In our work with family stewards, one of the most frequent issues arises around the need for passing the torch to the next generation. Especially in families with significant wealth that has been passed along to multiple generations, the desire to strengthen and perpetuate a philanthropic legacy is often a core value that requires not only careful planning, but also nurturing with those who will become custodians of the legacy in future years.
This topic is especially timely now, when some $68 trillion in wealth is expected to pass from one generation to another over the next two to three decades. How will family stewards and other trustees ensure that the next generation of family leaders has the vision and the financial literacy to further the financial and philanthropic values of those who created the wealth and established the original conception?
Communication and Mentorship
One important factor is good communication practices. Family stewards should begin conversations with younger generations well before they assume leadership roles. These conversations should revolve around the family organization’s core philanthropic values and priorities, but they should also encompass younger members’ ideas and values. It’s important to remember that while the traditional objectives of family philanthropy may have revolved around faith-based organizations and traditional nonprofit organizations that might be part of the local United Way, Millennials and even GenX’ers are likely to bring their own social and ethical priorities to bear on their views toward philanthropy; this may include organizations and efforts that are unfamiliar to their elders. It will be important for the older generations to listen carefully to what their heirs are saying if they want to foster the type of deep commitment that guarantees perpetuation of a legacy. Some families even develop “pitch” sessions, where members bring information about a charity or cause they are passionate about, seeking to demonstrate why it should benefit from the family’s generosity. Participation in these types of strategic conversations should be considered as a requirement for heirs’ readiness to assume leadership in the family enterprise.
Another important topic revolves around communication from the older family members to the younger ones about expectations, responsibilities, and resources. Learning that you are responsible for making decisions about a multi-million-dollar trust should not happen when the will is read. Instead, you should be able to learn the ins and outs of the family organization over time, with the ability to thoroughly absorb the information and incorporate it into your future planning. Those with more experience should begin the mentoring and advising process early, ideally allowing a number of years for the concepts of responsibility, family stewardship, and decision making to “sink in.”
By the way, this education process becomes crucial when dealing with specialized assets like artwork, collectibles, or unique real estate holdings. Unfortunately, stories abound of valuable items being donated to thrift stores or otherwise mishandled, instead of being auctioned and the proceeds used for worthy ends, simply because inheritors didn’t understand their significance or value.
Mentoring vs. Micromanaging
Engaging in effective communication around shared values, priorities, and long-term goals is essential for mentoring the next generation of family stewards. The process consistently looks at the horizon rather than the immediate surroundings; it is more strategic, less tactical. When too much time is spent discussing day-to-day transactions or plans, the process can change from mentoring to micromanagement, becoming less effective for preparing future leaders to make the kinds of long-range decisions they will be called upon to make. Instead, asking open-ended questions, maintaining “two-way curiosity,” listening carefully, and engaging in values-led discussions can equip future family leaders with the mindset needed to maintain and build the family financial legacy.
Effective mentoring creates capable, confident family stewards; micromanagement leads to anxiety, indecisiveness, and potentially, burnout or, worse, rebellion. Responsible family stewardship seeks out, nourishes, and encourages next-generation leaders with thoughtful, consistent, and planned mentorship.
GEM Asset Management, as a fiduciary financial and wealth advisor, works with affluent families seeking to perpetuate both financial legacies and important values. We can provide coaching, consultation, and guidance built on your family’s priorities and needs. To learn more about how we help families steward wealth across generations, please visit our website.
