Managing Both a Portfolio and Family Dynamics: Two Skill Sets

March 15, 2019

By Amy Castoro, President & CEO, The Williams Group

 

I was on a call with an advisor yesterday who said the advisors in his practice “do what we do.” If that were true, we would have far fewer families falling apart due to a lack of trust and communication with advisors.

 

Managing a portfolio and managing family dynamics: two different skill sets

 

By design, it is very challenging for the person managing the assets, and hired by the family leadership, to be viewed as a neutral party concerned with the well-being of the entire family, as well as the assets. Especially when he or she is compensated according to how well the assets grow.

 

The skills it takes to expertly manage a portfolio are not the same skills needed to manage family dynamics. When patriarchs or matriarchs hire an advisor, they are looking for an expert who comes with answers, gives expert advice and predicts trends. And, in my experience, the best ones have an uncanny ability to work with numbers from a highly analytical vantage point.

 

The skills to engage family dynamics are almost the exact opposite. They include being able to tolerate not knowing the answer to something, asking powerful questions instead of giving advice, listening exceptionally well and moving from a strong connection to the felt experienceof the conversation.

 

Yes, the best advisors take care of the family, but they do so by taking care of the assets. In other words, they have both necessary skill sets to coach families on estate planning. This aligns with our tradition of expecting the estate plan to take care of the family. In truth, the estate plan takes care of the assets.

 

A challenging role for family members to play

 

As parents, we often find we are unable to coach our own family members. Ever try to tell your wife, your son or your daughter-in-law how to manage money? Once we hold the position of power, it is challenging for the rest of the family to see us in any other role. A coaching role requires putting the relationship with family members on equal footing for there to be enough trust that each person’s voice has equal weight.

 

So how does an advisor take care of the family?

 

Why not bring in an expert, as you would with any other spoke of the wheel of estate planning? The traditional members of this important team include estate attorneys, CPAs, financial advisors, tax consultants and insurance specialists. Now there is an increasing awareness that the family itself — the very center of the wheel — requires its own expert.

 

Signs of a well-coached family

 

Family dynamics are complicated. Trying to tame them to achieve an optimum estate-planning outcome can be challenging. So what does it look like when everything runs smoothly? The following description paints a picture of the ideal inner workings of a well-coached family.

 

  • The Templetons are well managed. The family has developed the trust and communication skills to navigate challenging conversations.
  • The family has explicit standards for how they coordinate as a team. There are clear expectations regarding communication within the team, roles are well established, information flows freely between generations, there are clear guidelines on boundaries, and practices are in place to deal with underperforming members of the team.
  • Cordial hypocrisy is openly addressed. There is a high expectation that honest communication, although uncomfortable at times, will prevail over pretense.
  • They have a clear mission, clear values and a clear purpose that are operationalized in the family members’ behavior and in the daily decisions they make.
  • Family members are both individuals with a purpose and part of the collective mission of the family. Adult children assume responsibility and accountability for their own lives.
  • They look to their family as a team and believe that the family itself, rather than money, is their true wealth.

 

How to identify an expert family coach

 

To find an advisor who really does take care of the families you represent, here are six characteristics to look for as you interview family coaches who will serve in this all-important role:

 

  1. They are independent, with no conflicts of financial interest.
  2. They have an excellent reputation in the industry and are widely published.
  3. They have developed a consistent process.
  4. They build skills in the family, so they can manage challenging conversations on their own.
  5. They have a track record of working with successful families that are willing to serve as a reference.
  6. They have worked with hundreds of families and family businesses at a comparable level to your client.

 

Missing the opportunity to address the family side of asset planning can cost the family their wealth. More than half the time, families loses control of their assets, and family relationships break down because of a lack of trust and communication.

 

Don’t leave your families exposed or their wealth at risk. Bring in an expert to support the very foundation of all your hard work and expertise — the family itself.

 

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Your Family: Your Winning Team

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