By MONROE DIEFENDORF
Our work with wealth management, estate planning and death claims usually focuses on preserving financial assets for future generations. At the same time, most clients want to make sure those financial assets strengthen the heirs who follow, not cause family conflict, because they value their family more than their money. Financial professionals can differentiate themselves and prevent or mitigate tensions by recognizing that a client’s family – its members, its values and its future – is an essential component of a client’s total wealth.
Identify Family Bonds
After four decades as a family advisor, I have determined that three things usually hold families together: parents, possessions and purpose. But only one lasts. Parents eventually pass away, while possessions get scattered and their sentimental meanings fade over time. Purpose is different: when properly tended, it can transcend generations. Different facets of a family’s purpose often materialize over time. Intangible investments like family traditions, shared life experiences, lasting trust and mutual gratitude provide a strong root system for the family tree. Whatever the family’s focus is, communication is key in defining lasting purpose.
Identify the individual family’s purpose by having your primary client outline the facets important to their family history. Once clients know what they want to pass down with their money, work with both clients and heirs to develop an action plan. Lack of clarity or misinformation about family heirlooms or purpose may lead to otherwise avoidable tension, but discussing these values and intangible investments openly with the whole family will help align everyone ahead of an untimely death.
Involve Each Family Member
To create and uphold an effective plan, start with a kickoff meeting with your clients and their heirs to help them design mechanisms for maintaining family purpose, incorporating four key elements: family values, legacy, gratitude and governance. Each family member should list the values and pieces of the family’s legacy which are most important to them, and understand they need to be ready to share and respect differing views from family members. With all perspectives out in the open, discuss gratitude. Part of this discussion should honor the work parents and other ancestors have done to build up assets. It can also cover respect among heirs, especially, if one individual chooses to take on management of a larger piece of the inheritance.
To encourage families to uphold these values, work with them to educate children and grandchildren about their legacy and play a part in governance to civilly resolve disputes. Develop agreements between clients and their heirs to manage the business aspects of being a family. It should be said that family members can agree to disagree within these areas, but more closely-aligned families build stronger foundations for their successors.
After each family member shares their views on those four components, get everyone on the same page. This can require a large time investment from all family members involved. Digital communication platforms can speed the process up, allowing clients to work on it from home. Once the initial planning is completed, shorter meetings at regular intervals with the family should suffice to keep things on track. These check-ins will especially help advisors maintain contact with younger, time-strapped family members.
In addition to bringing in your client’s family, consider involving a younger advisor in family financial planning to align your successor. Just as parents must eventually pass control on to their children, we must be able to hand off our clients of multigenerational families to our own successors. Introducing a successor early on will make your own work more efficient, and your client’s heirs will know where to turn when both their parents and you are no longer there to help them stay on track.
To maximize the chance of successful wealth transfers, we must handle more than just our client’s monetary assets. Your clients have a family ethos they want to pass down just as much as they want their children to be financially secure. Help them identify and work with their families to nurture it, and you will help create a family legacy that grows with your client’s children and grandchildren.
Monroe “Roey” Diefendorf, Jr., is the CEO of 3 Dimensional Wealth Advisory, a continuation of the Diefendorf Capital legacy dating back to 1875. He has six financial advisory and insurance designations, including CLU, ChFC, CFP, RFC, CIMA and CAP, and has offered financial and life insurance services since 1970. Roey is a 41-year and Lifetime member of MDRT with multiple Top of the Table qualifications. He is a charter member of both Kingdom Advisors, a network of Christian financial professionals, and The International Association of Advisors in Philanthropy (AiP). He was the former president of the NYC Chapter of the Investment and Wealth Institute. Roey has also written 16 books, and works in Locust Valley, New York.
This article is based off a member presentation at MDRT’s 2019 Annual Meeting. MDRT members can find the full script within the MDRT Resource Zone.