Wealthy families may have business discussions that involve two or more generations. In this TV show Frank Akers Douglas  discusses how families approach this.

Wealthy families talk business

It really does depend on the families you’re talking to. The simple answer is to try and educate younger people to understand more about money so that the older generation feels more confident in involving them in their family's financial issues and financial decisions, particularly where there is a family business involved. So I think it’s an educational process, it’s also trying to make people feel comfortable both in handing on information and money as well as receiving it.

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Person centred planning means understanding the needs of the client and working from there. In this TV show Charles Gowlland of Smith & Williamson discusses the survey they did to find out about their family office clients.

Research for person centred planning

We wanted to understand what our family office contacts and clients were thinking about all manner of subjects, not just about investments or tax or education but a whole number of topics, so we interviewed over the course of 2013 nearly 40 families with whom we had contact and some of whom we acted for already, most of whom we acted for already and in total their wealth we estimated over a billion pounds. We wanted to get the broadest possible idea of what people were thinking and so we were conscious to try to ask some entrepreneurs, newer money, perhaps the two generations, the generation that had made it, who might have had young children, as well as much more established money that might have been in existence for five or six generations. Because we act for such a wide range of clients we were able to sort of capture what they all thought.

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High net worth families want a good relationship with their advisors as Frank Akers-Douglas explains in this TV show.

High net worth families' survey

One was that most of the interviewees that we surveyed and spoke to felt that their professional advisors needed to work closely together and in particularly they would have a lead advisor who would coordinate the various professional advisors that they used in their team and I find that interesting because that’s something that we’ve tried to concentrate on here at Smith & Williamson and it shows the importance of that relationship creation. The second point I would think was to do with the handing on of money and the really quite diverse answers we got from the families that we interviewed as to when was the right time, how to involve children, whether to involve them at all, and that is probably one of the most thorny issues facing a family with money is when to involve future generations. I think it tends to be the older, the older the older generation is the less comfortable they feel about involving the younger generation.

Inside Finance will continue to produce more great videos about high net worth families and related subjects.

Informed financial planning within wealthy families involves having good advisors and passing on knowledge early. In this TV show Charles Gowlland gives his advice for managing familial wealth.

Informed financial planning around the kitchen table

One of the most important things we feel for families, that not only came out of the results of this survey but is a continuing view of ours is that they need first and foremost to surround themselves with good advisors. Second to recognise the combination of education within the family is both a mixture of the formal, so with family meetings, and the informal, which is if you like the sort of gatherings around the breakfast table or the lunch meal or whenever, when the family are sort of mixing together. And in the latter informal category you might discuss things like the sort of family history and what the wealth means to the family and what the sort of characteristics are that are associated with that money. And once that kind of dynamic around the money is understood by the younger members of the family, they will be better equipped to understand how they in turn should use that money during their own lifetime and what is expected of them and to what degree, if you like the money is theirs to do with as they will and to what extent it if you like belongs to the wider family and they are merely tenants in their own lifetime. There are no rights or wrongs about any of this. Its really up to the family to decide, but equally advisors can help guide families and particularly we find with newer generation wealth, many of them like Warren Buffet and some other famous people in the news like that, they want to leave a lot of money to charities when they die, they don’t want to leave huge amounts of money to their children, others feel completely differently and they would rather leave, they feel that it’s family money and they should leave it to their children and who should enjoy it. So it’s entirely horses for courses. Inside Finance will continue to follow issues around informed financial planning. Look out for more great videos from our Smith & Williamson experts.

Business strategy models will involve pre-empting business disruptions and being ready to deal with them. Some issues will be more sensitive than others. In this TV show Matthew Haswell discusses sick pay policy.

Good business strategy models pre-empt difficult situations

The pure cost in terms of sick pay to be paid to someone who is off long term sick is very much reliant on the sick pay policy that the employer has, if they only pay statutory sick pay that’s obviously going to be a fairly low cost, if they have a promise to maintain that individuals salary for say three months, six months, obviously the cost will be higher. What we are finding, particularly in smaller companies is that some employers only tend to think about these kind of strategies when the event occurs. Now it’s very difficult if you don’t actually have a sick pay policy to suddenly try and make one up when someone goes off sick and it’s also very difficult to just say ‘Right we’re going to stop paying you full pay after a month’ if that’s not in contracts of employment or that’s not something that’s been communicated to staff prior to the event of sickness.

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The attitude to risk will change depending on how much there is to lose. As Charles Gowlland explains in this TV show a Smith and Williamson survey found that threats to wealth are a common concern.

