2024 Week 51

Legacy Planning: Building Family Enterprise Success Beyond Wealth

by with No Comment BlogFinancial PlanningGovernance

Legacy Planning: Building Family Enterprise Success Beyond Wealth

For many ultra-high-net-worth (UHNW) families, wealth planning often begins with the tangible—investment strategies, tax efficiency, and portfolio management. While these foundations remain vital, experience shows they compose only part of the formula for lasting family enterprise success. The crucial element many overlook? The strength of family bonds and shared values that cement your legacy.

Through our work with successful multi-generational family enterprises, we’ve observed a clear pattern: sustainable wealth creation flourishes when families prioritise both financial and human capital. The most resilient family offices understand that strategic planning must encompass not just wealth transition but also the cultivation of family unity and purpose, specifically in three key areas: social relationships, strategic joy, and well-being.

The Happiness-Legacy Connection

The strength of social relationships emerges as a defining factor in successful family enterprises. These bonds create a foundation of trust that facilitates better decision-making and fosters innovation. When family members feel connected and valued, they’re more likely to contribute their best efforts and remain committed to the organization’s long-term success.

Consider SC Johnson, a family enterprise since 1886 that is still thriving five generations later. Business metrics don’t measure their success solely; their ability to maintain strong family bonds across generations is evident. The company’s guiding principle, “This We Believe,” comprises family relationships and well-being in addition to conventional corporate values. This framework has helped them navigate complex family dynamics while building a global enterprise worth billions. Their story demonstrates how structured attention to family relationships can drive multi-generational success, avoiding the “shirt sleeves to shirt sleeves in three generations” curse.

Engineering Family Joy: A Strategic Approach

Lasting family happiness requires intentional effort and strategic planning, beginning by establishing regular gatherings that do not revolve around business discussions. These meetings should create an open and safe space for personal sharing, celebration of individual achievements, and collective goal-setting. The key is fostering an environment where all family members feel heard and valued.

Consider designing a family development program that supports individual growth while maintaining connections to the family’s broader vision and mission. This might include educational opportunities, mentorship programs, or funding for personal projects that align with family values. The emphasis should be on nurturing both individual aspirations and family unity.

Lasting success demands more than just creating these initiatives – it requires attentive stewardship. Monitor how your family’s engagement programs enhance both individual growth and enterprise achievements. Focus particularly on meaningful participation and genuine connection among family members. Above all, ensure your approach remains adaptable, ready to embrace new perspectives as subsequent generations join the family enterprise.

Redefining Family Governance Through Well-being

Modern family enterprises benefit from governance structures that integrate business performance and family well-being. This approach recognizes that both emotional and social capital are as crucial as financial capital to long-term legacy success. Creating a formal governance structure helps clarify roles, responsibilities, and decision-making processes while maintaining family harmony.

To effectively implement this approach, consider these practical governance mechanisms:

  • Conduct regular family surveys to assess satisfaction and engagement.
  • Implementing conflict resolution protocols that prioritize relationship preservation
  • Using decision-making processes that consider emotional impact.
  • Creating professional development opportunities that balance individual growth with family needs.
  • Regular reviewing of family policies to ensure they support both prosperity and well-being.

The foundation for these should be a shared vision statement and core family values to guide business decisions and family interactions. These foundational elements provide a framework for resolving conflicts and making decisions that honour individual needs and collective goals. When family members understand and commit to these shared principles, they’re better equipped to navigate challenges together.

Effective wealth transition demands looking beyond technical competencies. When evaluating succession, consider how potential leaders strengthen family enterprise culture and unity. Create meaningful opportunities for generations to collaborate through shared governance, strategic planning, and leadership development. These touchpoints build the mutual understanding and trust essential for successful transitions.

Your family enterprise represents a legacy built on more than portfolio value; it embodies your shared values, relationships, and collective aspirations. By focusing on both wealth planning and family cohesion, you create the foundation for sustainable, multi-generational success. The most resilient family enterprises recognize that their true competitive edge lies in the strength of their family bonds and shared commitment to long-term prosperity.

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As you shape your family enterprise's future, remember that your family's well-being drives sustainable success. At Beacon Family Office, we help you protect, preserve, and grow both your wealth and your family's lasting legacy. Contact us today to learn more.

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ABOUT THE AUTHOR

As the Senior Wealth Advisor at Beacon Family Office at Assante, Cory Gagnon has supported successful family enterprises to preserve, protect and transition their wealth since 2011.

Cory’s personal objective as a Wealth Advisor is simple. He is committed to supporting families to take control of the areas of their lives that truly matter to them. This commitment revolves around using specific tools and strategies that enable families to take action with confidence which will support them through life’s critical transitions.

Picture of ABOUT THE AUTHOR

ABOUT THE AUTHOR

As the Senior Wealth Advisor at Beacon Family Office at Assante, Cory Gagnon has supported successful family enterprises to preserve, protect and transition their wealth since 2011.

Cory’s personal objective as a Wealth Advisor is simple. He is committed to supporting families to take control of the areas of their lives that truly matter to them. This commitment revolves around using specific tools and strategies that enable families to take action with confidence which will support them through life’s critical transitions.

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Time in the Market versus Timing the Market

How Family Offices Are Adapting Their Wealth Strategies Globally

by Asset AllocationBlogFinancial PlanningInvestment Planning
Time in the Market versus Timing the Market

How Family Offices Are Adapting Their Wealth Strategies Globally

The global economic landscape has undergone significant changes in recent years, bringing with it challenges and opportunities for ultra-high-net-worth (UHNW) family offices seeking to preserve and grow their wealth. They must navigate a complex chain of economic factors, geopolitical risks, and market volatility. In this context, asset allocation has become more critical than ever as family offices strive to build resilient and diversified portfolios that can withstand the tests of time. This leads us to ask – globally, how are family offices adapting their wealth strategies?

For this, we turned to the UBS Global Family Office Report 2024. Here, we were not surprised to find that one of these strategies involves creating a diverse asset allocation strategy. Let’s explore what this can look like, along with what to consider when thinking of your own asset allocation and wealth strategy.

The Shift Towards Portfolio Rebalancing and Risk Management

According to the UBS Report, family offices made significant adjustments to their strategic asset allocation in 2023. One notable shift was the increased allocation to developed market fixed income, which rose to 16% in 2023, up from 12% in 2022, marking the largest increase seen in five years. Conversely, family offices reduced their exposure to real estate from 13% in 2022 to 10% in 2023. These changes reflect a growing emphasis on portfolio rebalancing and risk management.

The move towards fixed income can be seen as a response to the heightened market volatility and uncertainty that have characterized recent years. Family offices are increasing their allocation to this asset class in order to stabilize their portfolios and reduce potential downside risks. At the same time, the reduction in real estate exposure may be a reaction to the sector’s volatility and the potential for asset price corrections in certain markets.

