The vision a family creates for itself can energize not just current family members but members in many generations to come. Williams and Preisser used the word “mission” in their research into the reasons succession plans fail. In using the Family Bank approach, I prefer the word “vision.” A mission statement implies that a target is set; when that target is reached, the mission is completed. A vision statement, on the other hand, is ongoing—it defines an entity’s purpose vis-à-vis its values. With regards to your Family Bank, the vision is ongoing, dynamic and multigenerational.
Optimism is a personal philosophy of mine, and I encourage families to approach their shared vision statement in that way. Your shared family vision will not likely leap off the page at you. Depending on the ages and stages in life of your family members, and the existing level of conflict in your family, the process may take extensive consideration. A newlywed couple might arrive easily at a shared family vision statement. At the other end of the spectrum, in a multigenerational family that includes Family Bank leaders who are parents, grandparents, and maybe even great-grandparents, developing a shared family vision statement will take more time. Factors such as strained communication within the family, the greater number of people who must reach consensus, differing views on the purpose of the family, and the nature of the financial assets of the wealth-creating generations can all come into play. Preconceived expectations about the family and its financial assets can be particularly difficult to navigate.
However, there is no pressure to create the perfect shared family vision statement right away. You will begin by creating a draft. Like any succession and wealth-transition plan, your vision statement is not static, either; it must be flexible, able to bend and change as the world and your family both evolve. What will never change, though, is that your shared vision statement must be agreed to by all of your Family Bank members, biologically related or not, and must inspire them to action. In the end, no matter the stages in life of the Family Bank members, your shared family vision statement will posit a realistic, credible, and attractive future for the family.
Since a family’s shared vision statement captures how the family wants to approach all of the Family Bank’s assets—human, intellectual and financial, now and into the future—this statement is a logical extension of the family’s shared values conversations. After all, a family’s vision of itself in the future will reflect what is important to the family now. Remember that breakdown in communication tops Williams and Preisser’s list of reasons why succession plans fail. By discussing shared values, Family Bank members strengthen their communication skills. Working together to create a vision that everyone agrees to and wants to strive for strengthens communication in the same way. The vision that is right for a family’s future will be positive, uplifting, and inspiring for each Family Bank member.
A shared, clearly articulated family vision statement provides Family Bank members with the information they need to manage their individual expectations. It also sets a goalpost of sorts for the family. This is invaluable when it comes to evaluating the proposals put forward by the slick sellers of succession and wealth transition products. Using highly sophisticated focus groups, these hijackers dedicate themselves to muddling a family’s vision and substituting a seemingly logical vision of their own.
Many of these “experts,” for example, will advise families on the benefits of minimizing taxes or using trusts to control the next generation, without explaining the potential costs of these structures. As a CA and a personal business builder and seller, it would be scandalous of me to say that a family should ignore the tax consequences of a particular transaction, especially one of a significant size. Disregarding prudent tax advice along these lines could constitute a loss of family financial assets due to “inattention,” as Williams and Preisser point out. However, a great deal of tax work today has crossed over into territory that has some very unpleasant consequences with regard to succession and wealth-transition planning.
The Family Bank approach treats the family like any high-achieving business. It realizes that the family must focus 70 to 80 percent of its efforts on developing of the asset side of its balance sheet, whether those assets are human, intellectual, or financial, and only 20 to 30 percent on the liability side. Taxes are a very short-term liability. Many professional advisors get this backwards, however, spending 70 to 80 percent of their time on the short-term liabilities of a family, like taxes, and leaving only 20 to 30 percent of their time to address the family’s most important assets: its human and intellectual capital. To put it bluntly, a lot of time and money is wasted on professional fees to strengthen the family’s financial assets—assets that will be frittered away by the following generations if they are unprepared.
The Family Bank approach specifically addresses the predominant reasons most succession plans fail. For example, an underlying priority of the Family Bank approach is establishing solid communication within the family. Many professional advisors, however, unaware that communication breakdown leads so often to the failure of succession and wealth-transition plans, often recommend complex tax-deferring or tax-minimizing structures, like trusts, that can complicate or even stifle family communication.
In a common scenario, individual family members often learn about their family’s corporate and trust structure only at the time they file their first personal income tax returns. In signing their returns, they see that they are trustees, beneficiaries, preferred shareholders (of Class A, B, C, D, E, etc.), or common shareholders (of Class A, B, C, D, E, etc.) in an assortment of structures. They may wonder about the fact that money is moving between these entities under their name but not into their personal bank accounts. These young family members are seldom able, without preparation, to understand these complex structures or their roles and responsibilities in relation to them. The result is confusion about the family’s expectations of them and what all these numbers and dollars really mean.
