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Making a Statement

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The family wealth mission statement is a great opportunity for affluent clients to begin a dialogue on family priorities, determine their family’s core values, and create a wealth management plan for future generations. Helping your clients develop such mission statements is an innovative way to differentiate your practice, deliver

personalized service, and build client satisfaction.

The family wealth mission statement has been a planning tool for the ultra-wealthy since the early 1900s. Used to guide the preservation of the family fortune, maintain intergenerational family unity, and encourage ongoing philanthropic gifts, family mission statements have been the “constitution” for wealth planning for many of America’s high-net-worth families. Hearst family matriarch Phoebe Hearst created financial structures that would support family businesses after her death and encourage philanthropic gifts to the community, while John D. Rockefeller, Sr., established foundations to encourage future generations to renew business and philanthropic goals.

Wealth planning trends that began with the ultra-wealthy, such as separate accounts, alternative investments like hedge funds, and even private foundations have been adopted by the merely affluent. Because history has shown that many affluent families have been unsuccessful at preserving wealth, the family wealth mission statement is another financial planning tool that can help your clients manage their assets and establish a legacy for future generations.

Affluent families often seek innovative alternatives for managing their financial capital. They are also concerned with both family unity and ensuring continued success for their children and grandchildren. Because the next 20 years promise to bring a huge transfer of wealth from the baby boomers to their children and grandchildren, wealthy families will want to have systems in place to help younger generations both manage and plan for the transfer of these assets to their own children.

A Direct Line to the Heart

Research tells us that the affluent client will choose an advisor based not only on the execution of day-to-day tactics, such as selecting suitable and well-performing investment products, but also on the comfort level the client has with the advisor. An advisor’s ability to discuss product performance as well as more intimate topics, such as long-term family goals and values, can determine a client’s satisfaction. Given the desire for personalized service, if you can discuss core values with your clients–and find ways to help clients identify those values–then you will be at a distinct advantage in differentiating yourself from your competition. With the upcoming baby boomer retirement, and the $5 trillion in retirement assets that will be rolled over into IRAs by 2010, according to Financial Research Corporation’s 2004 study, The New Landscape of IRA Rollover Marketing, now is a great time to set yourself apart through innovative and personalized service.

The subject of a family mission statement will rarely come up on its own. There are, however, a variety of opportunities to broach the topic with your clients and not feel awkward. For example, you can discuss it within the context of a particular family financial goal, such as retirement planning or college funding. You also can also provide a framework to discuss personal and financial goals in quarterly or annual meetings when you review portfolios with your affluent clients. Such portfolio reviews can lead to larger discussions on values, philanthropy, children, wealth management, and wealth planning. Why not add the topic of a family mission statement to help them focus on an overall financial plan?

Here are some questions that may help to begin the conversation with clients:

  • Will your current plan successfully transition both family values and family wealth to the next generation?
  • How are you preparing your heirs so that wealth is a force for good in their lives and not a burden?
  • What should your heirs be doing to prepare for wealth and responsibility?

If you feel that these questions–and the answers–are somewhat personal, keep in mind that the key to a successful conversation is asking the questions respectfully, listening carefully, and giving clients the chance to openly discuss these issues, perhaps for the first time.

Centerpiecing Core Values

A family wealth mission statement outlines what the family wants to be and do, and the values and principals on which those goals are based. The statement is a testament to a family’s core values.

Creating a family wealth mission statement can help a family to determine those values. Through a discussion about wealth and how to best use it, family members can learn from and about each others’ priorities and principles. It can be a “roadmap” to help identify and achieve financial goals and objectives, such as educating children and grandchildren or leaving a legacy for future generations and a charity through philanthropic gifts. It can also provide meaning and context to a family’s wealth in terms of how that wealth could be used to benefit both the family and the community.

Creating a family mission statement can open a dialogue about money and wealth among family members and, in particular, teach the younger generations the meaning of wealth and the responsibility that accompanies it. Often, parents do not know how to approach the topic of money with their children and some may be concerned that children who know about the family’s wealth may lose their ambitions or aspirations. A family mission statement created through conversations about the meaning of the wealth can provide a child with important perspective and offer a financial knowledge base. (See the article, “Raising Healthy, Wealthy Kids: Improving Your Chances, by Jane Hilburt-Davis, and the “Educating Your Clients…” sidebar.)

Steps to Creating a Family Mission Statement

To get the discussion under way, Judy McKenna of the Colorado State University Cooperative suggests in a 2003 article ( that your affluent clients begin by asking themselves some questions to determine goals and priorities, such as:

  • What are our family’s priorities and values?
  • Are there any goals that we want to achieve as a family?
  • What are our family’s individual (e.g., college) and collective (e.g., wealth transfer) needs?
  • How can we serve our community?
  • If someone were to write an article about our family in 20, 50, or 100 years, what would we want it to say?

Within the conversation, it is important to review the past while also focusing on the future. This may help to dispel any family myths and uncover strong emotions such as fear or greed.

Many advisors have found it helpful to separate a client’s core values into three basic sections: Wealth values, philanthropic values, and interpersonal values.

  • Wealth Values: To what end will the family build and manage its wealth
  • Philanthropic Values: What is the role of the family in the community? What should members of the family do to ensure the community remains healthy?
  • Interpersonal Values: How should family members behave toward each other? How should disputes among family members be resolved?
  • A fourth section may be added if your client is involved in a family business. For simplicity’s sake, this could be called “Business Values” where you would want to ask how the family business should operate, and in what industries, and for what purposes?

Put It in Writing

If your affluent clients are thinking about and discussing these questions with you, it will help set a framework for the mission statement. However, discussion is only the first step to implementing a plan. Putting the mission statement in writing gives it credibility and emphasizes its importance.

The mission statement need not conform to one specific structure. The statements can be as short or long as the family wants. The length can range from two sentences to one full page (this could include information on the family’s history and how its wealth was created). Here are some examples of family mission statements pulled together by Roy Williams and Vic Preisser in their book, Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, (Robert D. Reed Publishers, 2003):

  • “To use our resources to strengthen our family and to support causes in which we believe;
  • To strengthen our family and use its assets wisely; to enable our family and others to realize their fullest potential; to value and encourage love, work, self-sufficiency, and cooperation within the family and the larger community;
  • To live with integrity and make a difference in the lives of others.”

Whatever the length and the goals of the family wealth mission statement, it is imperative that each family member be committed to the statement’s goals and purpose. Your clients should realize that a family wealth mission statement cannot be decided by the senior generation alone if it is expected to be followed by all family members. Studies have shown that, for the mission statement to be effective, it must incorporate a joint sense of purpose versus one dictated by the patriarch or matriarch.

The statement should be reviewed regularly to ensure that the goals are still relevant, counsels Judy McKenna. You can encourage your clients to review their mission statements every three to five years, as well as after any major family event occurs, such as the birth of a new generation, the entrance of the younger generation into the workforce or the death of a grandparent.

But beyond encouraging consistent financial reviews or identifying objectives, the suggestion of a family mission statement can help set you apart from the competition. While any advisor can help determine basic financial goals and schedule meetings, the mission statement offers a creative and innovative way for affluent families to not only manage their wealth but also create a structure of stewardship for that wealth for their future generations.