Stewarding Family Wealth

Money is a resource. I’ve long seen it that way. And like all resources (or, to use another word, assets), it’s something that we’re given by our Creator to steward.

We’ve all seen money ruin people, and the best protection against money ruining you is to have this stewardship mindset. Hold it without hoarding it. Employ it without embracing it.

This isn’t new thinking. I learned it from others who learned it from others, and so on, going back at least as far as the first decades of the first century A.D., when the Apostle Paul told a young pastor, “As for the rich in this present age, charge them not … to set their hopes on the uncertainty of riches, but on God. … They are to do good, to be rich in good works” (1 Timothy 6:17-18).

So, the idea of stewardship and charging the wealthy to do good isn’t new, but in the last couple of decades, two things have stood out to me as new here.

First, the ability to create life-altering wealth in less time than ever. The number of people who are first-generation wealthy is staggering, and the ways they create that wealth vary greatly. And second, the resistance to the idea of simply passing wealth to the next generation. For generations, it was, “Don’t risk too much of ‘your wealth.’ Invest wisely and transfer on to the next generation.” A subtle counternarrative is emerging.

Today, I’m seeing more and more wealthy individuals (and families) who want to leverage their wealth now and invest it in new ways, whether to seed quick multiplication or for multiple bottom-line impact.

The trusted pillars of wealth management and transfer aren’t crumbling, but it’s evident that a bit of innovation is being introduced into the architecture. It is forcing the traditional players to slide into new lanes and allowing new players to join the conversation. Tax attorneys and brokers are no longer the lone voices in the family office.

I know of families from Orlando to Oklahoma City, Dallas to Denver, who are making big shifts with their family wealth mindset, structure, and transfer. In the past, a business sale that resulted in eight-, nine-, or ten-digit dollars (or more) would have sent the seller to a wealth manager who stuck it in the New York Teachers’ Union or some similar fund to be seemingly forgotten while it grew. Now the possibilities seem to be endless. Consider Mark Zuckerberg’s decision to start an LLC instead of doing a donor-advised fund and the well-publicized Giving Pledge.

This topic can be a bit overwhelming to some—and all-consuming to others.

What is worth considering when it comes to transferring family wealth? A few years back, I started using the following grid to facilitate conversation with friends and clients. There are a bunch of possibilities within each quadrant, but you at least want to look at each of the four categories as a starting point.

Quadrant One: Traditional Investment 

This is the option to take your funds and entrust them to a financial broker or money manager. You can use someone local, regional, or national, and it becomes their job to put your money in places that reflect your investment proclivities. This person manages the returns, reports back on how your money is doing, and tries to increase your portfolio’s value by increasing returns on your money. This is standard and familiar. Every city has these offices up and down the street, and if you can’t find one, TV and internet ads are everywhere.

Simple advice: Choose someone you trust. Expert, experienced, full of integrity, and not going anywhere (but also connected enough that, if something happens to them, you know where to turn).

The hesitation: You’ll always have the family member (and maybe a part of yourself) saying, “Can’t we do better than this? It’s just sitting there.” It’s a fair point. And be ready for your adult children to have a different group of chosen trusted advisors they prefer.

Quadrant Two: Family Dynamics

While quadrant one utilizes professional money managers, quadrant two often looks to psychologists, professors, and pastors. The novel Anna Karenina opens, “Every unhappy family is unhappy in its own way,” and even if your family is happy, the transfer of large amounts of wealth is a big stressor on the system. What if brother David wants to be a silent partner, and sister Sydney feels it’s all on her? What if son Travis is estranged, or if a divorce and remarriage has doubled the number of people to satisfy and serve with the wealth? Family dynamics are a factor. And rarely does more wealth solve anything—it usually compounds problems, regardless of the generation.

Simple advice: Don’t make snap decisions. Family dynamics are shifting, so wisdom here takes the long view, both relationally and financially. Get some outside help from someone experienced and trained in family dynamic navigation.

The hesitation: Hopefully, you’ll always have Thanksgiving dinner together. Stuffing the tension can seem like a smart move—but it usually just postpones and compounds things. Mixing family and business is tough, so family gatherings run the risk of bringing tensions to the surface.

Quadrant Three: Nontraditional Investment

So many families are choosing to give away rather than give down (to the next generation), and they’re doing this in incredibly creative ways. Micro investments, venture capital firms, impact/cause investment, friends’ local startups, etc. It’s not an easy road, and it requires a lot of work and great people running the operation you’re funding, so do your homework. But for those who are entrepreneurs at heart, this can be personally appealing and wildly impactful at the same time. And, for sure, it will appeal to the younger next-generation stewards of the wealth. 

Simple advice: Set expectations for yourself and for partners regarding everyone’s involvement/role. You’re threading a needle between generosity and control. There’s potential for the thing to explode because of misaligned expectations. Ask everyone to be a learner.

The hesitation: Nontraditional often means higher risk. Consider the Zuckerberg article, which stated that Zuckerberg spent $100 million to reform New Jersey schools, and it didn’t work. 

Quadrant Four: Generosity

It’s so healthy to give generously, but like all healthy things, it is often difficult. Cynthia Dill, a politician in the Northeast, said, “The opposite of corporate greed is personal generosity.” A personal commitment to generosity humanizes and tethers the transfer of wealth, and it begins with the heart. My friend April Chapman runs an organization called Generous Giving that is exploding under her leadership. It doesn’t tell people how to transfer money or even how to give; instead, it focuses on cultivating a heart of generosity. Have the heart to give and then look for help from individuals or organizations like the National Christian Foundation, which helps people give their money away—both wisely and with no strings attached—to great causes. 

Simple advice: Set clear generosity goals and decide to be spontaneous occasionally as well. Don’t just choose one or the other. And make sure you are transferring your heart for generosity to your children and not just the bank accounts. I’ve been watching and helping people do that for decades. It’s an amazing accomplishment for a parent.

A hesitation: It’s tempting to treat this as the best of the four quadrants. The stewardship mindset, though, says all of my money is on loan, so don’t succumb to the pride of generosity.

Conclusion

I paint these as distinct (that’s what a grid does, after all). But these days, they’re all bleeding together, and every area of specialty is migrating into the others. A financial broker offers nontraditional investment options, a pastor speaks like an entrepreneur, a college professor does this on the side, and so on. This isn’t necessarily a good or bad trend. It just is.

If you’re thinking about the transfer of family wealth (either your own wealth or that of someone in your personal or professional circle), you’re already thinking about some of these factors. My suggestion: Make sure you at least take a look at all four because all four are worth looking at. The transfer of family wealth isn’t as simple as it used to be, and that’s honestly pretty exciting.