Balancing Traditional and Alternative Assets

The UBS Global Family Office survey, which covered North America, Europe, Asia-Pacific, Latin America, the Middle East, and Switzerland, offers useful information about the typical asset allocation of family offices globally. The data reveals a diverse mix of traditional assets, such as equities (28%) and fixed income (19%), and alternative assets, including private equity (22%), real estate (10%), and hedge funds (5%).

This balanced approach to asset allocation suggests that family offices across these regions are seeking to diversify their portfolios by combining traditional and alternative assets. In doing so, they can potentially benefit from the stability and liquidity of public markets while also tapping into the higher return potential of private investments. However, it is essential to recognize that alternative assets also come with their own set of risks, such as illiquidity and higher fees.

The report also highlights some regional variations in asset allocation. For example, North American family offices tend to allocate a higher proportion of their portfolios to private equity (35%), compared to the global average, while Latin American family offices have a higher allocation to fixed income (34%). These differences suggest that the specific needs and objectives of UHNW families may vary depending on the economic factors and market conditions in their respective regions.

Building an Adaptable Asset Portfolio

Looking ahead, family offices must be prepared to adapt their asset allocation strategies to the evolving economic landscape. Several key factors are expected to shape the investment environment in the coming years, including interest rates, inflation, and geopolitical risks. Highlighted in the UBS Report, it’s stated that 73% of family offices believe that the U.S. will experience positive real interest rates for an extended period.

Globally, as central banks grapple with the challenge of normalizing monetary policy, family offices will need to keep a close eye on interest rate movements and their potential impact on different asset classes. Rising inflation is another concern, as it can erode the purchasing power of wealth over time. Geopolitical risks, such as trade tensions and regional conflicts, can also have significant implications for global markets and investment flows. The UBS report reveals that 58% of family offices are concerned about the potential impact of a major geopolitical conflict on their financial objectives over the next 12 months.

To more effectively navigate the above, family offices are adopting a range of strategies. Some are increasing their allocation to real assets, such as infrastructure and commodities, as a hedge against inflation. Others are focusing on sectors and regions that are expected to benefit from long-term structural trends, such as the transition to a low-carbon economy or the rise of emerging markets. In fact, over a third of family offices plan to increase their allocations to North America (38%) and Asia-Pacific (35%) over the next five years.

Ultimately, the key to success in this environment is to maintain a flexible, diverse, and adaptive approach to asset allocation. Family offices that can quickly respond to changing market conditions and rebalance their portfolios accordingly will be advantageously set to preserve and grow their wealth in the years ahead.

The UBS Global Family Office Report 2024 provides a wealth of insights into how UHNW family offices globally are proactively adapting their asset allocation strategies. The objective of these family offices is to construct enduring and diversified portfolios through the implementation of risk management and portfolio rebalancing, the smart allocation of traditional and alternative assets, and staying attuned to key economic and geopolitical indicators.

Family offices that can stay informed about the latest trends and projections to make informed decisions for their unique needs and objectives will be best positioned to protect and successfully transfer their multi-generational wealth.

Listen to our Legacy Builders Podcast

If you are curious about how these global trends may be relevant to your family portfolio or are seeking new asset strategies, book an initial conversation with Beacon Family Office.

Why Succession Planning is Key for Your Business

Wealth Strategies: Facing Unforeseen Challenges with Resilience

by BlogFinancial PlanningInvestment Planning
Why Succession Planning is Key for Your Business

Wealth Strategies: Facing Unforeseen Challenges with Resilience

Life’s plot twists often arrive unannounced. For ultra-high-net-worth (UHNW) families and business owners, these events can present both challenges and opportunities. Twists, such as the inherent instability of the economy, provide an opportunity for family stewards of UWHN families to be more intentionally strategic and forward-looking in their approach to financial security. This intentional strategy builds resilience within family enterprises when confronted with challenging circumstances, building a legacy that can adjust, recover, and thrive regardless of the economic environment.

One essential strategy for UHNW families and business owners revolves around liability and risk management. This requires a thorough examination of existing wealth management strategies and a proactive stance towards potential vulnerabilities. Comprehensive liability coverage should be assessed to act as a robust shield against a spectrum of risks, from property-related challenges to personal and business liabilities. It is crucial to establish partnerships with trusted financial advisors, legal specialists, and insurance practitioners to identify, assess, and mitigate potential risks. This approach allows UHNW families to transform uncertainties about the future into opportunities.

Assessing Comprehensive Liability Coverage

Comprehensive liability coverage is essential for UHNW families and business owners to protect their assets and interests. This involves a thorough review of property insurance, considering factors like property appreciation and specialized assets. Business owners need to adjust their commercial property coverage to account for market changes, expansions, or acquisitions. Personal liability coverage should be tailored to address potential legal challenges, reputational risks, and emerging liability trends.

A holistic review of business-related risks is also crucial. This includes professional liability, cyber liability, and Directors and Officers (D&O) liability coverage. Professional liability coverage, often referred to as Errors and Omissions (E&O) insurance, serves as a shield against claims stemming from mistakes or oversights in the services provided. This is particularly crucial as it mitigates the financial ramifications associated with professional errors, ensuring that any potential legal claims are met with an appropriate defense.  Cyber liability coverage has grown significantly over the past decade and continues to become a necessary investment for family enterprises as it protects you against data breaches and cyber-attacks. D&O liability coverage is recommended for UHNW families and business leaders, tailored to protect the personal assets of executives and board members in the event of legal action arising from decisions made while managing the company.

Implementing Effective Risk Management Strategies

Proactive risk management goes beyond regular insurance coverage. It involves deliberately and strategically dealing with potential threats, acknowledging that just having insurance might not be enough for effective wealth preservation. A straightforward collaboration with financial advisors, legal experts, and insurance professionals transforms into a partnership aimed at accurately identifying, assessing, and mitigating risks unique to an individual’s or business’s circumstances.

Encouraging ultra-high-net-worth (UHNW) families to adopt comprehensive risk management strategies highlights the benefits of moving from reactive measures to a proactive wealth management approach. This means integrating financial expertise, legal know-how, and insurance insights to understand and anticipate potential challenges. The approach recognizes that a one-size-fits-all method won’t cut it for the nuanced challenges posed by substantial wealth and complex business structures. Implementing these strategies aligns with the article’s theme of preparing for unexpected events or crises by fostering a proactive, adaptive mindset capable of navigating the complexities of family wealth management.

Creating a Personalized Contingency Plan

Within the context of crisis preparedness, a contingency plan is a roadmap that outlines specific actions and protocols to be executed in response to unforeseen events. These plans prepare for a range of potential crises, including financial downturns, legal disputes, and personal emergencies. Contingency measures are strategically designed to mitigate the impact of crises and facilitate a swift recovery.