A young family member struggling to meet his monthly rent for shared accommodation, for example, may understandably feel resentment or anger towards older family members if he is unprepared for this new information regarding the flow and extent of financial capital. If this situation is left unaddressed, this resentful young person will mature into an adult who, unsurprisingly, will make decisions about the purpose of the family’s financial assets that are at best uninformed and at worst completely misguided. What I have described is not something anyone wants for their family.
Communication is complicated enough in a family where we all wear a number of hats: daughter, sister, mother, aunt, etc. Adding complex functions like trustee, beneficiary, owner, employee, or shareholder into the mix, with no explanation about the roles and responsibilities, is a recipe for trouble. The traditional scenario of establishing structures that link roles to family members sets up perfect conditions for a breakdown in communication in the family and for all of the negative consequences that follow.
By following the Family Bank approach and clearly articulating a shared vision statement based on your family’s shared values, you will not fall prey to the poor advice of a professional with a product to sell. In fact, as I have seen in my practice, a family’s vision for its future is seldom focused on tax minimization or on controlling the Family Bank members. The Family Bank approach, with its emphasis on open and honest communication based on trust, allows each family to determine for itself what is important. That shared family vision will include preparing all family members to lead independent, self-fulfilled lives.
For instance, a shared vision statement, based on the family’s shared values, may recognize the importance of a robust democratic political system, including a healthy tax system to provide infrastructure, education, healthcare, and other social safety nets. This family would inculcate in each generation the importance of exercising their vote. For this family, the solution to aggressive tax rates and wasteful government spending would be for Family Bank members to get out there and vote, get involved, work to change the politicians, or maybe even run for office themselves. Instead of using the financial assets of the Family Bank on the sunk costs of complex and confusing tax-planning strategies, this family might decide to invest its Family Bank assets in support of one member’s political campaign running on a platform of much needed tax-spending accountability and reform. In other words, these Family Bank members may want to focus their efforts on changing the tax system rather than accepting the increasingly convoluted status quo. After all, someone’s son or daughter has to be the prime minister or president.
A strong shared family vision statement links the past, present, and future, and invigorates Family Bank members by resonating with each person both emotionally and rationally. It should be relevant for the times, clearly outline the purpose and/or direction of the family, and reflect the family’s special qualities. Emotional commitment depends on the shared family vision statement being deemed worthy by all Family Bank members.
Here’s one example of how the emotional and rational components of a shared family vision fit together. My husband grew up in a small town with two brothers, a dedicated full-time mother, and a well-respected father. When my husband was in his early teens, he was crushed between two cars on his bicycle, which landed him in the hospital for over a month. If it had not been for Canada’s universal healthcare system, his medical bills would have buried his parents, who were very financially responsible, in debt. However, because my husband’s medical costs were covered by our tax-funded healthcare system, they managed to keep their financial heads above water. They went on to provide an education for each of their sons and also saved enough to invest some modest funds in raw land.
Decades later, my husband’s parents are spending their retirement years turning this raw land into a productive commercial farm, which they own and operate. Because of the support of universal healthcare at a critical time and stage in their life, this family was able to maximize the development of all of the family’s assets—human, intellectual, and financial—by providing opportunities for their sons to participate in programs that increased their physical, emotional, and intellectual capabilities, as opposed to the entire family being buried by an insurmountable mountain of medical bills. Today, all of the family members, including my husband’s parents in retirement, are independent, productive members of society. As a family, they have paid far more back into the tax system that supports universal healthcare than they ever utilized after my husband’s accident.
On the rational front, looking out over the next few decades, our governments are warning us that our personal debt levels are too high. Compounding the problem is the fact that many of us have grown accustomed to our entitlements. Yes, I said entitlements. The term does not apply only to those who I call cookie-jar kids (more on them later). It applies to all of us who assume that government will always be in a position to finance, in full or in part, our education system, healthcare, and other social safety nets.
Our governments have not been prudent financial stewards of the money we pay through taxes. Like many citizens, they have spent more than they have taken in and this reckless overspending cannot go on forever. This is one of the ongoing conversations my family has at the dinner table. Because our sons understand the important role universal healthcare has played in their family’s history, and because they realize they may face a future in which they are required to pay for these kind of entitlements that are currently funded by our government, they readily agree that providing for the health of future generations of our family is a worthy purpose of our Family Bank. Based on our shared values, this purpose is reflected in our family’s shared vision statement.
