefully more) that you need to reevaluate or fine tune to help you and your family accomplish your goals. Obviously, our firm would love to help you with an inventory of your financial position and your goals and objectives in that area. It would be wise to do an inventory of the following items:

1. Do you have adequate life insurance in place if something unforeseen were to happen to you or to your spouse? 
2. Do you have your will in order to protect your family and your estate and does your will clearly state who will be responsible for taking care of your children if you were no longer able to instead of the courts deciding that for you?
3. Will you be able to retire at an age that you expect to and will you have the financial wherewithal to be able to sustain the kind of lifestyle that you anticipate or have the desire to when and if you finally decide to stop working?
4. Have you reviewed your investment portfolio recently to make sure that you are investing your hard-earned funds at a level of risk that you are comfortable with and that you are putting you and your family in the best position to be adequately rewarded for the level of risk you are taking? You want to make sure that you are taking what we call efficient risk (i.e., that you are being rewarded for each unit of risk that you are taking).
5. Do you need assistance with developing a financial plan? Do you make more than you spend or do you spend more than you make? Some of our clients need a roadmap to assist them in determining if they are on the path they think they should be on or if they are on one that will allow them to meet their goals and objectives.

The above list could easily be expanded by asking about whether you are maximizing your tax situation, are you giving to the charities that you want to in the most efficient manner, do you have adequate insurance in other areas like disability, property and casualty, etc. The list goes on. Just as I started out saying, David lived a very full life and was always thinking of others. I know his life is a big reminder to his friends that we need to do an internal checklist and I started mine this weekend. Please take the time to do the same and let us know if we can help you in any way.