As I travel across the country, meeting with our family clients and their close advisors and speaking at leading associations in the high net worth services industry, there is one topic that continues to come up for discussion. While the context of the question and the way it is phrased changes, the recurring theme is the gap between (a) families’ concerns about security, privacy and protection and (b) clarity on how to best address these issues.
In general, we have found that our clients in this arena are most concerned about the following five priorities, in order:
- Family succession and sustainability, which involves a host of generational issues
- Investments and ensuring a sustainable return over time
- Lifestyle and happiness, in whatever form each family member chooses to define this
- Philanthropy and charity
- Security, safety, privacy and safeguarding the family’s reputation
The first four are well understood by Family Office directors and high net worth family advisors. The fifth is a challenge for most. But that’s true only until a security, safety or privacy issue rockets to the top of the list. “Once the crisis is upon us, it’s the only thing that matters,” these advisors observe. “And by that time, it’s too late to evaluate options, costs and plans of action.” The first thing I typically recommend is making the fifth item – security, safety, privacy and reputational integrity – a priority. Even if the family elects not to place these issues as more important than the others, I suggest at least developing an understanding of the full range of risks, threats and vulnerabilities to the family and its various members. That insight will help the advisors and the family make better choices. The second thing I emphasize? “Be sure to take a strategic approach to security, one that is proactive and strongly biased in favor of prevention.” Then I point out that if they do so, every other priority on the list will be advanced measurably.