A decade is a long time, but sometimes it doesn’t feel like it. A lot can change in a decade, even though it seems to happen in fast-forward mode, like a time-lapse video. This often leaves people with a nagging sense that they need to update some things. Maybe it’s their estate plan or their insurance coverages? But in my experience, for every one thing you can think of that needs to get updated, there are likely five to seven things that you probably would update if you had time to think about it.
Whitnell’s commitment to producing thought leadership materials stretches back several years now. The Whitnell Way is one example of how we share ideas with our clients and the wider market. But it’s not the only way – especially now that Brian Henderson is a published author on Forbes.com.
I know it might sound strange for me to say that you shouldn’t focus on money. Of course, I’m not saying that you should ignore your finances and hope for the best. That would not be wise. But through my experiences with serving families, something has become very clear to me. Wealth is a means to an end – living a great life.
Families work hard to build wealth, not for the sake of achieving some number on a balance sheet. They want the wealth to support their family life. As a family’s wealth grows, it is easy to get consumed by the numbers from taxes to balance sheets to interest income, etc. There comes a point where it may be a good time to take a step back and reflect on the why – your family purpose – to assess whether your wealth and hard work is helping you to achieve a greater purpose.
Over the last few years, I've begun to work with more private equity entrepreneurs, venture capitalists and business executives. I really enjoy working with these people because they are so bold and willing to take risks. These individuals live and breathe the American Dream every day. They put it all on the line.
Yet I've also noticed that their penchant for risk-taking sometimes hurts them when they miscalculate an opportunity. Private equity entrepreneurs are willing to take huge risks because they know that's how they'll realize huge rewards. But this mindset can be a hindrance to building and preserving long-term wealth.
We all have to take risks to achieve rewards. But it’s essential to fully evaluate the opportunity while being realistic about best-case and worst-case scenarios. The key is to take the right risks at the right time. When we take the wrong risks, or take reasonable risks at the wrong time, we diminish the likelihood of achieving our goals. Here are lessons I've learned about risk-taking from working closely with private equity entrepreneurs.
While there are many strategies that can be put in place to preserve multi-generational wealth, here is what I’ve learned after so many years of serving affluent families. There are two critical factors that will have a greater influence on this goal than anything else: recognizing tipping points and viewing family wealth as an enterprise. The surprising thing is that neither of these are strategies, per se. They are both about mindset, about taking a certain perspective. Let me explain.
“Family offices” are often thought of as the domain of the ultra-affluent. When people think of a family office, they often envision a team of highly skilled people, such as lawyers, CPAs and investment advisors, serving a single prominent American family, such as the Rockefellers.
While this has been the common perception over the last several decades, a new trend is emerging. This trend is designed to serve a changing demographic. During the Baby Boomer and Gen X generations, the US witnessed a proliferation of wealth unlike ever before.
Whitnell is pleased to announce that Robert Legan is now leading the Family Office Service team. His background in working with ultra-affluent families made him the obvious choice for this role. For those who may not be aware, the Family Office Service team at Whitnell works with a select group of ultra-affluent families who have complex financial needs.
I read an interesting statistic the other day, although I did find it somewhat disturbing. According to the Exit Planning Institute’s Readiness Survey (2013), 75% of business owners “profoundly regretted” selling their business 12 months after the deal. To me, this is very sad to hear. I’m privileged to work with a select group of entrepreneurs and I know how much passion and energy they bring to their businesses. They pour their lives into these enterprises.
They look forward to the day when all of their hard work will culminate in a transfer of equity to someone else. But all too often, that moment is followed by disappointment. Why?
As I watched the Super bowl recently, I was reminded of different teams I played on growing up. In team sports, there are certain fundamental principles that come to life. Teamwork prevails over a star player. Execution matters more than raw talent. Experience comes with age. Defense wins championships.
But the football season is now over and baseball is just around the corner. Not everyone finds baseball exciting, but I find myself exhilarated by the looming start of the season. Of course it doesn’t hurt that I’m a lifelong Cubs fan and we have a lot to be excited about.
I’ve had the privilege of working with entrepreneurs to transition their business to others, and I’ve noticed a disturbing trend. Many business owners may be unprepared to transfer their business when the time comes to sell. This not only delays the liquidity event, it can also have a material negative impact on the value of the business.
If you are a business owner over the age of 40, I’d like to give you some key insights to think about now so you can start to prepare for your business transfer. Even if you think this may not happen for another decade, these insights will help you be ready when the time comes.
How Might These Benefit Your Situation?
Interest rates are still pretty attractive compared to previous decades. In fact, today’s low interest rates provide some opportunities that may not come around again for a very long time, potentially in our lifetimes. What seems certain, at this point, is that interest rates will not remain low forever – in fact, they could start to trend higher yet this year.
This raises some important questions. How can one take advantage of low interest rates? What strategies might work for your goals? What steps might you take now that might not be available or attractive in the coming months and years? Will you miss out on some great opportunities?
Many successful private businesses are owned and managed by a limited number of partners. Sometimes these partners are family members or life-long friends. Other times the business partnerships formed after trusted working relationships were fostered. But I’ve noticed a dangerous trend in these types of businesses.
It seems many closely-held, privately owned businesses do not have formal agreements in place to protect the business owners from unforeseen circumstances that could dramatically impact them and their families. A high degree of personal trust and loyalty, handshake agreements, seem to suffice between partners. I believe this is a mistake. I’d like to share my perspectives with you.
The holiday season is here in force. I feel it and I’m sure you do too. This is a wonderful time of year. But I sometimes wish there were 62 days in December instead of only 31 days. I know it’s the holiday season because of what happens with my clients. The busy executives and business owners that I’m privileged to serve are often so busy during the year that I have to schedule meetings months in advance. The pace of work and life leaves them with little time for anything else.
But during the holidays, somewhere around the third week of December, things start to change. People slow down a bit. They take time off from work and spend it with family. They relax and just breathe.
For family-owned businesses, especially those families where children are involved in the business, the retirement of the business founder can be a real conundrum. There are so many issues to sort through. Some of these issues are financial or business-related. But other issues are unique to family-planning and caring for loved ones.
My son’s t-ball team recently won the championship in the Oak Park, Illinois youth baseball league. Over the course of the season, we experienced many highs and lows. That’s the nature of coaching 5, 6 and 7-year olds. I witnessed joys and agonies among these young competitors who are just learning to deal with life’s ups and downs.
In my last article, I stated that a great financial team includes a wealth manager, CPA and estate attorney. The reason you need this team is because success in business does not necessarily equate to success in wealth. Even those who earn a high income may not achieve their wealth goals unless they have the right team guiding them.
Success in business does not necessarily equate to success in wealth. Just because someone earns a high income, owns a lot of assets, holds equity in a private business or has a large portfolio – this does not always mean that they’ll achieve their wealth goals. To achieve the goals that matter most to you regarding your wealth, you need a team of experts who work together to address a wide range of issues including financial planning, taxes, retirement, cash-flow, estate planning, asset protection and even charitable giving.
When I meet with business owners, it seems they want to talk primarily about their investment portfolio. What I often discover, however, is that their current investment portfolio is a fraction of their potential net worth, unless they’ve already had a liquidity event and sold their business.
Sooner or later most senior executives consider switching to another company. Exciting new opportunities pose increases in career satisfaction and work-life balance. But when it comes to comparing the executive compensation packages and figuring out if you are better off leaving or staying – based on economics alone – it can be very tough to make an apples-to-apples comparison.