The Laird Norton family just issued an updated family tree chart. Being in their seventh generation with the eighth well underway, their “tree” resembles the Bowthorpe Oak (the UK’s oldest oak tree). At least it used to. In its latest iteration, they’ve totally abandoned the traditional tree format and went with concentric circles instead. Each generation now has its own circle with the wealth generators placed in the center.
Although the old tree model does a good job of communicating a family’s hierarchy, the circle model does an even better job of telling a family’s history by visually communicating both hierarchy and the exponential nature of reproduction – something that is a challenge to keeping wealth in the family. As you progress in generations, wealth is at increased risk of getting spread more thinly at an exponential rate. Fortunately, there are antidotes to losing wealth as families grow and these often fall into one of two categories:
- The offensive – Includes creating value, empowering family members to earn, strategic investing, and generally building financial capital.
- The defensive – Primarily consists of protecting what’s already in the family, which is achieved with a number of risk management tools like limited partnerships, trusts, and insurance.
In addition to the above, both categories require a heavy dose of financial education in order to be fully successful in keeping wealth in the family. Certainly, parents need to educate their children. But, as underscored by recent headlines about cultural and ethical deterioration in certain financial services firms, it is also important for older generations to take refresher courses from time to time. If you are interested in learning more about how financial education can mitigate ‘cultural and ethical deterioration,’ read Joline Godfrey’s recent blog post called Economic Self-Defense: The Time is Now. She does a wonderful job explaining how the negative headlines have “validated the efforts of families making an effort to develop economic self-defense through financial education.”