At Complex Interests we have spoken with hundreds upon hundreds of families and family advisors. Almost all of them enthusiastically agree with the statement “stewardship of complex family wealth is important.” Yet prior to meeting with Complex Interests, very few families have naturally incorporated the discipline of stewardship into their wealth management routine. Why?

Stewardship of complex family wealth is not an ideal. It is not something that can be purchased. It is not a character trait that some people are born with. It’s a job. And, like any job, it will fall victim to the enemy of all productive endeavors procrastination if it is not properly framed among the family’s other important enterprises.

Over the next few blog posts, we will outline a recipe for successfully incorporating stewardship into family wealth management. This first post examines the importance of properly and effectively using fear as a motivator of action.

Fear

Nothing motivates like fear. Look at the top of a family’s priority list, and you will see what they fear most. (Number one on the list is invariably not earning a return as good or better than the family next door.)

If the family does not fear the absence of stewardship, it will not practice stewardship. Thus, the question becomes ‘what is there to fear by neglecting stewardship?’

Often, the most commonly used fear motivator is the hit-by-the-bus hypothetical: if (the wealth creator / family CFO / steward) is hit by a bus, how would the family be able to understand and manage all the components of the family’s complex estate? This fear is very real, and its manifestation is potentially catastrophic to the family’s ability to manage its interests into the future. The problem is that while many people recognize the possibility (even the eventuality) of getting hit by the proverbial bus, most rationalize that it is highly unlikely to happen tomorrow. Thus, this type of fear often lacks the necessary immediacy to be effective.

We have found that a more pressing fear associated with an absence of stewardship is the failure to be aware of important deadlines that impact the family’s interests. Think of the financial injury incurred by a family’s failure to know about an expiring contract, lease, or loan. How about the missed opportunity associated with not knowing about an expiring stock option/warrant or contractual right to extend the term of an agreement or trigger a price increase? Consider the legal liability that can arise on account of missing trigger dates in family trusts. Even if the financial impact is ultimately small, the embarrassment associated with missing important dates and deadlines is significant. It sends a message of sloppiness, carelessness, and mismanagement. If a family cannot do something as simple as maintaining a calendar, what else must it be neglecting?

At Complex Interests, we have found that the most direct path to get family decision makers to align on the importance of immediately implementing a stewardship plan is to focus on the implications of missing important dates and deadlines. Once this fear pushes stewardship up the family priority list, there is a clear mandate to find the time to do the work of stewardship. The next part of this series will delve into best practices for turning intent into action.