When you think about wealth in your family, are you only thinking about financial assets? Charlie Collier says there’s much more to the story. Charlie, a former Senior Philanthropic Adviser at Harvard University for 25 years, is considered one of the world’s top experts on family wealth. Based on his extensive experience at one of the largest philanthropic organizations in the world, second only to the Vatican, he says it’s important to think past money when considering wealth.
Charlie Collier spent 25 years with Harvard’s wealthiest philanthropic families. He’s seen them flourish and flounder. He’s advised on and observed the most successful structures, strategies and value sets of wealthy families. Here’s how he inventories family assets:
Traditional thinking about wealth starts and ends with a number, the sum of all financial assets. It deserves attention, of course. We want to protect, build, and transfer wealth to benefit family members and others. That means, among other things, making tax-efficient decisions and setting investment allocations to reflect long-term multigenerational goals. But there’s more. What are the other, less obvious, forms of capital?
Eventually someone other than you is going to be the one who is responsible and in charge of the family wealth. That’s when human capital’s huge value becomes apparent.
How can you ensure that your successors treat financial capital the way you would, thoughtfully and carefully? The answer lies in values. The character, spirituality, passions, dreams and aspirations of your family members are the most important factors in a long-lasting family legacy. Find out what your family members are good at. Watch for talent. Invest in and nurture their passions and gifts. Involve your family in financial matters. Ask them what activities they think need the most backing.
And keep building human capital. What education can you invest in to help your children reach their potential? Can you invest in your kid’s entrepreneurial idea? Remember, even Olympians need the support of solid principles and continuous coaching. You can provide that for your kids by yourself or with the help of a coach. The goal of human capital, according to Charlie, is secure, autonomous children who lead their own lives while staying connected to the family. There’s a bonus here if they participate in open and equal discussions about the family’s goals and actions as a whole.
Think of intellectual capital as the operating handbook for your family. How will you all work together to solve problems and manage conflict? Having discussions about this during good times prepares you for inevitable challenges down the road. Charlie says, “I have come to the conclusion that as adults we ought to strive to treat our children as our peers (perhaps) by age 25.” He also says to make decisions based on thinking rather than emotion, the same way you would a business. Reinforce this standard for all members of the family and you reinforce positive and collaborative decision making.
We also want to prepare children to be responsible owners of money, whether they are artists, entrepreneurs or athletes. Often that involves teaching core competencies and skills to future generations. Ask us for our handpicked reading list of financial books for all levels, from Federal Reserve Comic Books to Peter Bernstein’s narrative of the history of calculating risk in Against the Gods. High-level financial conversations are not all that valuable without a contextual background.
What is your level of civic engagement? Through giving your time, expertise and/or money, you can reinforce communities and form more bonds with those around you. True family wealth includes expanding the horizon of your self-interest to include caring for others. Leading by example through giving helps strengthen a sense of community and inspires others to do the same. For instance, giving your employees stock ownership in your company is a form of social capital that aligns incentives and facilitates community.
When you think about the legacy you will leave, remember that money is only a small piece of the greater whole. Think about how you can enhance and foster all four kinds of capital today and for generations ahead. We’re here to help.
Max Osbon – firstname.lastname@example.org
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.