January/February 2015 Toolbox
Reviews of two books: One that helps heirs to find their own voice, and another that offers practical, succinct wealth-planning advice.
The Voice of the Rising Generation: Family Wealth and Wisdom, by James E. Hughes Jr., Susan E. Massenzio and Keith Whitaker • Wiley/Bloomberg Press, 2014 • 146 pp., $40
Many young adults who are members of enterprising families have trouble finding their own voice, contend the authors of The Voice of the Rising Generation, a new book written for these inheritors. The young people fear they will never measure up to the founder's greatness, or "feel that many of the important choices in their lives have been made by their parents or grandparents," the authors write.
James E. Hughes Jr. is a retired attorney and author of Family Wealth: Keeping It in the Family. Susan E. Massenzio and Keith Whitaker are with Wise Counsel Research Associates, a think tank and consulting firm. The authors explain that the book's goal is to keep the founder's dream from becoming a "black hole" that absorbs the dreams of descendants. The gravitational pull of this "black hole" is a recurring theme in the text.
Hughes, Massenzio and Whitaker prefer the term "rising generation" to "next generation," because they believe the latter term puts "all the emphasis on the founder or founding generation." They also assert that a focus on stewardship has its drawbacks. "If you become a steward only of someone else's dream," they caution, "then your own voice will likely fall silent."
A common problem in enterprising families, the book notes, is the emphasis on financial capital rather than human capital—defined as family members' dreams, abilities and relationships.
The authors compare a wealthy family's struggles to those depicted in Homer's epic poem The Odyssey. In the Homerian epic, Telemachus (son of the hero, Odysseus) leaves home to search for his father—and to find himself. Similarly, the book says, members of the rising generation must pursue their own passions within the context of their family history. In The Odyssey the goddess Athena, disguised as a family friend named Mentor, asks Telemachus tough questions and gives him constructive criticism, just as members of wealthy families must find mentors who can help them navigate the process of individuation. And those family members must avoid the dangerous temptations of a life without work, just as Odysseus had to steer clear of the lotus flower (which had a narcotic effect when eaten) on the island of the Lotus-Eaters, the book points out.
Some rising-generation members are afraid to take the risk of striking out on their own to do work they enjoy, the authors write. Others try to "negate" the family wealth through compulsive spending or excessive philanthropy, or by refusing to acknowledge bank statements. Too many succumb to substance abuse.
Hughes, Massenzio and Whitaker counsel readers that wise choices about how they spend their time can help them avoid such pitfalls. The authors assert that work meets a "human" need, even if there is no financial need to obtain a job. They define "work" as a challenging pursuit that "meets the true needs of others" (as opposed to a sinecure obtained through the family).
The book includes a chapter aimed at heirs in "the middle passage" of life, particularly those ensconced in undemanding jobs in the family enterprise or those grappling with loss of identity after the family business is sold. Siblings or cousins can help each other work through a sense of isolation and find their individual voices, the authors suggest.
The author trio also notes that although trust arrangements may be wise from a legal or financial standpoint, in practice they can make members of the rising generation "feel separated from important choices in their lives." Beneficiaries are advised to educate themselves about ownership structures and to develop relationships with trustees or trust officers.
Hughes, Massenzio and Whitaker previously co-authored The Cycle of the Gift: Family Wealth and Wisdom, a book aimed at parents and grandparents of inheritors. That book is referenced in the current volume, and a helpful model from its pages is reproduced: the "Four Cs," representing one's sense of control, commitment, challenge and community.
While The Voice of the Rising Generation eloquently describes inheritors' struggles, it offers few concrete solutions to common relationship problems, other than recommending communication and "self-advocacy." An appendix suggests workshops offered by Wise Counsel, the authors' firm.
Yet for people of wealth who have just begun to recognize uneasy feelings, the book is a good way to spark deeper thinking and, it is hoped, family conversations. In many points in the text, the authors put into words thoughts that readers may have been afraid to express or even acknowledge.
The authors write, for example, that a family's financial wealth "may inform what work family members do, whom they marry, how they raise their children, and how they spend 'their' money." Their book can be a starting point for those who want to honor the founder's success while living a healthy life of their own.
It's More Than Money: Protect Your Legacy, by Patricia M. Annino • 117 pp., $18.80 (via Amazon.com)
Estate attorney Patricia Annino likens wealth planning to sailing. A family leader, she writes in It's More Than Money, should use "true north" (family values) as the basis for a plan. External forces may dictate a change in course, but true north remains a fixed point on the compass.
Annino urges readers to view their various financial and legal documents as parts of a single, integrated plan that is congruent with the family's important values. In too many families, she laments, creation of each document is viewed as an individual exercise to achieve a short-term goal, such as saving on taxes. What's more, some family leaders never get around to creating an important document, or if they do, they never update it.
Annino notes that although every family has values, there is a tendency not to think about them until there is a shock to the system. Such shocks, the author writes, can be negative, such as a divorce, or positive, like a sale of the business that results in significant liquidity. "It would, of course, be much better to think about your family legacy before a shock happens," and to be intentional about transmitting the family values to succeeding generations, Annino writes. "A strong family system with shared beliefs," she contends, "will absorb the shocks from the external world and adapt and become more resilient and sustainable each time a new shock (positive or negative) occurs."
At less than 120 pages, It's More Than Money is a quick read. But the author packs a lot of important, practical information in her slim volume.
For example, Annino urges family leaders to perform a "congruency audit" on legal and financial documents. "The legal structure can enable a plan and allow goals to be implemented," the author states, "but it cannot address the fault lines of emotional issues." She also discusses the advantages of having advisers work as a team whose members communicate with each other—and notes that as the family life cycle progresses, it's often necessary to make replacements on the team roster.
Annino warns readers to think carefully about health care and elder care issues. "As the population ages," she writes, "the most significant threat to family wealth and harmony is no longer estate taxes; it is now the erosion of wealth by the cost of living and an extended lifetime with significant additional custodial and medical care."
Estate plans should be reviewed regularly, the author advises. "What may make sense at the very beginning when the business does not have value or the real estate is heavily mortgaged or the children are very young may not make sense ten years, or fifteen years or twenty years later," Annino notes.
The book also presents advice on risk mitigation, including strategies for protecting the family's reputation on social media, questions to consider when deciding whether to make gifts to heirs, and the advantages of prenuptial agreements. In addition, the book offers information on achieving philanthropic goals.
In It's More Than Money, Annino provides ample motivation to stop procrastinating and get to work on your planning.
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