Fearful attitude to risk

There were a number of things, I think when we looked at the results of the survey we weren’t completely shocked or surprised by anything that came in and to a certain extent that gave us a lot of reassurance that we already had a good sense of what they were thinking and what they were worried about. So from that point of view there were no radical shocks. But I still think there were a couple of aspects that came out of it that were interesting to us. One of the areas was the concept of threats to wealth, I mean this is obviously one of the big long term issues for families. They’ve made their money or they’ve inherited it, how do they ensure that that money, that wealth persists through the generation and there were four main categories of threats to wealth as far as we could see it, and what was interesting I think about the response was that they were broadly similar in that people were equally worried about each of those and there wasn’t any particular split by, if I can put it like this, by how old the money was. So in other words these fears were common to all types of clients and those categories were legislative change that might be adverse league or tax, the financial mismanagement, the children squandering the money or volatility in financial markets. And included in those was inflation, and I think certainly for some families with a long and bitter history, inflation for them was a big worry.

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High net worth families may have high profile lives. Research by Smith & Williamson shows that wherever possible they will try resolve conflict within the family, as Frank Akers-Douglas explains in this TV show.

Conflict in high net worth families

I was very surprised that virtually all of the respondents have said ‘We don’t have family disputes’. You only have to read the press to read about some pretty high profile family disputes and if those are in the press imagine all the ones that aren’t. So I think there is more conflict than people probably care to admit to and it can start from something simple or it can be quite a complex and diverse issue. Again it’s trying to get involved, or perhaps I should go just back a step in that again in the survey most families said that where there was a dispute they would want to deal with it internally, i.e. within the family. Again I found that quite a strange answer because by definition if there is a dispute there is a dispute within the family and are they really best equipped to deal with it. So I think the answer is to get somebody, an external trusted advisor involved at an early stage just to try and talk to the party, if it’s a relatively straightforward dispute that should be simple to resolve. The more complex and the more sort of aggravational disputes are much more difficult and there I do think professional, whatever the right word is, counselling, is needed. For more insight in to advice and issues for high net worth families take a look at our briefing on family business.

Business strategy models can be put in place to prevent employee absence, as Matthew Haswell discusses in this TV show.

Absence prevention business strategy models

Well the first side, the first thing to do is try and import procedures that are actually going to prevent absence in the first place. Now that doesn’t necessarily relate to immediately spending money, that can be a kind of training and an approach basis. A lot of sickness is recurring, getting to the background of why that sickness is occurring, getting managers to be able to talk to their staff about sickness and absence and looking at patterns, the way sickness is recorded can actually throw up into light certain patterns of illness, it may be from a certain department has reoccurring illnesses, it may even be within a department those under a particular manager have certain recurring absences. That’s something that isn’t exactly a huge cost but it is just a procedural change. And also the culture and value system of the employer has a relation between that and sickness absence. Inside Finance is very interested in innovative business strategy models and will continue to bring you expert discussion on the subject.

High net worth families in the UK and the US have always given money to charity and this hasn't changed. But there are differences in the kind of involvement families in each country tend to give, as Frank-Akers Douglas discusses in this TV show.

High net worth families charity in UK and USA

There hasn’t been a great deal of change in people’s philanthropic wishes to contribute, although there has been more reticence I think about committing too much money in the difficult economic environment. But certain I feel clear that most families with money do want to have an involvement with giving into the charitable sector, primarily through their own charitable vehicles, so they have got control over it rather than going through external organisations. And there tends to be a pretty good understanding of what they are trying to achieve. I think if you go to the United States it’s a much more complex area and I think families get very much more involved in very specific sort of philanthropic issues, supporting their old university or whatever it may be. I think here in the UK people are much more broadly minded on charitable issues and want to contribute.

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High net worth families have unique needs from financial services. In this TV show Frank Akers-Douglas discusses how Smith & Williamson has tried to understand these needs.

Finding out what high net worth families want

We were interested as part of our family office project which we launched last year, to get some views from high net worth individuals, particularly clients, as to what they wanted most from their advisors, what concerned them most about the issues which they had, and how they felt about the sort of generational handing on of money, attitudes towards children. So we were very much looking for some positive stuff rather than do you want to invest in gold or do you think the market’s going to go up or down, it was really trying to get into the family’s mind as to what they wanted from their advisors.

Inside Finance TV will continue to explore the issues surrounding finances in high net worth families. Look out for more from Frank Akers-Douglas.