7/16/2012 - StarChapter · 7/16/2012 16 keep the family business (including investments) separate...

7/16/2012

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The Elements of Heritage Planning

SUSTAINING FAMILY WEALTH, UNITY, CLIENTS & DONORS

ACROSS GENERATIONS

© 2010 Heritage Intellectual Resources, LLC. All rights reserved.

Who We Are


Dan T. Garrett, AEP®, CFP®, CWC®

President, The ACU FoundationPresident, The Garrett Group

The Heritage Institute engages in the research, development,application and reality of increasing the 10 percent.

(And, we will explain “the 10%” in a few minutes!)

The ACU FoundationBox 29200 • Abilene, Texas 79699-9200

325-674-2508 • Fax: [email protected]

[email protected]

Agenda


• Expectations

• Issues and gaps in traditional planning

• The key elements for Sustaining FamilyWealth & Unity Across Generations (thathave worked for centuries)

• Next steps

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Times Change“What got you here, won’t get you there …”


“Smart people learn fromtheir own experiences.

Wise people learn fromthe experiences of others!”


How many know families that have beenharmed by inherited wealth?

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Our research determined that we had

to identify ways to help charities and

allied professionals profitably

integrate new services without

disrupting their current organization.


Our Research Highlighted Two Issues


1. There is a lot of money in motion.

2. Traditional planning has failed tokeep families and their fortunestogether for three or moregenerations.

There is a lot of money in motion…

• Wall Street Journal: 81% of affluent investorswould consider leaving their current advisors.

• 75.5% of investors who fired their advisors did sodue to lack of chemistry or poor working rapport(not poor performance).

• There is a direct correlation between knowing yourclient’s core values, and how much business andhow many introductions they provide to you.

• CEG: Less than 1% of inheritors keep theirparents’ advisors.


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China 2000 years ago

“Wealth Never SurvivesThree Generations”

Spain 1500’s“First generation Trader,

second generation Gentleman,third generation Beggar”

Germany 1700’s“Seldom three descents

continue good.”

United States 1800’s“From shirtsleevesto shirtsleeves in

three generations”

England, 1350“Clogs to clogs in

three generations.”

Brazil 1900’s“From the stables to the

stars to the stables inthree generations.”

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Lessons from history –Geography

Cultures - EconomiesGovernments - Tax Structures

Don’t Matter.

Families rarely keep their moneyand families together for more

than three generations.

The Gaps


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Perception vs. Reality:


“What do you think will get you?” (FOX 2/2009)


Williams & Preissers Study“What got you?”


• 60% - Lack of Communication and Trust

• 25% - Unprepared Heirs

• 3% - Failures in Financial Planning,Taxes or Investments

• 12% - Everything else

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Vision of FamilyFuture


Controlling Leaders

Sibling Rivalry

Unknown Cousins

Vision of FamilyFuture


Cousin Consortium

Sibling Teams

Enlightened Leaders

Another huge gap exists between what is

known about wealth transfer,

and what is done.© 2010 Heritage Intellectual Resources, LLC. All rights reserved.

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What We KnowAmong the studies on issues related to wealth transfer

in recent years are those done by:


What Is KnownSuccessful families share common characteristics

They foster good communication & trust

Have shared vision

Meet regularly

Promote a balanced view of “wealth”

Keep business and family separate

Know the roles necessary to be successful

Inspire family members to participate in the family

Actively train and mentor each generation

Facilitate the genuine transfer of leadership

Have ongoing family governance


What Is KnownWhat Clients want to pass and receive…

The family storyand life lessons!

77% for both “Baby Boomers”and their parents (“Elders”)

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For “Baby Boomers”it was 10X more important to

pass or receivethe family story and life lessons

than financial assets or real estate.



• 35% Spirit (Passion/Enthusiasm/Sense of Humor)• 19% Religion• 16% Knowledge/Advice• 15% Homes/Property• 8% Way of giving/Supporting the Community• 7% Money• 1% Business/Career


Journal of Gift Planning Dec 2008

(What would you MOST like your heirs to inherit from you?)


What is DoneTypically, you work with your financial and estate planningadvisors to:

• clarify your desired lifestyle;

• create financial plan and investment portfolio thatprepares and protects your assets based on thatdesired lifestyle, and creates cash flow through yourlife expectancy to achieve those tangible goals; and

• determine who gets your stuff when you die, with themaximum tax savings and minimum administrativecosts (with or without trust controls to protect yourheirs from themselves)


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An Additional Riskfor You:

Fiduciary Duty!


To fill the gap and build a strong foundation that cansupport the inheritances, we must act on what we

know and expand what we do.

FinancialPlanning

EstatePlanning

Heritage PlanningThe Heritage Process

Heritage Planning gives families the tools they need toreplicate what successful families have done for centuries.


Successful Wealth Transfer

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Epiphany

“We can’t solve problems by using thesame kind of thinking we used when

we created them”

EPIPHANY!

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Wealth Remaining at the End of Each Generation


0

20

40

60

80

100

End of 2nd End of 3rd

Why?• It is NOT due to a of lack of traditional

financial and estate planning…

• It is due to transferring MONEY ratherthan WEALTH, and not having asolid foundation to support theinheritance that is being given andreceived.


(c) 2010 Heritage Intellectual Resources, LLC. All rights reserved.

Jessie O’Neill, the founder of the Affluenza Project and the heir ofa wealthy family, lists the following outcomes

when a financial inheritance is passedwithout an emotional inheritance.

