Phoebe Venable: Four habits of highly effective generational planning

As a parent or grandparent, how many times have you said, “I want to be able to give my kids more than what I had”?

We all want our children and grandchildren to avoid toiling, scrimping and missing out on family time because of finances. But once we amass a significant amount of wealth, enough to pass on to the next generation, how sure are you that your future heirs will take care of the wealth responsibly?

Most of us have heard of Stephen R. Covey’s bestseller “Seven Habits of Highly Effective People.”

But what about families such as the Rockefellers and Vanderbilts who have carried their wealth through generations? What habits do they share that you can instill in your family?

A house united

Families like these stick together, hold family meetings and understand how to govern one another. Each person contributes to family discourse and embraces the values of all its members. While there will always be miscommunication, friction and even fighting, these families equip themselves with ways to manage these issues.

Action item: Agree upon and write down a set of family goals, rules and values culminating in a family constitution or mission statement. There are great tools available to assist with this task, such as James Hughes’ book “Family Wealth.”

Invest in education

From a young age, members of these uberwealthy families are trained to become responsible wealth owners. They receive personalized attention from CFAs, CPAs, CFPs and other industry experts.

These families understand that if you invest in proper training of stewardship, wealth will last much longer.

Action item: Search for ways you can increase your children’s financial education outside of their school’s curriculum. Ask your adviser to conduct meetings with your children or grandchildren.

Look for a money camp or other creative ways to help children learn financial concepts at an early age.

Charitable donations

When creating a family constitution, include details of your family’s charitable intentions. Financially fit families do the same. Whether donating time, food, clothing or money, all family members should be able to give to their favorite cause.

Action item: If your family chooses to make one large annual contribution, consider making the decision together. This is a wonderful agenda item for a family meeting that can engage family members of all ages.

Clear succession plan

When it becomes necessary to transfer authority in family meetings, make sure each member agrees, understands and feels comfortable with the new arrangement. Families of long-standing wealth recognize the importance of maintaining healthy guidance throughout every generation.

Action item: Discuss with your children the what-ifs of family governance (what if you are in charge of the wealth, what if your siblings begin to fight, what if you disagree on investments, etc.) and make sure you’ve properly devised a plan for conflict resolution.

Incorporating even some of the above habits will produce beneficial results for you and all those who come after you.

Phoebe Venable is president and chief operating officer of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.