Your family’s vision will motivate commitment when it provides purpose and meaning to individual family members’ lives and to the family as a whole, so don’t hesitate to be bold in creating your vision statement. A shared vision statement reaches much further than minimizing or deferring taxes, or attempting to permanently control all the assets of the family. Big dreams can be achieved—a family just has to be inspired to reach for them. Different cultures have imbedded in them differing views around succession and wealth-transition planning. Who knows, you may find that something new to your family’s vision for the future may be widely accepted in another part of the world.
A respected friend and client of European descent, who grew up in a home where he witnessed successful succession and wealth transitions over multiple generations firsthand, one day commented to me, “Big dream, it can’t be done here!”
“Excellent,” I thought, “a challenge!” You see, after this client had spent decades of dedication and hard work creating a significant nest egg of human, intellectual, and financial assets, accountants and lawyers had had their way with him. Consequently, his family corporate and trust structure was very complex. In fact, he had initially contacted me to discuss the idea of establishing another trust structure. After reviewing his family’s existing structure of trusts and corporations, I asked him what he wanted to achieve at the 30,000-foot level. In other words, what did he want for the future of his family? He paused before answering and I swear I could have heard a pin drop. Finally, he looked at me wide-eyed and said, “You know, no one has ever asked me that.”
I was stunned. This client had spent lots of time and money on professional advisors yet not one of them had ever bothered to ask him what his vision was for his family, let alone what role the other family members played in that vision.
After further consultation, an additional trust structure was added—but only after a clear purpose for adding another trust, which had nothing whatsoever to do with tax deferment or control, was articulated, and it was determined that the advantages of this structure outweighed its potential disadvantages. Interestingly, though, our meetings and ongoing discussion started another conversation, in the family. In this case, the client’s children are in their sixties and his grandchildren are in their twenties. The Family Bank approach is an idea the family is weighing as it considers skipping a generation with its future wealth transition.
A successful shared family vision statement requires input from all family members who have earned or are working on earning a voice in the Family Bank, regardless of their age. That means listening carefully to others. As my husband quite rightly pointed out to me, humans have two ears, two eyes, and one mouth. I understand his point. Active listening is an essential aspect of effective communication. All Family Bank members must genuinely feel their voices count in the articulation of a shared family vision statement. When everyone knows their ideas have been thoughtfully considered, there is a real sense of fairness in the process. The result is a vision statement with a far greater likelihood of general acceptance.
Finally, when discussing your family’s shared vision, encourage young family members to think outside the box, and think for themselves. The question why should be encouraged. Young Family Bank members with the confidence to ask questions and seek answers are building the skill set needed for strong decision-making. Look for ways to help them develop their communication skills, both written and oral. A good leader is always a good communicator, someone who can communicate their ideas and visions to others so that they are easily understood. The Family Bank approach provides many opportunities for all members to practise their communication skills in a friendly, non-critical environment. These skills not only prepare them as future leaders of the Family Bank but also strengthen their confidence in their own ability to present themselves as they mature and head into long-term relationships and seek independent work.
You will know that you have articulated the right vision statement for your family when all Family Bank members agree with it and are excited by it. If Family Bank members are openly conflicted or, worse, are talking and stirring up trouble behind each other’s backs, you will know that the process is not yet complete.
One family I work with created the following vision statement: “To always be able to gather in genuine fondness with one another at the dinner table.” Their statement is brilliant, and it suits them to a tee. My first meeting with the Family Bank leaders was at their home. Like them, their home is warm, friendly, and inviting. As we walked through the dining room, I noticed that a number of tables had been pushed together end to end running from the dining room into the living room. Mismatched tablecloths under clear plastic and an assortment of chairs made the table one long inviting unit. It did not take a lot of conversation to learn that this was the family’s gathering place. It was around this long table, my clients told me, that the family communicated regularly, nurturing members of all the generations in an open and honest way to prepare everyone for what to expect in the future. This family had already established the fundamentals of a Family Bank: communication and shared values. Crafting a shared vision statement was the next logical step.
You might now be looking for more examples; it is what I did when I first studied this topic. Interestingly, over the years I have gathered together quite a list of examples, but I have long since put it aside. This is because there is more learned from the process of communicating and working together to create a shared family vision statement that captures your unique family based on your previously defined values than from following or adopting someone else’s. The strength of the shared family vision statement that will set the destiny for your Family Bank will be exponentially more powerful when, through ongoing communication built on trust within the family, it is created by the well-prepared Family Bank members themselves.