LUTZ BUSINESS INSIGHTS
Resilient Family Capital
LISA STRUTZEL, FAMILY OFFICE SERVICES DIRECTOR
It’s no secret, family dynamics are complicated, and families of wealth have their own unique challenges. While having financial means can create countless opportunities for family members, it can also lead to entitlement, divisiveness, and a host of other problems that can erode both family wealth and relationships.
High-functioning families of wealth take a broad view of family capital, realizing the concept refers to so much more than just financial wealth. These successful enterprises are rich in family capital. They are resilient with strong family bonds because they:
- Put family first,
- Practice effective communication,
- Teach their children to be responsible, and
- Effectively resolve conflict.
1. PUT FAMILY FIRST
Kristin MacDermott and Jocelyn Baker, Founders of The MacDermott Method, are experts in the field of resilience. They describe putting family first as using financial capital to build strong family capital. In their words:
“When pressed, though, most wealth-holders have this goal: They want their children to be happy and self-sufficient. They want to have strong relationships with their children based on mutual respect. They want their children to share their values, and they want to enjoy time together, free of resentment. Their goal is not to build financial capital, but rather to use their financial capital to build strong family capital.”
2. PRACTICE EFFECTIVE COMMUNICATION
Practicing effective communication is the glue that holds families together. Good conversations breed good relationships, and listening is one of the best ways to foster great conversations. Unfortunately, most listening is focused on responding versus understanding. High-functioning families realize listening well is a skill that takes practice, and they work hard to listen with curiosity versus with an agenda.
3. TEACH CHILDREN RESPONSIBILITY
Teaching children responsibility means helping them develop self-efficacy. People with self-efficacy have confidence; they believe they have control over their own lives, and their actions can produce favorable outcomes. Mahatma Gandhi gives meaning to the term saying:
“If I have the belief that I can do it, I shall surely acquire the capacity to do it even if I may not have it at the beginning.”
Parents with means have the ability to provide safety nets for their children to prevent them from failing. This support network can actually work against their children, preventing them from developing the self-efficacy they need to thrive in the world. Resilient families recognize this. They transfer responsibility to their children as early and as often as possible, and they understand recovering and learning from mistakes is instrumental to building self-efficacy skills.
4. RESOLVE CONFLICT
The primary reason 90% of wealth is lost by the third generation is the breakdown of communication and trust in families due to the inability to resolve conflict. Even the highest functioning families have conflict – it is inevitable. What sets these families apart is their ability to resolve it effectively. According to The MacDermott Method:
“The strongest of families do not shy away from conflict. They understand that it is an opportunity to identify problems, find solutions, get people’s needs met, and grow closer as a family unit.”
Resilient families address conflict head-on and resolve it productively using various healthy consensus building strategies.
The truth is: Money isn’t enough. And family units don’t just naturally fall into place by default. The odds of sustaining wealth across generations are low. If families want to flourish, they need to work at it.
ABOUT THE AUTHOR
LISA STRUTZEL, CPA, CAP® + FAMILY OFFICE SERVICES DIRECTOR
Lisa Strutzel is the Family Office Services Director at Lutz with over 14 years of past experience as a family office executive. She is responsible for assisting high-net-worth clients manage their family enterprise.
AREAS OF FOCUS
- Family Office Services
- Financial Reporting
- Philanthropy and Legacy Planning
- High-Net-Worth Families
- Aviation Matters
AFFILIATIONS AND CREDENTIALS
- Certified Public Accountant
- Chartered Advisor in Philanthropy, CAP®
- Purposeful Planning Institute, Member
- Nebraska Society of CPAs, Member
- BBA, Iowa State University, Ames, IA
- Chartered Advisors in Philanthropy (CAP®) Advisory Board Member
- Metro Comunity College Applied Finance Institute Advisory Board
- The Hope Center for Kids, Past President and Treasurer
- Fantastic Family Meetings + The Key is in the Planning
- Family Office FAQs
- Resilient Family Capital
- Resilience Skills: What You Need When the Going Gets Tough
- Family Businesses + How to Operate Like the Pros
- Eyes Wide Open + Mitigating Risk
- Financial Fitness for the New Year
- Family Philanthropy + Creating a Shared Legacy
- Family Governance + Not an Act
- Family Meetings + Strengthening the Bonds That Bind
- What is a Family Office?
- Engaging the Next Generation With the Family Foundation
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