Family Dynamics: The Intangible Component of Generational Success

Family Dynamics Questions your wealth advisor should be asking you

By Greg Mech, Caprock Managing Director and Client Advisor

I have spent decades in the investment and wealth management world. Although my career is focused on growing and sustaining wealth, my true purpose is acting as a guide and counselor. After years spent working with families who are building wealth and preserving it for future generations, I’ve witnessed how family dynamics can either ensure success and stability or lead to division and loss. My role is to facilitate and support families in transferring their values as well as their wealth.

All families are unique, but in my experience, the Caprock families that have successfully managed generational wealth have taken several specific steps to prepare their heirs for the responsibilities of their inheritances.

They Share and Communicate Their Values

Sharing family values is the single most critical action a family can take to safeguard against the challenges of wealth. I work with a client in his 70s who amassed a fortune and wanted assistance with the transition of wealth to his family. We were reviewing his estate planning documents when he turned to me and asked how he should share this important information with his children. His lawyer had suggested they meet at his law office.

I advised against it. “Have you told them what your hopes and dreams are for everything you’ve worked for? Have you shared what you hope for them and their children and grandchildren? Have you told them what all of this means?”

He hadn’t. I suggested he write a letter, which he did that night and dropped off at my office first thing the following morning. That eight-page letter was one of the most amazing documents I’ve ever read. He talked about how difficult it was for him to build his company, how his wife supported him every step of the way, and his wishes for future generations. It was an incredible letter that left no doubt what the hopes for his family were.

Sharing values — whether those are hard work, philanthropy, prudence, communication, or any number of traits you hold close — sets your entire family up for success. In addition, candid discussions help your children feel empowered, recognized, and appreciated, which can prevent difficult and emotional disagreements.

Sharing values — whether those are hard work, philanthropy, prudence, communication, or any number of traits you hold close — sets your entire family up for success.

— Greg Mech

The families who are most adept at preserving their generational assets are those who recognize money is a commodity, but values are forever.

They Are Grateful and Give Well

I was speaking with a 4th generation family member who was born into enormous privilege; in fact, you would probably recognize his surname. Generations of his family worked to build the wealth he enjoys today, so I asked him how his family had remained grounded and whole through several transitions.

“Gratitude,” he said. “I had the good fortune of being born into this family but I did nothing special. I have the greatest good fortune of all time. I don’t take it for granted that I didn’t do anything special to get here.”

His answer revealed one of the greatest lessons I have learned from advising wealthy multi-generational families: Wealth comes with the responsibility of helping others, and the greatest enemies of successful wealth transitions are entitlement and arrogance. As my client made clear, the antidote to such thinking is gratitude.

They Build Financial Acumen Among Their Heirs

I was working with a client who had just sold his business and wanted to determine how best to invest his earnings over the long term. It was apparent that something was on his mind.

“I’m really worried I’m going to screw up my kids with all of this money,” he said. “They’ve had a comfortable life.”

We created a plan for the children, who ranged in age from 18 to 35. Each child received $1 million with the caveat that the decisions they made with their money would determine whether they would receive more. (We did not tell them their father had no intention of withholding their inheritance.)

Now, the second generation calls me for investment advice, and I am privileged to help educate and empower them as they learn how to manage and develop their wealth. It is never too early to begin honing your heirs’ financial acumen and never too late to offer new avenues for growth.

It is never too early to begin honing your heirs’ financial acumen and never too late to offer new avenues for growth.

– Greg Mech

They Raise the Rising Generation

Families don’t produce private equity experts or real estate entrepreneurs from birth; Instead, they build a support team across disciplines that can lend expertise for years to come.

In my role, I assess the strengths and weaknesses of each individual family member and determine their level of interest. As generations progress, it’s natural that some people may be interested in managing and growing wealth while others are not. It’s important to plan for that inevitability, as well as for the prospect that the wealth may last multiple generations — with exponentially more stakeholders.

One of the wealthiest American families holds an annual reunion that doubles as a financial check-in with reports from committees comprised of elected family members. Others take a more formal approach. The format can be customized to what works best for your family as long as there is clear, regular communication and reiteration of the family’s values.

A multi-family office such as Caprock can provide the guidance and structure needed over multiple generations, but true success begins within the family. When I assist my clients in sharing their hopes and dreams, reiterating their values, or helping the next generation value their privilege, I’m doing more than helping them communicate. I’m helping them build their future.

Does your wealth advisor take the time to truly understand the family behind the numbers? To get to the root of your family’s dynamics, your advisor should be asking you important questions that reveal the unique interplay between you and your loved ones. Download our guide, “Family Dynamics: Questions Your Wealth Advisor Should Be Asking You,” and discover whether you’re working with someone who can guide your family for years to come.

Get to the root of your family’s dynamics.

Download our guide, “Family Dynamics: Questions Your Wealth Advisor Should Be Asking You,” and discover whether you’re working with someone who can guide your family for years to come.

About the Author

Greg Mech, Caprock Managing Director and Client Advisor, has spent more than 40 years as a consultant, wealth manager, entrepreneur, and senior executive. He works exclusively with ultra-high-net-worth families whose complex needs and balance sheets require strategies and solutions beyond what standard investment firms can offer or manage. Greg combines his financial acumen with a personal approach that addresses multi-generational family dynamics with compassion and unvarnished honesty.

©2023 Caprock. All rights reserved. The Caprock Group, LLC (“Caprock”) is an SEC Registered Investment Advisor. This brochure is intended to provide general information about Caprock and is not a solicitation or offer to sell investment advisory services except in states where we are registered or where an exemption or exclusion from such registration exists. All content is for informational purposes only and may not constitute a complete description of available investment services. Registration with the SEC does not imply a certain level of skill or training.

Date

July 17, 2023

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