Central to any crisis preparedness plan is the establishment and maintenance of emergency funds. An emergency fund serves as a financial cushion, providing liquidity to navigate unexpected challenges without resorting to liquidating assets or disrupting long-term investment strategies. For UHWN families and businesses, there is an underlying principle: have a dedicated financial reservoir ready to deploy when unexpected events unfold.

In particular, two areas should always be included in a contingency plan. These include legal documentation and effective communication strategies.

  • Legal documentation involves the detailed review, organization, and storage of essential legal documents ranging from wills and trusts to business contracts and property deeds. Legal documentation becomes a key factor in crisis management, offering clarity and structure amid tumultuous circumstances. In your contingency preparedness plan, all critical legal paperwork should be readily accessible in times of crisis, streamlining decision-making processes and safeguarding assets. 
  • Effective communication strategies can save families from misunderstandings and miscommunications. In times of crisis, clear and timely communication is paramount. This involves internal communication within a family or business as well as external communication with relevant stakeholders, financial institutions, legal advisors, and other pertinent parties. Establishing communication protocols in advance ensures that everyone is on the same page, reducing confusion and leading to a collaborative approach to crisis resolution.

When it comes to managing wealth and dealing with unforeseen events, the age-old saying “the only constant thing is change” resonates. For UHNW families, leveraging an integrated wealth management approach allows for proactive and strategic protection, preservation, and growth of their wealth.

Listen to our Legacy Builders Podcast

Ultra-high net worth requires a proactive approach to navigating the complexities of risk. Connecting with a strategic partner to protect your financial legacy helps take the burden off of you - the steward of family wealth. Contact us for an initial conversation about what a proactive wealth strategy means for you.

2024 Week 3

Starting the Year Right: Re-evaluating Financial Wealth Strategies

by BlogFinancial PlanningInvestment Planning

Starting the Year Right: Re-evaluating Financial Wealth Strategies

The first quarter of every year tends to be a time when Ultra-High-Net-Worth (UHNW) families assess what the past year brought and what the year ahead holds. This often involves a re-evaluation of their financial wealth strategies. This reflection is particularly important for those who are stewards of substantial wealth, as it allows them to assess the effectiveness of their current strategies and align them with the evolving financial climate. Along with this, considerations for market dynamics and global economic trends that can significantly impact wealth portfolios allow UHNW families to be more proactive in ensuring their financial plans are robust and adaptive to potential changes. Incorporated into these considerations is the focus on developing a  forward-looking mindset. This mindset allows family stewards to more effectively lay the groundwork for a resilient and flexible family wealth management strategy that lasts for generations. Three areas that this mindset drills down on in relation to wealth include the evaluation of wealth trajectory, navigation of the global market, and developing strategic succession plans for long-term family success and continuing legacy.

Evaluation of Financial Wealth Trajectory

When it comes to managing financial wealth, an annual review becomes an essential means for achieving financial success. Effectively managing your wealth means having a clear understanding of how your strategies are performing. An annual evaluation provides you with a comprehensive snapshot of your strategy’s trajectory, giving you an idea of the current state and potential future paths. This process identifies which strategies are producing good results while enabling the identification of any necessary adjustments or reallocations.

The evaluation becomes a proactive measure for safeguarding and augmenting your generational wealth. Aside from serving as a testament to the resilience and foresight necessary for navigating the complex world of family wealth management, through an annual review, you can stay on top of evolving economic conditions, capitalize on emerging opportunities, and shield your family’s wealth – thereby their financial well-being – from potential risks.

Navigating Global Uncertainties through Diversification

One key aspect that warrants attention is the practice of diversification, a financial strategy that involves allocating your assets across different asset classes, geographies, and industries. This approach is instrumental in enhancing resilience in the face of an unpredictable economic landscape. Diversification serves as a shield against concentrated risks; therefore, spreading assets across a spectrum of opportunities can mitigate the impact of economic volatility.

The emphasis on diversification acknowledges the ever-changing nature of global markets and reflects a proactive stance toward risk management. By strategically allocating your assets, you are positioning yourself to weather uncertainties while maximizing the potential for long-term gains. This deliberate and thoughtful approach to diversification encapsulates the ethos of prudent family wealth management.

Strategic Succession Planning for Long-Term Sustainability

Strategic succession planning is a crucial aspect of family wealth management, ensuring the smooth transition of wealth across generations while maintaining the family’s values and financial sustainability. It requires a balance between open communication, generational education and knowledge sharing, collaborative decision-making, and a forward-looking mindset. Open dialogue among family members, stakeholders, and financial wealth advisors is essential for understanding the unique dynamics and expectations that will continue to shape the family’s financial legacy. Working with a wealth advisor partner, such as Beacon Family Office, helps to facilitate these necessary conversations through a structured framework for open communication and periodic family meetings. Here, UHNW families receive comprehensive guidance, combining financial expertise with a deep understanding of familial dynamics.

A forward-looking mindset is essential for long-term sustainability, as succession planning is an ongoing, iterative process that allows families to adapt their plans to accommodate unforeseen challenges and capitalize on emerging opportunities. This proactive approach ensures the family’s wealth remains resilient in the face of changing circumstances, contributing to sustained financial success across generations.

As you re-evaluate your financial wealth strategies at the dawn of a new year, remember that they include a history built on toughness, forethought, and a promise to change with the times. Always bear in mind that your present is built on the past, while your decisions today lay the groundwork for the future success of your generational wealth goals.

Listen to our Legacy Builders Podcast

If you're contemplating the need for a strategic re-evaluation of your financial wealth strategy at the onset of this new year or if you're seeking guidance on diversification and succession planning tailored to your family's unique dynamics, Beacon Family Office is here for you. Reach out for an initial conversation focused on you, your goals, and the legacy you’re protecting and growing and will one day transfer to the next generation. Book your conversation here. Initiate a meaningful conversation with us today.

3 Reasons Why Investing in Real Estate isn’t for Everyone

Elevating Ultra-High-Net-Worth Families through Generational Financial Wealth Mastery

by BlogFinancial PlanningInvestment Planning
3 Reasons Why Investing in Real Estate isn’t for Everyone

Elevating Ultra-High-Net-Worth Families through Generational Financial Wealth Mastery

January is often a time of renewed wellness focus for numerous families. Our Januarys are filled with new commitments to our physical wellness, emotional wellness, and even our financial wellness. This is no different for many ultra-high-net-worth (UHNW) families. Yet, for aging family stewards, their focus on financial well-being often looks toward how the family unit and family business can secure a sustainable and thriving financial future for the rising generation and what must be done over the next 12 months for this to happen.

