Abstract
Daniell and Hamilton offer a new approach to an age-old goal—how to turn a family fortune into an enduring family legacy. The thrust of their book is to “allow leaders to serve their families with better information, greater insight, diminished risk and an improved chance to build a lasting family fortune and an enduring family legacy.”
The book is a worthwhile read because, unlike other books on family wealth management, it goes beyond the concept that the primary focus of financial legacies is money. The authors demonstrate that the passage of true wealth involves more than transferring money. The prime focus, in their opinion, should be engaging the entire family to create reasons why they should stay together despite their differences and to establish what each family unit wants to accomplish together.
To attain financial family cohesiveness, the authors argue that it is essential that leaders of each family unit create a common set of family goals, values, and guiding principles that represent his or her family. The leaders must then come together to create overall goals, which represent all the families involved. To create these goals, family leaders must remember that a family’s legacy is the sum of valued accomplishments, traditions, assets, histories, experiences, lives, places, and memories that flow from the past through the present into the future.
Leadership
The book addresses the challenges in family leadership and identifies approaches and skills needed for long-term success. Having qualified leaders at each level of family structure and a documented process of decision making helps families make better decisions and avoid unnecessary conflict.
Like any good business, a family needs strong, capable, and assertive leadership. The authors create a family leadership job description as a series of questions that families need to discuss as a group.
The leader’s prime directive is to motivate family members to build the family’s legacy. Skills needed by family leaders include the abilities to build consensus, identify the benefits for each owner, find an artful way to identify problems, and help find solutions. Leaders care about a collective solution and have no vested interest in the outcome. The writers believe good family leaders serve as guardians—only wanting the best for the family.
Based on the leadership discussion, the family determines who is the most capable. Every family member has a shared responsibility in the process of leadership selection. The selection process would include developing a committee to map leadership skills and identify gaps, conduct a skills inventory within the family group, and develop a training process for future leaders. Twenty-first century family leaders need to have the skills necessary not only to manage the current family situation but also to anticipate the challenges of the future.
The authors identify eight important steps to implement a successful leadership process. Families who successfully navigate through this will enhance their chances to find leaders who are capable and have the capacity to help their family build and enhance the family legacy.
Values and Vision
Building a family’s legacy begins with understanding family history, values, and guiding principles. The family history is a guide in understanding and addressing the larger issues and risks that may be challenging the family and its legacy. The book offers questions that can used to discover the founder’s vision, values, and challenges.
For example, each generation must address whether or not they want to act as proprietors or stewards of their family’s wealth. The authors believe that this is a decision that must be made by each new generation because only they have the power to create a long-term financial and family legacy for their generation.
The authors stress that legacies can only be built by family members who are committed to a basic set of principles that reflect and support their beliefs, attitudes, and behaviors. Their commitment is called a “Family Promise,” and it is documented formally and informally based on history, trust, and shared experiences. The authors have developed a detailed list of what such an agreement should contain. They also give a detailed template used by one family. The authors stress that the process to create these agreements must be transparent so that all family members have the opportunity to review and amend the content.
Education
To ensure that family legacies continue, it is essential to educate family members. According to the authors, continuing education is essential for growing human, intellectual, and financial capital. They believe that personal and career problems associated with wealth will be mitigated if children are trained in wealth management.
Daniell and Hamilton, like other writers, advocate that the education process be age-appropriate but propose that time to start educating the next generation is when they reach their 20s (others in our field believe education can and should begin much earlier). Ways to develop wealth management skills are outlined in the book.
Risk Management
Risk management is an important aspect of creating a legacy. Family Legacy and Leadership discusses a variety of strategies on how to manage opportunities and mitigate risk. The authors identify three key questions families must answer to help understand risk:
What are the levels of risk that are tolerable across the family?
What will the family do about the risks that are not tolerable?
How does the family reconcile differences of opinion about appropriate levels of risk taking?
Every family must address known risks and prepare for unknown risks, which include financial and family well-being.
The book recommends risk management strategies such as creating a committee for this purpose, responsible for documenting expectations, setting roles and responsibilities for risk management, and monitoring external events. This committee’s work would be tracked and subject to periodic review (at least annually).
The authors offer some suggestions for families with net worth from $10 to $100 million, but what do other families do? Creating a family “Eco System” may be appropriate. This is an interesting concept because it recognizes outsiders—a host of advisors, trustees, institutions, friends, and likeminded families—as resources that can be used to support the family. The leader’s job would be to optimize the talent and experience of the team. This team would be created to support the family’s long-term vision and legacy plans. Families must evaluate their advisors on a regular basis to ensure value is created for the price paid.
The authors conclude that families must create a culture that fosters risk taking and entrepreneurial pursuits. This is not a view shared by many other authors. They go on to say that new sources of wealth must be found because existing wealth will dissipate over time. Members of the family need to be educated on how to evaluate opportunities. This training will help ensure family members gain valuable business experience, learn to become capable stewards of wealth, and understand how hard it is to compete and be successful in today’s world. Here the authors offer their insights and initiatives on how to create and maintain a sensible strategy to help families create this entrepreneurial culture.
Wish List
This is a very useful and thought-provoking book. However, this reader had the following wish this for the authors:
Growing consensus: What if families cannot agree? Family conflict is identified as a roadblock that family leaders must overcome to achieve success. I wish the authors had spent time discussing the kind of professional assistance that is needed to help create the agreements and some tools that are useful to manage.
Philosophy of wealth: If it is prudent to have a more detailed discussion of how to prune the family tree and allow the dissenters to manage their own affairs, it would have been helpful for the authors to have created a description of the skills necessary for membership in the family “Eco System.”
Risk management: This reader would have been grateful if the authors had given the readers a story of how such a committee could be created and how it should be organized.
With these points made, I recommend Family Legacy and Leadership to you. This book offers new insights into how families can become more successful pursuing their legacy and is a welcomed addition to my library.