Education Is the Key to Your Family's Financial Future

Date: Nov 29 2012

Teresa Bellock

Family education is one of several building blocks that interlock to support the transfer of family legacy and sustain wealth across generations. When done well, family education results in responsible, engaged family members working together to achieve common goals. Perhaps equally important, it can help individual family members make sense of their lives and serve as productive members of society.

Family Education as a Keystone

As we look back and review the fortunes of the families FOX has worked with over the past 25+ years, we are struck by the fact that certain family enterprises have been more successful and endured longer than others. As documented in the FOX 50 Best Practices for an Enduring Family Enterprise, commitment to family education is one of the three common denominators that support sustainability. The others that work hand in hand with education are 1) a focus on continuity and 2) an effective framework for governance and decision-making. In the context of the family enterprise, education is a means to an end. So, it stands to reason that successful, effective education systems are those that are designed with the goals of the enterprise in mind. Ideally, the family has already reached agreement on

  • The purpose for staying together,
  • A shared vision for the future, and
  • Long-term goals for the family enterprise 

before undertaking an education initiative. The purpose, vision and goals will be explicitly stated and will have been effectively communicated. With that groundwork in place, it will be much easier to identify the required roles and the values, behaviors and skills needed for individuals to perform those roles. From there you can establish an education plan and identify programs and resources that will help develop the competencies that are needed to support the goals of the enterprise.

An effective framework for governance and decisionmaking helps to ensure that the enterprise stays on track. Effective leadership ensures that the people and resources are in place to get the job done, and that individual members of the enterprise are invested in its success. Leading the family education effort requires keeping tabs on the shifting needs of the individuals within the family and the needs of the enterprise, making sure the education plan and system support those needs, and making sure they adapt when necessary. Of course, just as today’s education relies on leadership, tomorrow’s leadership relies on education.

The Voice of Experience

Speaking of leadership, family office executives often carry the responsibility for leading family education efforts. So, FOX invited twelve successful, highly experienced family office groups to come together and identify guiding principles for successful family education. Here are five important concepts that came out of that discussion:

  1. Family education is the responsibility of all family stakeholders, not just the principal stockholders. The creation of an education strategy must be a partnership between family members and their advisors.
  2. Family individuals who take responsibility for and ownership of their own education are better able to sustain wealth.
  3. Educational journeys may occur at varying developmental stages and in a variety of ways. Respect for individual readiness, learning styles, and unique needs, balanced by the imperative to be “on a journey” will help ensure success for family learning and legacy.
  4. Education must be engaging, even entertaining, to sustain the interest of multiple generations. Travel, family meetings, and learning experiences shared by cousins are just a few of the tactics available to build bonds that reinforce shared visions, values, and learning.
  5. Education is a process, not an event. Meeting once or twice a year with owners without a sustained, coherent vision with learning goals and clear outcomes is not sufficient. Educational opportunities need to be consciously threaded throughout the activities of the family and the family office.

The Core Curriculum: Key Concepts to Master

All family members have critical roles as relatives within the family and as stakeholders in the family enterprise. But some have leadership responsibilities and others do not. Some also serve as managers and have important decision-making roles as general partners, trustees, or protectors, for instance. Successful education programs recognize the various roles individuals play and account for the fact that they will shift over time. They also recognize that individuals have different natural talents and strengths and work to leverage them for the good of the whole. However, while each family’s education plan and system must be tailored to its needs and the needs of the individual family members, there are some key concepts and basic skills that all members of any family enterprise must master. These include:

  • Understanding of family virtues, values and history.
  • Basic financial fluency (e.g., income statements, balance sheets, personal accounts, and the skills of saving and investing).
  • Awareness and understanding of legal duties and rights as individuals.
  • Ability to make competent decisions in tandem with financial advisors.

Moving from Plan to Action

To be successful over time, there must be someone who serves as the champion for family education – someone who helps to keep the objectives in focus and can generate enthusiasm and support. In larger, more sophisticated families this might be the education committee, which is an offshoot of the family council. Whatever the case may be, the champion need not be the chief cook and bottle washer. In fact, attempting to do so is a great way to get off track quickly. Once you determine what your goals are and where you need help, there are many highly skilled consultants and facilitators who can provide assistance at each step of the way.

Establishing and managing a family education system over time is not easy, nor is learning to be a responsible, productive member of a family enterprise. While there is not a set roadmap to follow and clearly one size will not fit all, we hope that the concepts presented here will help you get started on the right path. Our experience shows that the rewards are great and the return on investment is well worth the effort. 

Note: FOX members may access the recently released FOX Guide to Family Education. If you would like to discuss the development of an education plan for your family, feel free to contact the resident experts at FOX.