This January, as you focus on the financial wellness of your legacy, connect with the rising generation in your UHNW family to discuss strategies to grow their confidence in preparation for when they become the stewards of your family’s wealth. Below are four of these strategies to help initiate these conversations for your family’s long-term financial well-being.

Understand Your Complete Family Wealth

The foundation for securing the financial well-being of future generations lies in a complete family wealth plan that is augmented by an Integrated Wealth Management approach. This involves a thorough examination of your current financial landscape, including assets, liabilities, and potential risks. Along with the more “technical” aspects, there is a deep dive into the overall family values and long-term objectives to ensure there is alignment between the strategic plan and their values. Many of Beacon Family Office’s clients are referred through industry partners, such as the family accountant or lawyer, to gain a more holistic view of how their assets interact with each other and how they can work more proactively together in a way that moves the client’s vision forward.

By including the rising generation in these kinds of conversations, they begin to understand how family wealth remains healthy, what their role will be in the future of the family business itself, and where they may need to further their knowledge to prepare for their future responsibilities. This leads to one of the most important things you can do as a family steward – sharing key knowledge with the rising generation.

Be Intentional with Education and Knowledge Transfer

At Beacon Family Office, we know that the best way to achieve goals and protect one’s wealth is to continually educate oneself. This results in gaining intellectual capital – wealth that can easily be lost if not shared across generations. Be proactive in fostering financial literacy in your family by transferring knowledge about wealth management principles to the younger generation. Ways we’ve seen our clients successfully transfer knowledge have included establishing an educational program within the family business, mentorship initiatives, and regular family meetings. Each of these helps to facilitate an open dialogue about financial responsibility, philanthropy, and the values that underpin the family’s wealth.

One of my favourite things to do is help my clients prepare their children for how to manage a large sum of wealth before they are responsible for it. This can be done in several ways, but the one that stands out most for me is when a client gifted a large sum of money to each of their adult children with the caveat that they were to connect with me on how to manage the wealth they were gifted. Without giving confidential information away, it was an absolute success whereby each child did something different with the significant sum and was successful based on what they did because of the trust they received from their parents, the discretion they were given to use the funds for, and the guidance to their questions they learned along the way. This is a highly impactful way to prepare your rising generation, so you’re not leaving your legacy to chance.

Plan Strategically with Family Philanthropy

Community is our passion here at Beacon Family Office and our clients carry this same value, often expressing it in the philanthropy work and giving that they do. When we include the rising generation in meaningful philanthropic endeavours, there is a deeper connection to the purpose of your family’s wealth. By involving the rising generation in philanthropic conversations, such as the type of legacy giving strategy to build, you give them a voice to influence decisions and care about the impact they can have, fostering a sense of social responsibility.

You’re not just being strategic in your complete family wealth plan. You’re being strategic in how your legacy will continue to do good in the world through your family line.

Remain Adaptable to Technological Advances

Like it or not, technological advances are both simplifying and complicating the work of financial wealth. While we’re not encouraging you to become a leading technology expert in FinTech (unless that’s what you want to do), we do recommend staying abreast of technology and how you can use it as a proactive tool. Technologically literate family members tend to be better prepared to navigate the challenges and opportunities that arise. The future requires that UHNW families embrace change to continue building their meaningful legacies.

What’s fun here is that while you may not be at the forefront of technological advancements, your rising generation may be, thereby supporting you as you navigate the future of your family’s financial wellness today and into the future.

As a UHNW family steward, you know the journey toward securing the financial well-being of future generations is a dynamic and multifaceted one. It was the same as when you initially stepped into the role of family steward. By embracing the rising generation and including them in conversations around family stewardship, philanthropy, and a more holistic approach to wealth, you equip your legacy for a bright future founded on great purpose.

Listen to our Legacy Builders Podcast

If you’re beginning to have these conversations with your rising generation or are curious to learn more about how you can strategically preserve, protect, grow, and then successfully transition your wealth, we’re here to support you. Connect with us today for an initial conversation.

3 Investment Rules for Estate Trustees

Beneficiary’s Guide to Amplifying Your Family’s Financial Future

by BlogFinancial PlanningTransition Planning
3 Investment Rules for Estate Trustees

Beneficiary’s Guide to Amplifying Your Family’s Financial Future

Imagine you’re the heir to a substantial fortune, responsible for maintaining and growing it. As a beneficiary, your financial future is relatively secure. However, in this security, several questions are raised. What will you do with this wealth? How will you contribute to its growth and preservation? And, perhaps most importantly, how can you make the most of this privilege?

To truly appreciate the role of the beneficiary, particularly when it involves substantial wealth, we must first understand the basics behind this term. Fundamentally, a beneficiary often carries the responsibility to honour the wealth that has been handed down from generation to generation. However, it’s not all sunshine and rainbows; it comes with its own unique set of advantages and potential challenges. 

To support you as you step into the world of being a beneficiary, there are three key elements that will help you make the most of the family legacy and the associated wealth.

The Significance of Grantors' Goals and Intentions

The wealth you inherit is a reflection of the goals, motivations, and intentions of those who created it—the grantors. Understanding this is pivotal, as it allows you to gain insight into the family history and relationship to wealth (along with family values, vision, and purpose). The choices the grantors make in structuring trusts and endowments can significantly impact your experience as a beneficiary. Their values and aspirations will shape the trust’s nature and structure, ultimately impacting its purpose. The trust documents—consider these the blueprints of the financial legacy—are where the grantors’ wishes are embedded. These documents are not just legal instruments; they are your legacy in written form.

For example, if the trust stipulates support for specific philanthropic causes, it’s your responsibility to ensure these commitments are fulfilled. If the grantors emphasized responsible investing, it’s your role to uphold their ethical and financial principles in managing the trust. In essence, your grantors’ goals and intentions are the soul of the wealth you inherit. To be a responsible beneficiary, you must not only grasp the financial intricacies but also immerse yourself in the values and dreams that underpin wealth.

Your Duties and Responsibilities as a Beneficiary

This brings us to what your duties and responsibilities are as a beneficiary. To do this, we always recommend taking the time to learn the basics of financial literacy. Really, this literacy is a vital element of fulfilling your role effectively. Being financially literate means you can have meaningful conversations with your trustees, grantors, and financial advisors, ask the right questions for clarity, and actively participate in the management of your wealth. It empowers you to make informed decisions, protect your wealth, and contribute to its growth, ultimately contributing to your family legacy.

Financial decision-making is another crucial aspect as a beneficiary; hence, being literate in finances will help you. One must be mindful not to squander the wealth but, instead, allocate it thoughtfully. This can involve diversifying investments to reduce risk, supporting charitable causes in line with the grantors’ values and wishes, and preserving capital for the benefit of future generations. By making decisions that align with the long-term vision, you’re ensuring that wealth remains a powerful force for good.

