Enduring Vision or Armed Fortress
Distinguish yourself! It seems a safe assumption that the prediction made in a study by Boston College that the largest transfer of wealth in history, (some $41 trillion will be passed down within the next 50 years), will set the wealth management and estate planning worlds on their ears. And yet, according to the World Wealth Report sponsored by Merrill Lynch in 2006, only 16% of wealth will come from inheritance. New money from entrepreneurial endeavors and income, which represents 58% of wealth, is not included in the Boston College estimates. In other words more wealth in more hands than ever before in our history. Anticipate new entrepreneurial wealth and new inheritors emerging from diverse sources with different life experiences than previous generations.
In this climate it comes as no surprise that financial institutions, wealth managers, insurance agents, accountants as well as estate attorneys are all expected to respond to the increased business potential. Appealing to everyone’s desire to leave a legacy is a common approach. As a result the term “legacy” rather than “estate” has become part of the language and appears frequently in ads targeting the high net worth market.
The fear that an inheritance will be dissipated, often voiced in the expression from “shirtsleeves to shirtsleeves in three generations” remains very real. Ideally legacy planning eases those concerns. The real question is whether the current trend toward legacy planning is really estate planning in sheep’s clothing? Is it possible to leave a comprehensive legacy that benefits multiple generations and impacts the world? Can legacy planning distinguish the professionals associated with this endeavor while engaging future generations? Can leaving an intentional legacy enhance future generations survival in our rapidly expanding entrepreneurial climate? Or can planning empower those who are actively considering their impact on the world? If legacy planning is merely an attempt to find another way to protect the tangibles across generations then it avoids the most critical components of what leaving a legacy truly means. If the objective is to actualize an enduring vision, one that addresses both the intangible and tangible aspects of one’s legacy, then don’t we need to find a more effective comprehensive approach?
Wisdom is essential! The founders of Inheriting Wisdom™: The Legacy Process that Reaches Across Generations believe that wisdom is an essential component of “legacy” planning. In contrast to other approaches centered on asset protection and growth, the founders of Inheriting Wisdom put financial considerations to the side and begin with wisdom one’s values, traditions, and life experiences. The first step in their process is “Clarify Your Wisdom.” Trusted advisors who engage with their clients in a conversation about these intangibles start with what’s important to the lives of their clients. Since wisdom taps into aspirations, trusted advisors take a bold step toward exploring an enduring vision by entering into an open dialogue. Most of us tend to build an armored fortress when money is at the center of a conversation. When money and values are laced together in the same conversation the natural tendency is to find ways to assure that next general behaves responsibly.
What is a trusted advisor to do? One senior trust officer at a bank stated that, at his best, he is only a “qualified amateur” when it comes to initiating conversations about sensitive issues. This particular advisor is unusually skilled at developing strong relationships. He also does not shy away from the deeper concerns that arise in the planning process. I have stood next to him when a client called to report a personal victory for one of their children and know of incidents where he pushed clients to look deeper into their decisions. Yet like many advisors he recognizes where his skill set ends, where being a “qualified amateur” is not good enough. What distinguishes him as an advisor is that he appreciates the importance of addressing the intangible aspects of leaving a comprehensive legacy. He opens the door, asks open-ended questions, but then understands the value of teaming with professionals not directly connected to financial and estate decisions. While some advisors hesitate, afraid that their clients won’t want to spend time or pay fees for non-legal or non-financial issues, others know the value of being part of the most importance decision-making process of their clients’ lives. Rather than accept the long-term risk of failure they emphasize the intangible aspects for the benefit of future generations as well as for their own professional satisfaction.
By definition, legacy is not about us; it is about future generations. Ultimately the value of our wisdom of what matters to us rests in the hands of the recipients. Documents, value or mission statements, family governance, even well thought out ethical wills, only matter if the next generation buys in. Real legacy planning demands that we reach across generations. For many decades, estates were revealed only after death with the legatees having no prior knowledge about the specifics of what they would receive. Royalty and those of affluence tried to prepare the next generation to handle the responsibilities that accompanied the opportunities that would be set before them. History and literature offer ample examples of when this process produced less than desirable results for the next generation. Often the protection of assets called one to literally armor oneself against outside threats.
Guard against the real dragons! The need to guard assets is still a real concern. If recent history remains a predictor of future outcome we can assume that in 9 out of 10 families wealth be dissipated within three generations. For those looking to preserve wealth, this lowly 10% success rate creates an imperative to find better solutions. The question is whether the threat comes predominantly from external environmental forces, or from internal family issues?
We assume that wealth opens a world of opportunities for the recipients. Yet we know that this is not always the case. A preponderance of evidence exists that, like lottery winners. Those who acquire wealth suddenly often experience depression and other symptoms. For them the opportunity turns into a handicap. Even in the best of families, jealousy, greed, envy, or power-struggles emerge as everyone evaluates how other family members respond to their inheritance. Aren’t these the real dragons that one needs to guard against?
In an entrepreneurial age, the doors for each of us open to a global world. In a world that values individual achievement, each generation needs to find ways to create their own opportunities. Those who will thrive in rapidly changing times recognize that while you can empower the next generation, the real key is for them to find their own way in the world. Inheriting Wisdom: The Legacy Process that Reaches Across Generations offers an opportunity for a cross-generational exchange of wisdom. The trusted advisor of the future is entrepreneurial and will seek new ways to assure the long-term success of their clients.
Dr. James M. Weiner and Dr. Carolyn J. Friend , creators of Gen-T Legacy Institute™ and Inheriting Wisdom™: The Legacy Process That Reaches Across Generations, wisdom@inheritingwisdom.com.
