Josh Kanter, president of Chicago Financial, has learned a lot about family dynamics through his work with his own family office and by helping other families with their family offices. He talks about key lessons he has learned:
I think of blind spots in two big buckets. One is: You don’t know what you don’t know. It could be very mechanical or very philosophical. When do you move from putting your art collection on your homeowner’s policy to getting a fine arts policy? Why is long-term care insurance still a smart thing to do even if you could self-insure? Maybe the family is smart enough to know to put a lake house or a ski house into a trust, but they don’t appreciate the family dynamics that come into play. It’s those family dynamics issues that land you on the front page of the Wall Street Journal.
The other is something that you knew you should do but never did: You got the estate administration memo that said to retitle all your assets into the revocable trust, but you never moved the assets to the trust.
Invest time in preparing the next generation
I think the industry has done a great job over the last 25 to 30 years of moving from the super-secret patriarch to preparing heirs more transparently, but we don’t really have the tools to do it very well. Families still don’t spend nearly enough time and money working on communication. We spend all this time preparing assets and not enough time preparing heirs. How do we rebalance that?
Answer the important questions for those who will come after you
Families need not just financial data aggregation, but also other information for the next generation: Who are your relationships? Why is that painting important? Why does this trust own this asset, and why is Josh the trustee? Do you have partners in that investment? What should your kids or spouse or partners know about this investment?
It’s important to tell your kids in two sentences about each of your deals. This could be advice like, ‘If your partner offers you $.50 on the dollar, don’t take it – hang onto this one.’
Looking at an art collection, for example, explain not only where is the collection maintained and whether you should work with one auction house vs. another, but who are the relationships that you’ve built over 25 years in the art world? Or tell them: ‘This painting is important to me because it hung in my dad’s office and now it’s in my office.’
These are the things I didn’t know when my father passed away. We corrected for that by designing what we used to refer to as a family owner’s manual. Ultimately, we found it was so unique and so valuable, we built a platform called leafplanner to offer it to other families.