At Beacon Family Office, we firmly believe that the best way to preserve, protect, and grow your wealth is through education on how to work with it. Education is your greatest ally in building the competence required for the responsibilities that come with being a beneficiary. Seek out opportunities to learn from trusted financial advisors, engage in courses or workshops about managing your inheritance, and attend conferences or seminars on relevant topics. Connect with other beneficiaries who share their insights and experiences. The more you know, the better equipped you’ll be to navigate the complexities of wealth stewardship. In addition to formal education, personal growth and development should not be overlooked. Cultivating emotional intelligence, effective communication skills, and ethical leadership qualities will serve you well with your beneficiary responsibilities.

Beneficiary's Relationship with Trustees Through the Years

Your relationship with the trustees of your family assets—those responsible for managing and distributing the wealth—evolves over time. In your childhood, you might have been shielded from the complexities. Trustees make decisions on your behalf, ensuring your well-being. But as you grow and mature, the dynamic shifts. The responsibility to make choices, exercise prudence, and understand the wealth you’re inheriting requires more involvement from you. This period offers you a unique opportunity to blend the wisdom and values of the past with your aspirations and dreams for the future. The relationship with your trustees may then evolve into one of collaboration and guidance, where you work together to honour the grantors’ intentions while adapting to the changing needs and values of your generation. To learn more about trusts and trustees, visit this piece on Navigating Trusts.

As you embrace your role as a beneficiary, remember that this role is not solely about inherited privilege; it’s a responsibility. It’s an opportunity to preserve and enhance the legacy of your family’s hard work and dreams. Approach wealth inheritance with a sense of duty and awareness, and empower yourself to be a responsible and informed beneficiary. In doing so, you ensure that your family’s legacy endures for generations to come.

Listen to our Legacy Builders Podcast

Knowing that you’re a beneficiary of your family’s legacy, are you prepared and confident to carry out the responsibility that comes with this? Connect with us for an initial conversation on how to begin this journey as a confident, responsible, and engaged beneficiary. Book a call today!

2023 Week 46

How to Succeed as the Steward of Family Wealth

by BlogEducationEstate PlanningFinancial Planning

How to Succeed as the Steward of Family Wealth

As the primary individual responsible for the multi-generational legacy of an ultra-high-net-worth family, it’s crucial to understand the role of stewardship. Stewardship involves the astute management of resources along with the preservation of the family legacy, including its transition to the next generation. Within the domain of complete family wealth management, stewardship becomes a sacred commitment—an intricate tapestry woven with the threads of preserving wealth, safeguarding a family’s narrative, and ensuring the endurance of its financial lineage. This role involves making sound decisions in relation to the larger family vision, employing strategies that shield assets from risks, and enhancing the family’s financial holdings over time. Beyond the mere management of wealth, stewardship embodies the greater  responsibility of upholding the family’s legacy with integrity and a forward-thinking perspective.

Overcoming Challenges in Stewardship

It’s no surprise that with the responsibility of being the family steward, there are also challenges individuals may face. Below are four common challenges we’ve helped walk our clients through, along with initial steps to overcome them.

  • Prioritizing short-term gain over long-term benefits.  With the pressures of today, many may find it challenging to make sacrifices today for the sake of tomorrow. To overcome this hurdle, it’s essential to shift your perspective and understand that stewardship is an investment in a legacy that will endure beyond your lifetime. Focus on the lasting impact of your decisions and actions to help you remain motivated by the family legacy.
  • Succumbing to societal pressures and consumerism. We live in a world that places value on materialism and consumption. This can be alluring, particularly in a culture where success is often equated with the accumulation of possessions and/or the pursuit of immediate gratification. To move through this challenge, it’s crucial to connect back to the larger family vision, tap into your deeper values, and develop a strong sense of awareness for aligning your values with your actions. Stewardship is often about making thoughtful and deliberate choices that are aligned with your family values as they contribute to the greater good. 
  • Lack of planning and clear communication One key to a successful legacy is in-depth planning and communication within families. When wealth and assets are intended to pass from one generation to the next, it’s essential to have clear and transparent discussions about your intentions and expectations. Without proper estate planning and open conversations, misunderstandings, conflicts, and even legal disputes can arise, jeopardizing the legacy you intended to leave behind. Consider the help of a qualified wealth advisor who can assist in drafting a comprehensive plan.

Lack of financial education and knowledge. One thing at Beacon Family Office that we are passionate about is making sure the rising generation is knowledgeable about the financial landscape they’re in. This helps mitigate risk during the wealth transition. To mitigate the lack of financial education and knowledge so you can have greater impact as the family steward, make it a priority to educate yourself about sustainable financial practices and responsible asset management. Seek out resources, attend seminars, and engage with experts in the field. By increasing your knowledge and understanding, you can make more informed decisions that align with your stewardship goals, leaving a positive impact on the people around you. Additionally, teaching family members about the importance of stewardship encourages them to take an active role in discussions about managing the family’s wealth and legacy. This creates a shared sense of responsibility and accountability that will help them understand the outcomes of different choices and encourage them to think about not only their own interests but also how those choices affect the family and the community as a whole.

Stewardship Principles in Estate Planning

As the family steward, you will be required to make thoughtful and sustainable decisions with the aim of protecting and growing your assets over time. A well-structured estate plan should consider the financial well-being of beneficiaries as well as the values, beliefs, and intentions of the benefactor. Whether it is the family business, real estate holdings, investments, or personal assets, stewardship in estate planning provides a framework to safeguard the legacy and ensure it aligns with the benefactor’s vision. This may encompass charitable giving, trusts, and endowments designed to support causes close to the heart of the benefactor.

Within this aspect of stewardship, wealth is thoughtfully managed and utilized for the betterment of future generations and society as a whole. This lays the foundation for a secure financial future while also cultivating a sense of responsibility, ethics, and a legacy of giving that can stand the test of time. By embracing stewardship as a fundamental pillar of estate planning, individuals can leave a meaningful, enduring legacy that extends far beyond financial assets and transcends into the realm of impact, making a difference for generations to come.

Listen to our Legacy Builders Podcast

As you reflect on the profound importance of stewardship in managing your family wealth and estate planning, ask yourself, "How can I ensure that my financial legacy is not only preserved but also aligned with my values, benefiting both my family and the greater community?" Connect with the Beacon Family Office. Together, we can navigate the challenges, make thoughtful choices, and build a lasting legacy of meaningful impact for generations to come. Your legacy awaits—let's shape it together.