Affluenza Project

•Inability to delay gratification;•Inability to tolerate frustration;•Low future motivation;•Low self-esteem;•Low self-worth;•Lack of self-confidence;•Propensity for substance abuse;•Lack of personal identity;

•Social and emotional isolation;•Feelings of failure, depression andanxiety;•Unrealistic expectations and lack ofaccountability;•False sense of entitlement;•Inability to form intimaterelationships

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Affluenza

Why are we just hearingabout this problem

now??


Growth in Material Wealth AcrossCenturies, 1000-Present

J. Bradford De Long, University of California, Slouching Toward Utopia, (2000)

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Three questions to consider as we go forward:

1. What value would it be to you if you were ableto provide the solution to your clients?

2. How many of your competitors are providingthe solution?

3. What will happen if one of your competitorsdoes provide the solution to your clients?

The Obvious Question...

What do the successful10% do differently?



Pass both the financial and emotional inheritances ...

... and build the FOUNDATION that supports both.

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#1Effective

Inter-GenerationalCommunication

#2Plentiful & Meaningful

Pre-InheritanceExperiences

#2Plentiful & Meaningful

Pre-InheritanceExperiences

#3Genuine Leadership

Transfer

#3Genuine Leadership

Transfer


To Be Successful ...

Families must create a culture ofcommunication and trust within the family,

andprepare each generation for both thefinancial and emotional inheritances

they will receive.


The Elements of Heritage Planning

SUSTAINING FAMILY WEALTH & UNITY

ACROSS GENERATIONS


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FOSTER STRONG AND EFFECTIVE

COMMUNICATION, AND BUILD TRUST

BETWEEN GENERATIONS

DEVELOP, MAINTAIN AND REGULARLY RE-VISIT YOUR VISION FOR THE PRESENT &

THE FUTURE

SUCCESSFUL FAMILIES MEET REGULARLY

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PROMOTE A BALANCED DEFINITION OF

THE MEANING OF “WEALTH”

Wealth Is Not Just Financial


‣Faith or Spiritual Beliefs

‣Skills

‣Experiences

‣Reputation

‣Causes

What do you valuemost in life?

‣Family

‣Health

‣Friends/Relationships

‣Money

‣Values

Holistic View of WealthFoundationHuman Capital

WisdomIntellectual Capital

FinancialFinancial Capital

CommunitySocial Capital


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KEEP THE FAMILY BUSINESS (INCLUDING

INVESTMENTS) SEPARATE FROM THE

BUSINESS OF BEING A FAMILY

IDENTIFY THE ‘ROLES’ NECESSARY FOR

THE FAMILY TO BE SUCCESSFUL(NON-FINANCIALLY AS WELL AS FINANCIALLY)

INSPIRE INDIVIDUAL FAMILY MEMBERS TO

PARTICIPATE FOR THEIR OWN REASONS

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What it takes to engage G2(and G3, G4, G5, …)

The 2 Questions They Will AskThemselves:

1. Is it worth it?

2. Can I do it?From: Influencer

by Patterson, Grenny, Maxfield, McMillan & Switzler (2008)


TRAIN AND MENTOR EACH GENERATION

FACILITATE THE GENUINE

TRANSFER OF LEADERSHIP FROM

GENERATION TO GENERATION

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REQUIRE TRUE COLLABORATION

BETWEEN YOUR PROFESSIONAL ADVISORS

CREATE MECHANISMS FOR

ONGOING FAMILY GOVERNANCE

DO IT NOW

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THE HERITAGE PROCESS™

The Heritage Institute took what successful families

(“the 10%”) have done for centuries and identified the

common elements these families used to sustain their

family wealth and unity across generations. We then

synthesized those elements into a proven six-step

process and a structure called The Heritage Process

that any family can replicate.



TheHeritageProcess™

InitialConversation

GuidedDiscoveryProcess™

HeritageStatement

Passing YourHeritage

HeritageDay

Living YourHeritage


Connecting the Dots:

What would providing The HeritageProcess to your clients/donors mean

to you –

both personally and professionally?

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Creating Clients/Donors Forever!


Heritage Planning creates clients forever by EFFECTIVEmulti-generational planning that fills the gaps

It allows families to replicate what the successful 10%have done for centuries;

It creates a culture of communication and trust in thefamily, and prepares each generation for both the financialand emotional inheritances they will receive, whicheliminates 85% of the reasons why families have failed;

It allows the clients to pass and receive the inheritancesthat are most important to them;


Heritage Planning creates clients forever by EFFECTIVEmulti-generational planning that fills the gaps

It allows you to build the relationship between you and yourclients that the clients want and are demanding – whicheliminates 75.5% of the reasons clients gave for firing theiradvisors; and become the advisor for G2, G3, etc., whileG1 is still alive;

It allows you and your clients to focus on their core values,which leads to increased business and increasedintroductions from your clients;

It fulfills your fiduciary duty to your clients; and

It allows you to make the difference in your clients’ livesthat you always wanted to make.


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Copyright (c) 2005, Perry L. Cochell, Rodney C. Zeeb, & Heritage Intellectual Resources, LLC© 2005 Heritage IntellectualResources, LLC. All Rights Reserved.

© 2005 Heritage Intellectual Resources, LLC. All Rights Reserved. 61


Next Steps


Questions

Dan T. Garrett, AEP®, CFP®, CWC®

President, The ACU FoundationPresident, The Garrett Group

The ACU FoundationBox 29200 • Abilene, Texas 79699-9200

325-674-2508 • Fax: [email protected]

[email protected]

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