The Importance of a Positive Family Culture
Creating a Family Dynasty takes more than some documents. There are intangible things that typically aren’t taught to families with less than $500 million. In this episode, you’ll learn three key insights that are critical to doubling the lifetime value of your accounts and dramatically increasing the value of your practice. Lean in as Paul shares a story from his childhood and also reveals how a family dynasty needs both technical things (like proper legal documents) as well as and intangible things like having a positive culture, shared values and ground rules for how it operates. The Importance of a Positive Family Culture This is the show devoted to financial advisors, fee-based investment advisors, and wealth managers who want to increase the value of their practice by attracting more premium clients and reducing client attrition. Now if this sounds like you, all you need to do is lean forward and listen carefully. Family Dynasty Planning is central to our discussions, and you and I will also explore other fascinating and important topics such as attracting wealthy clients, dealing with increasing competition, continuity planning and succession planning, growing and building your business, understanding the true worth of your business, and leveraging technology, just to name a few. In this episode, you’ll learn three key insights that I believe are critical to doubling the lifetime value of your accounts and dramatically increasing the value of your practice. First, we’ll discuss the difference between laws on one hand, and social norms on the other, and why that’s relevant in the context of Family Dynasty Planning. Second, you’ll discover that you need both a dynasty trust and a positive family culture. Just like a stable society needs both laws and positive social norms). Third, you’ll find out one thing you can do this week to start implementing what you’re learning in these podcasts. Please read carefully. Because this episode could have a significant impact on your future success. Laws vs. culture It was early evening. I was in the back seat of my step-dad’s Mercury Zephyr with my German grandma, Alma Meinen. My step-dad was driving. He went by the nickname “Dee,” because the guys in the Navy always butchered his last name of Deloughery. He was a big man who had been the feather weight boxing champion in the Navy as a teenager. My mom was sitting in the passenger’s seat. I had just played the alto saxophone in my first band concert, and we were just starting to drive away from the school. I rolled down the window because I saw one of my friends walking on the sidewalk. “Bite me!” I yelled to him. He looked shocked. My grandma looked shocked. My dad became instantly angry. And I wondered what just happened. You see, during the previous couple of days, the Sixth-Grade boys had been saying “Bite me” to each other. It was just what we did. I didn’t know what it meant, other than that it was a way of showing camaraderie and being “cool.” You know how young kids can be, right? My step-dad immediately said, “Don’t you ever say that again. We’ll deal with this when we get home.” And deal with it “we” did. I was grounded for a week, which wasn’t the real punishment. Having my parents that upset at me was enough. They explained how it shocked my grandma, and that we just don’t yell things like that in public. I didn’t figure out that “bite me” was a short version of “bite my [blank]” until years later. I tell this story because it’s relevant to our discussion of creating family dynasties in which your clients’ heirs continue to retain the investments with you, despite their inner urges to quickly spend it. You see, in society there’s a difference between laws, ethics and social norms. When I was growing up, there was no law against rolling down the window and yelling “bite me.” Unless you consider that a breach of the peace, which was and remains illegal just about anywhere. I supposed if a police officer had been standing there when the incident happened, I could have been given a citation of some sort as a juvenile and been made to perform some community service. What I really violated was the accepted ethics and social norms of my community. We were simply expected not to yell obscenities out of windows. And “bite me” was considered an obscenity in small town Winona, with a population of 26,000 people. Multiple layers are needed to protect family wealth Here’s how this story is relevant. Let’s assume that your clients (and you) want your clients’ heirs to refrain from spending your clients’ investment accounts when your clients pass away. Your clients express that they worked hard for the money, and they don’t want it squandered on their heirs’ lavish lifestyles and unnecessary vacations. So, you explain that multiple layers are needed to protect the investment accounts from your clients’ heirs’ greediness and sense of entitlement. First, you explain, you need the equivalent to a system of laws. This is done with a system of well-drafted estate documents. The cornerstone is a dynasty trust that prevents outright distributions and monthly allowances. This is the equivalent of having a law against breach of the peace. The second layer is to create a family culture that promotes productivity instead of laziness. A family culture is the equivalent of social norms that say we don’t roll down windows and yell obscenities at each other. The family culture treats the family as a team, in which each player contributes to the whole. The team players consist of each family member who is physically and mentally capable of being productive. The team consist of people currently able to contribute, as well as future generations who either are currently able to contribute, or will become able to contribute at some point in the future. The members of a football team aren’t forced to participate. It’s not slavery. But, if someone is part of the team, they contribute. It would be completely unacceptable in the middle of a game for a team member to say he’s “feeling lazy” and doesn’t “feel like playing today,” or to ask another team member to run the ball down the field because it seems like too much work. That sense of entitlement just doesn’t work in the context of a sports team. It also doesn’t work in the context of a dynasty family. In future podcasts, we will cover family culture in more depth, including creating a mission statement and a Family Code of Honor. One thing to do this week The one thing you can do this week is to take a poll of your current clients. Find out which ones aspire to have a dynasty family, in other words a family that is financially successful for multiple generations. There is no sense in trying to apply this solution to a client who has no interest. Find the ones that are interested in learning more. Then just explain to them that you would like to work with them over time to take certain steps that will help put their families in a position to be successful for multiple generations. This will cement you in their minds as the person who is going to solve one of their deep-seated concerns, namely how their offspring will use the wealth. EPISODE REVIEW So, let’s do a quick review of the insights you and I discovered in this episode. This week you learned the difference between laws on one hand, and social norms on the other, and why that’s relevant when talking about a dynasty family. We talked about dynasty trusts being the cornerstone of a well-drafted system of estate documents, and that it serves as the basic laws for a family. Second, you learned why having a dynasty trust is key to protecting your clients’ wealth from the greed and sense of entitlement of future generations. However, you can’t force future generations to work. You’re not creating a system of slavery. That’s why having a positive family culture is so key. Third, you discovered one important step you can take towards implementing what you’ve been learning in these podcasts. Call or email your wealthy clients. Say that you’ve been learning about how to create family dynasties, namely families that are successful for multiple generations. Ask if they would like you to share information as you learn it. The clients who are interested will really appreciate you reaching out to them for two reasons. First, this is actually a real concern for them, and second, because probably no one else is talking to them about this issue. And speaking of reviews, please go to DynastyAdvisorPodcast.com/iTunes and type-in your biggest “take-away” or ‘aha!’ moment you experienced during this episode. You can do this now in the Reviews section and when you do it, iTunes will ask to rate this episode ... I hope I’ve earned 5-stars from you! It’ll takes 3 minutes out of your day, but what you declare could provide you a lifetime of learning! I hope our paths cross again next week for the Dynasty Advisor Podcast, the show dedicated to helping you use Family Dynasty Planning to keep your biggest investment accounts even after your wealthy clients have passed away. Please do whatever it takes join me next week because our topic will be how to bridge the information gap with your clients’ heirs. This is one of the challenges with serving the next generation of Generation X (which I’m from) and Millennials. I encourage you to invite a friend or bring a study-buddy. I can’t wait to connect with you then. In the meanwhile, all good wishes.