2023 Week 44

Navigating Trust and Trustee Basics in Family Legacy Building

by Asset AllocationBlogFinancial Planning

Navigating Trust and Trustee Basics in Family Legacy Building

For ultra-high-net-worth families, trusts are more than just a way to protect their wealth. Assets are safeguarded through various means, ensuring their intergenerational transmission and their alignment with the values and objectives of those who built them. Trusts, with their versatility and adaptability, form the bedrock upon which a legacy is preserved and perpetuated. They provide a framework that resonates with the complexities and aspirations of affluent families aiming to pass on their legacy and wealth while nurturing a lasting impact. To understand how trusts can help wealthy families, you need to look at how they can be used to create and protect legacies that go beyond financial fortune.

What follows is a look at what exactly a trust is, what types of trusts exist, and the required fiduciary duty behind a trust.

What is a Trust?

A trust is a legal and financial arrangement in which a person (referred to as the “grantor” or “settlor”) transfers assets, property, or funds to another party (the “trustee”) to be held and managed for the benefit of one or more individuals or entities (the “beneficiaries”). The primary components of a trust include:

  • Grantor/Settlor: The person who establishes the trust and transfers assets into it. The grantor defines the terms and conditions under which the trust operates and often provides the initial funding.
  • Trustee: The individual or entity responsible for managing the assets or property within the trust and ensuring that the trust’s terms and purposes are carried out in the best interests of the beneficiaries. Trustees have a legal and fiduciary duty to act prudently and ethically.
  • Beneficiaries: those individuals or entities who stand to benefit from the assets or income held within the trust. Beneficiaries are named in the trust document, and the grantor specifies how and when they will receive distributions.
  • Trust Property: This includes assets or property transferred into the trust, such as real estate, investments, cash, or other valuable items.

You have your own reasons for founding a trust. After all, they serve multiple purposes. However, a few reasons many of our clients have them in place include, but are not limited to:

  • Asset Protection: Some trusts, like irrevocable trusts (see below), can protect assets from creditors and legal claims.
  • Minor or Incapacitated Beneficiaries: Trusts can be used to manage assets on behalf of minors or individuals who are unable to manage their own finances.
  • Charitable Giving: Charitable trusts allow assets to be earmarked for a specific charitable purpose.
  • Privacy: Trusts can be used to maintain privacy by keeping the details of asset distribution out of the public record.
  • Business Succession: Trusts can facilitate the smooth transfer of ownership in family businesses.

Regardless of your reasons for starting a trust, the specific terms and conditions of a trust are outlined in a legal document, often referred to as a “trust agreement” or “trust deed.” The terms of the trust agreement, such as how assets are managed, when and how beneficiaries receive distributions, and the trustee’s powers and responsibilities, are crucial in determining the nature and purpose of the trust. Trusts are valuable tools in financial and estate planning, allowing individuals to protect and manage their assets for the benefit of themselves and their loved ones.

Trust Types and Their Purposes

Just as there are various reasons for founding a trust, there are various trust types to support your personal reason for opening a trust. These versatile legal instruments are designed to address a wide range of financial and personal objectives, offering individuals, families, and businesses the flexibility to manage assets, provide for loved ones, protect wealth, and accomplish specific goals. To make informed decisions about estate planning and wealth management, it’s crucial to understand the different types of trusts and their respective purposes. Here, we’ll explore some trust types and the specific goals and circumstances they are tailored for.

  • A revocable trust allows the grantor to maintain control of their assets during their lifetime. This type of trust avoids probate, which can be time-consuming and costly, and provides for the seamless transfer of assets to beneficiaries. This is ideal for individuals who want to maintain control over their assets during their lifetime and ensure a smooth transition of wealth to beneficiaries without the delays and expenses associated with probate.
  • An irrevocable trust, as the name suggests, cannot be easily altered or revoked once established. These trusts are often used for asset protection and safeguarding assets from creditors. This is useful for individuals seeking to protect assets from legal claims or ensure that certain assets are preserved for specific beneficiaries.
  • Special Needs Trusts (SNTs) are established to provide for individuals with disabilities while preserving their eligibility for government benefits. These trusts help ensure that beneficiaries with special needs have financial support without jeopardizing their access to essential services. This is essential for families with loved ones who have disabilities, as it allows them to provide financial assistance without affecting government assistance programs.
  • An asset protection trust is designed to safeguard assets from potential creditors, legal claims, or financial risks. They can be established in jurisdictions with favourable asset protection laws. It can be useful for individuals who want to protect their wealth from potential legal liabilities, such as business owners and professionals in high-liability fields.
  • A family trust is established to benefit family members and can serve various purposes, including managing family wealth, providing for education and healthcare, and preserving assets for future generations. Family trusts are versatile tools for wealth management and legacy planning, making them suitable for families with various financial goals.

Understanding the different trust types and their purposes is essential to meeting your specific needs and goals as the family steward. Choosing the right trust or combination of trusts can help you protect assets and achieve your financial objectives with efficiency and effectiveness. It’s advisable to work with a qualified financial advisor to ensure that your trust arrangements align with your unique circumstances and objectives.

The Trustee's Fiduciary Duty

When you assume the role of trustee, you are serving as the guardian of assets or property on behalf of the trust’s beneficiaries. This comes with high responsibility, particularly in the management and administration of trusts. Loyalty and the avoidance of conflicts of interest are vital principles that trustees must uphold, always acting in the best interests of beneficiaries and refraining from self-dealing or actions that could benefit them personally at the expense of the trust. 

At the core of their responsibilities lies a fiduciary duty, a solemn obligation to prioritize the best interests of the beneficiaries above all else. Trust management is a primary task, encompassing the oversight of diverse assets, from investments to real estate, and ensuring they are managed in compliance with the trust’s terms and relevant legal regulations. Alongside this, meticulous record-keeping is essential, including tracking all trust transactions, incomes, expenses, and distributions, as these records may need to be furnished to beneficiaries or authorities. Effective communication with beneficiaries is another key responsibility, as trustees are expected to provide regular updates and financial statements and respond to beneficiary inquiries.

Prudent investment strategies may also be part of their role, with trustees making sound financial decisions in line with the trust’s objectives, considering risk and return. The distribution of trust assets to beneficiaries, as specified in the trust document, is a pivotal responsibility, involving both regular income distributions and discretionary payments. Compliance with all applicable laws and regulations is paramount, covering aspects such as trust management, taxation, and fiduciary obligations.

Trusteeship is a role of great responsibility, one that can have a profound impact on the lives of trust beneficiaries. Understanding what it means to be a trustee, the various trust types and their purposes, and the fiduciary duty is essential for successfully navigating this complex terrain. Trustee basics are the foundation of effective wealth management, and with the right knowledge and mindset, trustees can fulfill their roles with confidence and competence. In doing so, they can ensure that the trust’s objectives are met and that their legacy endures for generations to come.

