One of the main take-home points of this interview is that the most important aspect of governance is putting it in place before you need it. It is much more difficult to define what happens when you are in crisis.

This publication has interviewed Jill Shipley, the head of family governance and education at AlTi, which is the new name for the combined entities of Tiedemann and Alvarium, the US and European multi-family offices, respectively, that merged at the start of this year. Shipley will be a familiar figure to readers in the FWR community, and we are pleased to be able to catch up with her. We talk about governance, conflict resolution, conversations in families, and other matters. These are anything but “soft” subjects – when relationships break down, much can be lost. 
 

FWR: We read and hear a lot about the importance of governance, and why values and purpose are crucial for families to avoid mistakes and make the most of their wealth in ways that don't spoil children but give them a platform. Some of these arguments are familiar. So, in your view, what can be said about these topics which is genuinely new? 
Shipley: It is strange for a family to have formal governance, facilitated meetings, defined values or set policies. The “normal” family does not have any of these things and typically does not need them – traditional family relationships tend to be unstructured and informal. Differentiation and independence are encouraged. On the other hand, typical business relationships are formal, grounded in rules and policies with connections being conditional and based on performance. The need for wealthy families to make shared decisions related to investments, a family office, a family enterprise, or philanthropic vehicle creates a complex overlap between these two types of relationships.

Proactive governance and agreed upon shared values and purpose are crucial for our clients, but it is important to acknowledge that this is not “normal” or intuitive for the family.  

This is why family wealth management requires much more than just financial planning. The financial industry has traditionally been made up of smart professionals who have deep expertise in financial and technical areas – investing, taxes, planning, risk – but they often miss asking the “why”? It is important to understand what matters most to the client, so that they know their money is furthering the family’s shared values and purpose.

This is another example of a concept that is intuitive yet relatively new: the definition of impact. Traditionally, impact in wealth management refers to impact investing. However, AlTi takes a much broader approach to impact – acknowledging that all investment decisions have impact and money itself has an impact on us as individuals, our identity, our children, and our relationships. We strive to help families introspect and reflect on the impact they want their money to have. What is the purpose of the money? What do clients want it to achieve for themselves, for their enterprise, for the community and the world?

Has AlTi crafted a particular approach to helping families deal with family conflicts/arguments?
Conflict is normal in families and businesses – it can even be healthy. At AlTi, one planning tool we strongly believe in and help families develop is a conflict management policy. This tool allows the family to come to a shared agreement on communication, including a facilitated forum to talk about disagreements and misunderstandings. We help families define how they will talk about each other publicly, and what is kept confidential. This helps our clients avoid damaging relationships or reputations as well as costly lawsuits. It is much easier and productive to set communication guidelines proactively, while you are getting along versus when an argument occurs. We encourage families to agree to bring objective, non-family voices to the conversation to function as mediators, to delicately and independently deal with power struggles that can arise. 

What approaches should families use in working with non-family members, particularly when confidential information, a need for business continuity, etc, is involved? What can be done, for example, to agree in advance on things such as different levels of security access, etc?
We recommend that families create Communication Guidelines, a Reputation Management Policy and a Confidentiality Agreement. Each of these governing documents begins with a shared purpose, outlining why it is critical to have a policy in place and align actions in accordance. Without these policies, clients run the risk of someone sharing confidential details that could put the family or the business at risk.

One of the biggest risks for these types of information leaks is social media. What can be seen as an innocuous photo of a family vacation can be damaging – for example, we had a client post a photo with multiple family members to his public Facebook page showing that they were away on vacation. When the family returned home, one of their homes had been robbed. Given that not all family members (especially teens and older adults) know the importance of having privacy settings on social media, having a standard policy in place can help prevent scenarios like this one.

A confidentiality policy is important so that individuals know what can and cannot be shared with friends, co-workers and significant others. Moreover, being a family member should not automatically guarantee access to information about the business. In some cases, a non-family member leader or board member might have access to information that a family member does not. Having a policy in place helps clearly define who has access to sensitive information. This is especially important when there is a family business with family members who are not a part of the company. Because of family ties, they may feel obligated to sensitive information which could put the business at risk. 

