Published in Family Office Magazine, Spring 2018 by Enzo Calamo
Although most HNW and UHNW families create, or retain, a family office to handle their wealth management needs, too often the sole focus of their family office is money allocation and asset management. To be fair to family offices, it is important to remember that it takes a lot of work to oversee these numerous projects and manage the family’s investments.
However, we all know that real wealth management is so much more than just money. True family wealth encompasses legacy planning, intergenerational wealth transfer, estate planning, risk management, family dynamics, relationship management, family governance, education, succession planning, tax planning, etc. As no one person can ever be an expert in all these areas, a collaborative virtual team needs to be created through the family office that consists of team members from the family office, family members with the knowledge or interest to participate in a particular area, plus bringing together the right external experts to handle the necessary challenge.
The key question that I am often asked is how does a family office, and the family, allocate their time, energy, and money to meet all these various objectives in life.
Being a recent cancer survivor, and having faced death several times over the past 5 years, I can honestly say that I have radically changed the way that I would answer the abovequestion about real wealth management to my clients today. Iwill verify upfront that facing death does really put what is important in life into perspective. In this article, I would like to share a few of the life lessons that I learned in my crisis on how a family office should prioritize real wealth management. The following is how I recommend prioritizing real wealth management for my family office clients today:
1) Health Management: Although we often overlook our health, since we take our bodies and mind for granted when we are feeling good, any critical illness quickly puts the importance of health into perspective. You don’t even needto be seriously ill to see why your health should be your number one priority. Just hold your breathe right now for as long as you can! Observe how the importance of everything else in your life will disappear as you gasp for oxygen. Your health, and the health of your loved ones, must always be your number one priority. If you doubt me, remember that the apparent last spoken words of Queen Elizabeth 1stof England as she lay dying were, “all my possessions for a moment of time.”
2) Time Management: When you are not certain if you will survive the next hour of your life, time becomes very precious. Although it is fine to have different timeframes to achieve our various goals, it is an illusion to believe that we have more than the 24 hours in the present day. Yesterday is history so there is nothing that we can do to change what happened in the past. Tomorrow is only a promise that is not guaranteed. Therefore, the present is all that is real. As time is a limited resource for each of us, how we use our time each day must be our number two priority for real wealth management.
3) Relationship Management: There is no doubt in my mind that relationships are essential to our wellbeing and happiness. This is why I believe that relationship management must be a key focus of any family office. I can honestly say that when I was facing death, the memories that crossed my mind were all about my most important relationships and the special moments spent with my loved ones. All my achievements in life, my expensive toys, my nice homes, etc. never even crossed my mind once. I cannot say with any certainty that you will have a similar experience to mine but I do believe that your relationships will always be one the most important aspects of your life. If you have any doubts about why I make relationship management the third top priority in real wealth management, just think about losing a loved one today to death and feel the tremendous amount of anxiety and grief that you will experience immediately.
4) Financial Management: Although money should never be your number one priority in real wealth management, your financial capital will definitely have a significant impact on your life journey. As most family offices specialize in this area, I will not spend a lot of time reviewing why financial management is ranked as my number four priority. However, I will make one observation that I hope will help family offices better understand their client’s wealth. Money management does not lie! How a person spends his or her money will always reflect what is important to them in their heart. Therefore, although budgeting is important,tracking where the cash flow is going is critical. There really is truth to the saying, “follow the money,” especially in financial management.
5) Structural Management: A dream is just a dream unless you do something to make it happen. This is why structural management is vital to the achievement of any endeavor.Whether it is people, process, products, legal structures, accounting and tax planning, finances, sales, etc, you need the right infrastructure to achieve your life goals. In my opinion, family offices are probably the best fiduciary vehicle in the world to help individuals achieve their life purpose and assist families fulfill their life mission!
6) Experiential Management: Life is not a trial run. Your life is at the very core of REAL wealth management. Therefore, achieving your dreams and experiencing your bucket list must be one of the top priorities in your life. Family offices need to align with family member passions and ensure that the proper resources are allocated to make each family member’s life a masterpiece. My only word of advice here is to remember that everyone has different talents and aspirations in life so real wealth management within a family office must be allocated fairly, not necessarily equally.
Finally, I left the most important real wealth management priority to the very end. It is by no means the least of prioritiesand many people will actually place this priority first above. However, as this priority is unique to everyone’s life, I will let you decide where you will rank this priority in your own life. 7) Spiritual Management is at the core of who we are. Therefore, to conclude this article, let me ask you a few simple questions that I asked myself while facing death:
1) Are you a spiritual being having a human experience or are you a human being trying to have a spiritual experience?
2) If you believe in a higher power, and if God owns everything and has blessed you with the successes in your life, how did you use your talents to fulfill your life purpose?
3) Are achieving worldly successes and gaining possessions the most important aspects of your life or is fulfilling a greater cause or doing the will of a higher power your goal for eternal treasures?
Although I could add many more observations under each of the above real wealth management priorities, I hope that my insights will help refocus family offices, and their clients, to pursue truewealth, live with passion, and make a difference in the world.