Listen to our Legacy Builders Podcast

How can you and your family harness the power of trusts to safeguard assets and attain unique financial goals with absolute confidence and expertise? Moreover, how can you do this in a way that honours and grows your family legacy? The answer lies in seeking professional guidance and expertise. If you are ready to explore the role of trusts within your family wealth, Beacon Family Office, with its wealth of knowledge and extensive experience, aims to earn your trust to serve as a partner on your journey. Connect with us today for an initial, confidential call.

retirement planning calgary

Beyond the Business: What to Diversify within the Family Enterprise

by Asset AllocationBlogFinancial Planning
retirement planning calgary

Beyond the Business: What to Diversify within the Family Enterprise

There comes a point when every family steward must ask how to best diversify their family’s wealth beyond the family business. This question serves as a way to safeguard their financial future and successfully navigate the ever-changing economic landscape. But this all goes beyond mere financial prudence. It’s about securing a lasting legacy that transcends generations.

Consider the Johnson family of Johnson & Johnson fame, who, for generations, built their wealth through a thriving manufacturing business. With time, they recognized the need to extend their financial reach beyond the factory floor. The decision to diversify their assets into various investment avenues, including real estate, private equity, and stocks, has not only protected their wealth but multiplied it. Their success story underscores the enduring strength that comes from venturing beyond the family business.

All of this begs the question: How does one diversify their family’s wealth? Unfortunately, there is no one clear answer for this. Each family simply requires a different strategy built on their unique assets, personalities, values, and so forth. However, there are a number of different types of assets that contribute to your investment portfolio. Below, we break down both private and public assets to support you in your own diversification conversations.

Exploring Private Assets

Private assets encompass a diverse category of investments that are typically not publicly traded on stock exchanges. These assets are often characterized by their limited liquidity and exclusivity and involve several key components:

  • Real Estate: Real estate is a prominent private asset class that includes investments in properties such as residential homes, commercial buildings, industrial spaces, and vacant land. Families often venture into real estate as it can provide rental income, potential for property appreciation, and a hedge against inflation. Diversifying into real estate, as in the example of the Johnson family, can create a steady stream of income and contribute to long-term wealth preservation.
  • Private Equity: Private equity involves investing directly in private companies or acquiring a significant ownership stake in non-publicly traded firms. These investments are typically made with the aim of helping these companies grow and eventually realize a substantial return on investment. Private equity investments may include venture capital for startups or buyouts of established businesses. While they often require a longer investment horizon, private equity investments can yield substantial returns when successful.
  • Private Debt: Private debt involves lending capital to non-public entities, which can include corporations, partnerships, or even individuals. Private debt can take various forms, such as loans, bonds, or notes. Families can diversify into private debt by becoming lenders to businesses seeking capital. Private debt investments may offer fixed interest payments and can be structured to fit the family’s risk tolerance and income needs.

Private assets appeal to families seeking diversification because they often have a lower correlation with public markets, potentially reducing overall portfolio risk. These investments typically require a longer-term commitment, limited liquidity, and a higher degree of due diligence.

Public Assets and Liquid Securities

Public assets and liquid securities represent a category of investments that are traded on public markets, making them readily accessible and tradable by investors. They are characterized by their liquidity, which means they can be quickly bought or sold on stock exchanges.

Public Assets
Public assets are investments that are traded on public markets and are accessible to a wide range of investors. They include:

  • Stocks (equities): Stocks represent ownership shares in publicly traded companies. When an individual or family owns stocks in a company, they become shareholders and have a stake in the company’s profits and losses. Stocks are known for their potential for capital appreciation, as the value of shares can increase over time. They are also associated with dividend payments, which provide a portion of the company’s earnings to shareholders. Families can diversify their portfolio by investing in a range of stocks across various industries and sectors.
  • Bonds (Fixed-Income Securities): Bonds are debt securities issued by governments, municipalities, corporations, or other entities. When an investor purchases a bond, they are effectively lending money to the issuer in exchange for periodic interest payments and the return of the bond’s face value at maturity. Bonds are known for their income-generating potential and relative stability compared to stocks. They can be an essential component of a diversified portfolio, providing income and acting as a hedge against stock market volatility.

Liquid Securities

Liquid securities are financial instruments that possess a high degree of liquidity, allowing investors to easily buy or sell them on public markets without significantly impacting their market value. These securities are readily tradable, making them a crucial component of a diversified portfolio for family enterprises. They include:

  • Common Stocks: Common stocks represent ownership shares in publicly traded companies. They are highly liquid because they are actively traded on stock exchanges. Investors can buy or sell common stocks through brokerage accounts with ease. Common stocks are characterized by their market prices that fluctuate throughout the trading day based on supply and demand. Investors often buy common stocks with the expectation of capital appreciation and may receive dividends as a share of the company’s profits.
  • Preferred Stocks: Preferred stocks are another form of equity investment but come with certain preferential rights, such as a fixed dividend rate. Like common stocks, preferred stocks are typically traded on public markets and offer liquidity to investors. Investors can trade preferred stocks to capture price movements or enjoy steady dividend income.
  • Corporate Bonds: Corporate bonds are debt securities issued by corporations to raise capital. They promise to repay the bondholder’s principal amount at maturity and provide periodic interest payments, known as coupon payments. Corporate bonds are traded on bond markets, offering liquidity to investors. The bond’s market price may fluctuate based on changes in interest rates and credit quality. Investors may buy or sell corporate bonds to manage their portfolios or capture price opportunities.
  • Government Bonds: Government bonds, issued by governments at various levels (federal, provincial, or municipal), are highly liquid fixed-income securities. They are considered one of the safest investments because they are backed by the issuing government’s credit. Investors can easily trade government bonds on bond markets, making them a valuable choice for income-oriented investors seeking liquidity and stability.
  • Exchange-Traded Funds (ETFs): ETFs are investment funds that hold a diversified portfolio of assets, such as stocks, bonds, or commodities. ETF shares are traded on stock exchanges, providing investors with an efficient way to gain exposure to various asset classes. The intraday tradability of ETF shares makes them highly liquid, and they are an excellent tool for diversification and liquidity management within a portfolio.

Public assets, including stocks and bonds, as well as liquid securities, are, in essence, instrumental in asset allocation strategies for family enterprises. These assets offer a host of advantages for a diversified investment portfolio. Their versatility and accessibility enable families to navigate the complex financial landscape, making more informed decisions that safeguard and enhance their wealth across generations. These also provide liquidity, diversification opportunities, and the potential for both income and growth, allowing family enterprises to effectively manage risk and pursue their financial objectives.

Listen to our Legacy Builders Podcast

Diversifying the family enterprise and moving beyond the confines of the family business is not just a financial strategy; it's an intentional step toward securing a lasting legacy. It's about striking the right balance as you diversify, leveraging the gains and risks of both private and public assets. Now’s the time to ask: How are you diversifying your family’s wealth beyond the family business? Reach out to the Beacon Family Office, and we’ll help you find your answers.