A "just-in-case" plan. Rather than householders having a "bug-out" bag with first aid and other useful material, what sort of elements should such a plan have? How can your firm explain to families about setting these up, involving different family members etc? 
We are all in the transition business. The reality of life is that none of us know when it will end or if an unexpected crisis, health issue or accident will occur. Covid-19 was a stark reminder of this fact. We help clients explore a variety of what-if scenarios and put just-in-case plans in place to avoid or lessen the impact of a potential crisis. 

Part of just-in-case planning includes running fire drills with clients playing out and testing our contingency plans. One example of a fire drill was holding a multigenerational family meeting during which we pretended that the current CEO was incapacitated. For the exercise, the CEO remained in the room during the discussion but was unable to answer questions and the family had to then go through the steps in their transition plan related to the business leadership role.

During the discussion, the family realized that no one knew the details of the CEO’s living will or power of attorney, they were unable to access the CEO’s bank accounts or pay their bills. There was even an argument about whether they would want to remain on life support or not…discussion was a wakeup call for the family and caused them to check their own estate planning documents, leading to many family members realizing that they had never even signed them. At the next meeting everyone came better prepared to communicate about their wishes related to their finances, health and personal belongings.

It is important to note that the elements included in just-in-case plans vary depending on the complexities of the family, wealth and/or business, and can often include uncomfortable discussions about the health of family members. For example, one component often not planned for due to its sensitive nature is how the family and the enterprise will navigate a concern over capacity. We recommend that families and business boards discuss and define what the procedure should be if someone suspects a leader of having dementia. This may include having all executives agree to undergo annual health assessments over a certain age by a trained physician, and if capacity is in question, a second opinion is required. If confirmed, the leader agrees in writing to step down and move forward with the predetermined succession plan.

How in your view did Covid, worries about various other issues, sharpen conversations around these matters? We live in the age of Zoom, social media, and 24/7 outrage culture – how can people keep a sense of composure through all this?
There are amazing benefits to rapidly evolving technological advances. Families can stay connected to each other from anywhere around the world, by attending board or family meetings and site visits with other organizations over Zoom. 

However, nothing replaces in-person connection. Though technology works for brief conversations and connections, when there is an important or emotional discussion to be had, I strongly encourage families to get together with a facilitator in the room. It is difficult to read and interpret body language on a computer screen and even harder to stare at a screen for hours at a time. Most importantly, something is lost when family members cannot physically fist bump, high five or embrace in a hug while making difficult choices.

Another sad reality of recent advances in technology has been an increase in polarization and tribalism around culture, political parties and beliefs. It is easier to lash out, to say mean things online and to not be our best selves when we are not looking someone in the eye. I have been called in many times over the recent years to address fights between family members. Most of the time, the argument can be resolved if both parties are willing to sit down with me and each other and agree to some basic ground rules regarding communication. I do not believe we have to agree with someone to love and respect them. People simply want to feel heard and be understood – trying to achieve this over social media or a text thread does not work. 

In creating a governance framework, how broad or detailed should it be?
Governance is about ensuring that the right people are in the right place at the right time to make the right decisions, and that there is a structure to how these decisions are made. Not all families need governance. The process starts with defining what shared decisions need to be made today and, in the future, who will be involved in making the decisions. Are there shared investments? Shared assets such as family property, vacation homes, operating businesses? Is there a charitable vehicle in place and, if so, what happens when the current decision maker(s) is unable to continue? 

While there is not a cookie-cutter approach, these frameworks typically become more detailed as the family, the wealth and/or the enterprise grows in size or complexity.  

The most important aspect of governance is putting it in place before you need it. It is much more difficult to define what happens when you are in crisis. Define the plan. Communicate it to anyone who will be affected. Stress-test it and adjust as things change. Ensure that all parties are educated and able to ask questions and clarify any concerns that may arise. With proper proactive planning and communication (even when it is uncomfortable) lawsuits and destructive family conflicts can be avoided.

Are there other points that you would like to make?
There is a changing paradigm related to expectations wealth creators and inheritors have for their money. Many creators expect their financial wealth to do more than grow – they expect it to create extra-financial value in the world. 

At AlTi we help individuals and families to reflect on their values and goals, define their why and align wealth management activities with their purpose. We build holistic wealth management plans focused on using financial capital to enhance human, intellectual, social, and spiritual capital. 

We help families define and achieve the impact they want their wealth to have on themselves, their families and society – aligning their actions with their values and leaving the world a better place for generations to follow.