Wealth Allocation — Asking The Right Questions

Developing wealth allocation principles for your family business succession will underpin family harmony and grow wealth in future generations. That, of course, is if you get your principles right, which all starts with asking the right questions.

We all know that great answers often come in response to great questions. Well, in the family business succession space, the questions may appear quite straightforward and simple, but your answers must still be considered carefully.

Over the next few days, we will build the key questions that must be asked and answered. Also to be considered is the future impact of the principles that are created out of your answers, which must be weighed against the goals you are seeking from your succession process.

It’s a bit like a compass bearing, you may be only a few degrees off course but over the distance of generational change that few degrees can have a significant impact.

In considering the effect of your principles, also bear in mind that the stakeholder groups that they impact can be quite wide. And, therefore, the flow on effect can be far more diverse that you may have first thought. Here is a diagram that captures the potential range of stakeholders in your succession.

Let’s start building your wealth allocation principles by just considering how the numbers stack up:

  • As a basic principle, do you propose allocating wealth across your family in equal proportions?

o What do you think your total wealth is and, therefore, what sum would each family member receive?

  • How will you ensure the ongoing financial independence of yourself and your spouse?

o What capital sum and annual income do you think you will need?

o Where will that capital and income come from?

Remember your wealth map? This should be used to pull together your family wealth figures.

Over the next few days, we will consider how assets may be allocated to meet each family member’s ‘share’ and, again, we will use the wealth map as a tool to assist us.

But at the present time, we are drafting principles to build up a picture and are not making final decisions.

One of the key barriers to effective succession is simply not having sufficient wealth to meet the financial needs of the exiting and new generations. Getting the above numbers right is the start of making sure this will not be an issue.

#familybusinesssuccession #familybusiness

An Invaluable Resource — ‘Transition — Orienteering The Lands of Succession’

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