One experienced American billionaire, heir to one of the country's great multi-generational fortunes and an articulate spokesman on the role of the family office, has argued strongly in favour of an approach to family infrastructure where "a family office acts primarily as a repository and protector of family values across generations" writes Mark Daniell.
From his perspective, building the correct foundation of values in younger generations is the best response to the risks of financial ruin, family discord, erosion of the family business, or actions bringing the family's name into disrepute. While not abnegating the responsibility of family leadership, he sees support from the family office in this cross-generational role as essential to long-term family wealth management.
A family vision establishes what a family wants to be and where it wants to go. Family values establish how the family acts toward that long-term goal. As life is as much a journey as a destiny or destination, the principles we live by contribute substantially toward the determination of our value as individuals and as members of a greater family.
Family values establish the limits, standards, and rules its members live by. In great part, the people they are, the families they create, and the legacy they leave behind are deeply influenced by the values they adopt in their personal and business lives.
Family values will, of course, be unique to each family. In ours, we adopted the following: In pursuing the family vision, we will adhere to a set of values which lie at the core of the family's history and our unique identity. These values can be honored in your family and in business ventures in the following way:
Unity: The family will remain united and strong through all environments and events, no matter how adverse or challenging. This may require individual sacrifice to ensure that the family's interests are maintained and that the harmonious integrity of the family is preserved.
Perseverance and adaptability: We will foster a strong work ethic in every individual, in every generation, and build a culture that recognises that life changes, and that we must change with it. Adaptability is the essence of survival and our approach to the family and business matters will reflect this understanding.
Discretion: Our family values and corporate activities require individual family members avoid excessive personal and corporate media coverage. To that end, all external communications should be made consistent with the policies and parameters determined by the relevant family entities.
Social responsibility: We will always remember the privileges that result from our commercial efforts and endeavour to share the benefits of our activities with those less fortunate. We will pursue extraordinary opportunities to make a substantial and positive impact on the lives of the many colleagues and individuals who engage with our business, especially in the emerging markets where we pursue business interests.
We will be sensitive to the appropriate standards of socially responsible behavior. In the pursuit of our philanthropic objectives we will be generous and thoughtful in improving the lives of other citizens whose needs are far greater than ours.
Belief and action
Mere statement of aspirational values does not fulfill any strategic purpose. Each family needs to define the appropriate actions and communications so that its own value statements become a real operating value system.
Younger members of the family will constantly be looking at the behaviour of their elders in coming to an understanding of true family values and how to apply them. From these observations they will draw their own conclusions, which will no doubt resonate with the old aphorism "your actions speak so loud I cannot hear your words."
Family office activities
There are a number of ways in which a family office can support the clarification, communication and implementation of a family set of values within and across generations.
Those activities can include: drafting a family statement of vision and values; assuring that trust letters of wishes are in alignment with the values statement; assuring that trust deeds, terms and conditions reflect family values; drafting and overseeing the implementation of an education and communication program of values for the next generation.
It can also include ensuring that family values are addressed at regular meetings of the family council or in discussions with senior family members; ensuring that screens against negatives, such as tobacco etc, are built into the family investment policy statement to ensure they correspond to family values; overseeing activities to ensure that family activities and advisors are selected with family values in mind; ensuring that an annual review of the family's progress addresses high priority values and issues related to those values.
In all these activities the family office should be forward thinking and provide solutions to problems before they arise.
Family identity, vision and values
A comprehensive strategy for any wealthy family needs to begin with a clear understanding and awareness of the family itself. Managing a family is not just about such "hard issues" as asset allocation or investment policy.
The real concerns are the "softer" issues, regarding a family's legacy and sense of identity, its organization and governance, and, finally, the human interactions of the individuals who make up the family itself.
Mastering these social, organisational, and human issues is not easy. As one observer said with regard to collective human behaviour: "these people issues, these so called soft issues, aren't 'soft' issues at all. Maybe we should call them the 'even harder' issues."