Why having a family vision matters.
Visions, in light of our ongoing discussion on the role and contribution of Family Offices, can be described as the forecast of what the needs of the future generation(s) are and of how they can be anticipated. Said differently? The vision you put into place for your family is likely to operate as a major goal or destination which ought to be achieved or reached within a given time frame. As a result, every move you are about to make ought to align with this direction.
To some extent, the idea here is to adapt the concept of reverse engineering to your family.
First, the point is to define what impact you want to have a few decades from now. This impact can be on your family, of course, but it can also be a matter of making a positive contribution to society more generally. For instance, if your family is committed towards environment, then a family vision could either focus on environment, or at least include an environmental factor.
Second, the stake is to define what needs to be put into place in order to reach the vision’s goal over time. Steps needs to be considered, from a positive and from a negative perspective. For instance, investments in green development funds can be a priority, while investment in polluting industries may be excluded.
Investment and securization alike.
Family visions can also help with securing your family in that they can help with clarifying the investment profile of the family. Perhaps one specific vision will require aggressive investment policies in order to achieve ambitious goals. Or, to the opposite, a vision based on stability and cohesion might give grounds to a low-risk type of portfolio.
Importantly, elaborating a family vision also has a direct impact on family cohesion. In the short-term, it helps making sure that the family members talk a similar language and share a similar approach to family business matters. In the long-run, the vision will also serve as a reminder (or even watchdog, in the most extreme circumstances) that a general direction should be pursued and followed, even though time passes.
Ways to plan a sustainable future.
The question of ‘how’ usually comes next. Beyond goodwill, the ability to do is usually what makes the difference between wishful thinking and operational strategic progress.
To start with, we always recommend that families meet and talk. We invite every family member to shortlist their respective family values, formulate their personal visions. Most importantly, this very important alignment exercise also helps to determine the level of their risk aversion.
Do they want to build audacious portfolios? Would they rather build stable funds to guarantee capital progression in a linear but safe way? Should green investments be considered? Does charity support make part of the long-term plan at all?
Once a form of consensus is reached among family members, the next step is typically to help the family to write a common vision and mission statement, which then needs to be signed by every participant. Why? Because whilst such a signature is symbolic rather than binding, it has the merit to commit people to the initiative, and to give them a role to play in whatever comes next.
Family vision helps with building risk aversion profiles.
Without a surprise, the family vision discussion brings us to the issue of risk management, which normally finds its roots in risk aversion profiles.
Risk aversion is a delicate topic, because it touches everyone in different and extremely personal ways. Some people are very risk-averse and will want their assets to be managed in a safe way, so as to guarantee a capital for the future generations. To the opposite, other people have very low risk-aversions and will typically believe that taking risks is the best way to increase wealth in the medium and long term.
As a result, the question always is to determine how risk-averse people are, and what investment strategies can (not to say should) be put into place in order to obtain one result more than another.
The good news is that when it comes to this, having a strong family vision helps. An ambitious family vision will probably push towards a rather audacious investment proposition, while a conservative family vision is more likely to focus on stability, even if that leads to lower returns on investment.
Family vision helps with wealth management.
Of course, once aggregated, the values and visions of all the family members will therefore help with wealth management because they then become the spine of the family’s long-term investment strategy. But they also help with determining how the investment managers will act and manage family funds in the future. Said differently, the opportunity to take control of the family’s destiny is extremely significant.
We mentioned that values are extremely important when it comes to selecting and hiring your family advisers, remember? Well, the reality is that writing a vision and a mission statement applicable to the family is also an extremely powerful way to identify whether or not your family advisers will be a match for your family.
Best case scenario? Potential Family Office representative will align with such statements and manage your assets in a way that makes sense for you. If they can’t align with your priorities – or if you don’t feel that they are actually aligned – your decision-making process will be dramatically simplified. Ultimately, that is to say, your values, vision and mission will act as boxes which will absolutely need to be ticked before anything happens, and as such they will be the best indicators you can get.
Food for thought (and next step).
In a nutshell? Well, we are absolutely convinced that when thinking about investing their wealth – one way or another – every single family should invest some time in elaborating, verbalizing and affirming a family vision everybody agrees with. Period.
In our experience, the families which take the time to invest in the exercise are always more aligned with their next steps than those who do not. Family visions and family values are more than indicators, they provide goals, directions and guidelines which become the core of the family’s investment strategy. The question is, what vision have you formulated?