Tax Rebates All Entrepreneurs Should Know About

Measuring Family Assets and Returns: A Tailored Approach

by Asset AllocationBlogFinancial Planning
Tax Rebates All Entrepreneurs Should Know About

Measuring Family Assets and Returns: A Tailored Approach

Balancing the complexity of family wealth can be challenging, often requiring astute navigation through a maze of investments, businesses, and real estate holdings. Maneuvering this complexity leads us to ask, “How can we measure success when the definition of returns varies so drastically across these diverse assets?”

The answer lies in a tailored approach—a strategic shift towards customized metrics that align with the unique facets of each family enterprise. Let’s delve into the art of measuring returns within a family enterprise, exploring the complexity of asset measurement, the importance of performance metrics, and the delicate balance between risk and return.

The Complexity of Asset Measurement

Family enterprises are mainly comprised of businesses, real estate, private equity, and liquid securities. The challenge arises when we attempt to measure the returns of these diverse assets using a one-size-fits-all approach. Imagine trying to compare the growth of a vineyard to the performance of a tech startup; the discrepancies are as glaring as they are inevitable. The limitations of such a uniform measurement become evident as we consider the vastly different performance metrics required for each asset. For instance, evaluating the success of a family business may involve assessing its long-term sustainability and its alignment with the family’s values, whereas a liquid security portfolio may require a more immediate focus on annualized returns. To further illustrate this complexity, let’s consider a common real-world example we’ve seen here at Beacon Family Office.

Imagine a family that owns a successful chain of restaurants as their primary business asset. The financial results of this venture will not solely determine its success. Rather, it also hinges on factors such as customer satisfaction, brand reputation, and the family’s commitment to upholding culinary traditions passed down through generations. Now contrast this with another part of the family’s wealth portfolio: a substantial investment in a technology startup. Here, the family’s focus is likely to be on more immediate metrics, such as the startup’s revenue growth, market share, and potential for future acquisitions or public offerings. Attempting to measure the success of these two assets with the same yardstick would oversimplify the picture and could lead to misguided decisions.

Moreover, the challenge of diverse asset measurement extends beyond businesses. Consider a family’s real estate holdings, which span various properties, including residential, commercial, and agricultural. Each type of property has its own unique performance metrics. For instance, evaluating the success of a residential property might involve factors like occupancy rates and rental income, while assessing agricultural land may necessitate tracking crop yields and land appreciation. Meanwhile, a liquid securities portfolio demands a different set of criteria, including market indices, annualized returns, and risk-adjusted performance. In this complex network of assets, a one-size-fits-all approach simply cannot work. Recognizing and embracing this complexity is the first step toward effective and informed asset management within a family enterprise.

Performance Metrics for Diverse Assets

It becomes clear that to effectively measure returns within a family enterprise, we must tailor our metrics to the idiosyncrasies of each asset class. This tailored approach is the compass guiding us through the sea of diversity. Let’s explore the nuances of measuring returns for some of the most common asset types found in family enterprises.

Family Businesses: For a family-owned business, success may not solely be measured in terms of financial returns. It may encompass the enduring strength of the business, the degree of intergenerational collaboration, and its alignment with your family’s values. Metrics here might include long-term sustainability, customer satisfaction, and employee engagement.

Real Estate: Real estate investments are a cornerstone of many family enterprises. Measuring success in this arena might involve metrics such as occupancy rates, rental income, and property appreciation. Additionally, it’s essential to consider the social and environmental impact of real estate holdings, aligning them with your family’s values and the broader community.

Private Equity: Private equity investments are typically long-term commitments. Measuring returns may involve tracking the growth of portfolio companies, assessing the impact of management decisions, and evaluating the fund’s overall performance. Metrics here could include the internal rate of return (IRR), the multiple on invested capital (MOIC), and the successful execution of value-creation strategies.

Liquid Securities: The world of liquid securities is dynamic and fast-paced. Measuring returns here often revolves around benchmarks like market indices and annualized returns. Yet, it’s also essential to consider risk-adjusted returns, diversification, and alignment with the family’s financial goals.

By customizing our metrics to match the nature of each asset class, we unlock the true potential for measuring success within a family enterprise. This approach not only provides a more accurate assessment but also empowers better decision-making.

Balancing Risk and Return

In the pursuit of success within a family enterprise, measuring returns cannot be a one-sided endeavour. The delicate balance between risk and return must always be maintained.

After all, what good are high returns if they come at the cost of excessive risk?

Understanding and managing risk is a paramount concern, especially when dealing with diverse assets. Strategies for optimizing risk-adjusted returns vary depending on the asset category.

Family Businesses: Ensuring the continuity and resilience of a family business often involves succession planning and risk mitigation strategies. For instance, establishing clear governance structures and conflict resolution mechanisms can help mitigate internal risks that could threaten the business’s stability, including, but not limited to, lack of communication, lack of clarity in succession roles and responsibilities, disconnection between generational values, and so forth.

Real Estate: Diversifying real estate holdings across different geographic regions or property types can help manage risk. Additionally, thorough due diligence before acquiring properties can minimize unforeseen issues and maximize long-term returns.

Private Equity: Effective risk management in private equity may also involve thorough due diligence before investments, active involvement in portfolio companies to influence decisions, and diversifying investments across different sectors and stages.

Liquid Securities: In terms of liquid securities, diversification and regular portfolio rebalancing can help manage risk. Setting clear risk tolerance levels and aligning investments with long-term financial goals are essential risk mitigation strategies.

One such instance we’ve seen where risk is not properly balanced within a family enterprise is when a family has heavily invested in a single industry. This leaves the family open to financial turmoil when this industry experiences a downturn, as most industries do at some point. By properly completing a risk assessment while also allowing for greater diversification in one’s portfolio, you are better equipped to shield your wealth should there be such a setback. 

Measuring returns within a family enterprise is a complex process that requires proficiency, adaptability, and a knowledgeable guide you can turn to to help guide you in protecting, preserving, and growing your assets. A tailored approach, rooted in customized metrics for each asset class, is the key to unlocking the true potential of a family’s wealth. It’s a journey that balances the magic of generational collaboration, the enduring strength of family values, and the resilience needed to weather the storms of diverse asset management.

Listen to our Legacy Builders Podcast

As you embark on this journey within your own family enterprise, remember that success isn't merely a number on a balance sheet. It's the sum of your collective efforts, the realization of shared dreams, and the legacy you leave for future generations. By measuring returns with precision and managing risk with shared generational wisdom, you can ensure that your family's wealth endures, providing for generations to come. If you're ready to explore this tailored approach to managing family wealth further, we invite you to connect with the Beacon Family Office for an initial conversation.