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The Family Wealth Sustainability Toolkit: The Manual by Fran Lotery, Fredda Herz Brown

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LONG-TERM MANAGEMENT OF FINANCES AND RISK

Financial accountability and responsibility represent risk management for the family that shares assets. Managing personal risk can be far easier than doing so for a large group of people. As a family grows in size, its risk appetite tends to change. Generations have different risk tolerances, and this can make for complicated portfolio management.

Over time, the family may come to require greater involvement by outside advisers and managers. This can be prompted by major changes in the enterprise, such as the selling of assets, an acquisition, the exiting of family members, or a transformation in business marketplace focus. Thoughtful use of outside specialists can add value and help to manage financial risks. But the effect of greater outside influence on family dynamics usually needs to be carefully monitored as well. Individual accountability of family members should still be maintained. The strength of the family enterprise relies on family members' continued sense of ownership responsibility.

Sometimes, trusts are established to protect the assets of younger family members. The appointment of outside trustees tends to separate individual interests from the family enterprise and remove some measure of control from the beneficiaries. It can also raise their risk, however, as control shifts to the trustees. Trustee relationships can be challenging, and each trustee and beneficiary relationship needs to be considered individually. Sometimes ...

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