Complete Family Wealth. Keith Whitaker

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Complete Family Wealth - Keith Whitaker


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at times) can end up seeing you only for your money. Not talking about money can be a sound defensive measure. The chapters that follow aim to help readers develop safe ways to talk about financial capital, ways that preserve and promote the family's four qualitative capitals.

      Before turning to the question of measuring the various types of qualitative capital, consider briefly a quantitative comparison. Tally up a rough estimate of how much your family spends each year to account for, preserve, and manage its financial capital. That spending may include asset management fees, advisory fees, legal fees, accounting fees, custody fees, and many others.

      (Notice the difference here, familiar to any business owner, between operating expenses—such as those related to managing assets—and investment, which is an expenditure meant to grow your assets.)

      You likely have a budget that covers the costs of managing your financial capital. Have you ever considered an investment plan for growing your qualitative capital? If you had such an investment plan, how would it compare to the budget for your financial capital? What would that comparison say about the relative importance of the different forms of capital in your family's life?

      Many families keep track of their financial capital on an annual or even quarterly or monthly basis. Careful stewarding of balance sheets and income statements is critical to the management of the family's financial capital.

      Unfortunately, these efforts often don't extend to the family's qualitative capital. Without an assessment of qualitative capital, the family and individual balance sheets are incomplete and will not measure the extent to which a family is growing its complete wealth.

      One way to measure, manage, and grow qualitative capital is Family Qualitative Capital Management, a program we developed at Wise Counsel Research. In this section we share a brief description of this process.

      First, every twelve months, we measure our client families' qualitative capital. To do so, we designed a tool we call the Family Balance Sheet. It takes each family member about 20–30 minutes to fill it out online. The Family Balance Sheet produces topline results for the family that show its scores in human, legacy, family relationship, structural, and social capital.

      Second, we aggregate all family members' responses to create a Family Qualitative Capital Report. This Report identifies the family's areas of strength and weakness in the five forms of qualitative capital. Based on the family's results, we include in the Report relevant and actionable recommendations for each family member and for the family as a whole.

      Fourth, family members pursue their agreed-upon Qualitative Action Plan in concert with appropriate specialists. These may include family office staff, attorneys, individual or family counselors, or governance specialists. This is the same as what is called “manager selection” in the world of quantitative capital. You don't expect one person to manage all your different financial assets. So why expect one consultant or adviser to help you with your different forms of qualitative capital?

      Fifth, after six months, we reconvene a family meeting to evaluate progress toward the agreed-upon objectives and make any needed adjustments to the Qualitative Capital Action Plan.

      Sixth, in the final month of each annual engagement, we meet once more with family leadership to summarize progress, identify changes in the family system, update the Family Qualitative Action Plan, and discuss overarching goals for the next year of the family's work together.

      No doubt you've noticed the parallel between the process of Family Qualitative Capital Management and the process of financial wealth management.

      There's one crucial way in which the two differ. As fascinating and as important as it is, financial wealth management is not an end in itself. Financial capital is a means to pursue other ends, such as security, comfort, health, meaningful experiences, etc.

      In contrast, qualitative capital is both a means and an end. Having strong qualitative capital allows your family members to do more—to work together effectively, to make good decisions, to sustain their family business or family finances over generations. But it also allows them to be more—to be healthier and happier in their individual lives and with each other. It promotes true “wealth as well-being.”

      1 1 We share additional thoughts on the relation between financial capital and the qualitative capitals in Chapter 21, “Financial Capital.” There we also summarize two practices related to the intersection of the qualitative and quantitative capitals, Investor Allocation and the Family Bank.

      Affinity

      In this chapter, we will share insights on family flourishing and family enterprise. But first what do we mean by family? This is not as simple a question as may seem at first.

      A family of affinity rarely arises on its own. Usually it takes years or even generations to cultivate. That cultivation begins with being clear about the goal. As you begin this journey, ask yourself:

       Who in my family shares this vision of family based on affinity rather than blood?

       Who are the members of my family of affinity?

       Who could be potential members of my family of affinity?


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