Training Your Family to Cultivate and Preserve Money | David Sebastian - Credo

TL;DR

Families can cultivate and preserve money by building a family office that coordinates wealth growth, operations, estate planning, concierge work, and advisers across generations. David Sebastian outlines a progression from an executive assistant to a controller, fractional CFO, personal CFO, and larger staff as complexity grows. Read on to understand the roles, structures, and succession challenges involved.

Transcript

welcome everyone uh I live here in Dallas so if you're not from here welcome y'all you know um yeah so uh so my name is David and I've worked with a lot of high net worth individuals I started out in Sun Valley Idaho and uh the clients that I was working on there were worth about 50 million and then I got down to uh San Francisco and I started work... Read More

Key Insights

• 🧑‍💼 Family offices have a broad scope, encompassing aspects such as wealth generation, operations, wealth growth, estate planning, concierge services, and leadership coordination.
• ❓ They address the complexities of wealth transfer across generations, providing guidance and ensuring a smooth transition.
• 🖤 Wealth growth strategies and investment decisions can be challenging, particularly when the next generations lack the founder's skills.
• 🧑‍💼 Estate planning is a crucial aspect of family offices, including managing estate taxes, determining appropriate gifting, and considering charitable donations.
• 🧑‍💼 Concierge services provided by family offices streamline everyday tasks and ensure efficient coordination.
• 🧑‍💼 Leadership coordination is essential in family offices due to the involvement of multiple advisers and professionals.
• 🧑‍💼 A comprehensive process is necessary to manage the complexities of family offices, similar to using bumper lanes in bowling to avoid gutterballs.

Questions & Answers

Q: How can families cultivate and preserve money across generations?

Families can create a process for growing wealth, transferring their mission and values, and preparing children to understand the money. A family office can support that process by coordinating investments, operations, estate planning, services, and advisers.

Q: What does a family office do?

A family office can handle mission, vision, and values; daily operations; wealth growth; gifting and estate matters; concierge services; and leadership coordination. Its scope can be very broad because these responsibilities often overlap.

Q: Why might the next generation struggle to grow inherited wealth?

The founder may be highly skilled in a particular field, such as manufacturing or technology, while the children may not share that skill. Without a process for continued growth, the second or third generation can feel stuck, spend the money, or see it run out.

Q: How does a family office support estate and gifting decisions?

It helps families consider how much money to give their children, whether that amount is excessive, how much to give to charity, and how estate taxes will be paid. Sebastian says the U.S. lifetime gifting amount is $25 million and amounts above it face 40% taxes.

Q: What operational work can a family office manage?

Operational responsibilities can include facilitating payments, fixing a primary or vacation home, and working with property managers. Handling these tasks lets the founder focus on finding deals and building wealth.

Q: What concierge services can a family office provide?

Concierge work can include booking flights, scheduling meetings, and coordinating family gatherings. The family office determines who will organize and follow through on these personal tasks.

Q: Why is adviser coordination important in a family office?

Sebastian says the average family has about 27 advisers. These may include wealth managers, tax accountants, bookkeepers, executive assistants, private bankers, and numerous people connected to deals, making coordinated leadership necessary.

Q: How can a family office team evolve as financial complexity grows?

It may begin with an executive assistant who gradually handles personal bills and money transfers between LLCs. The family can then add a controller, move to a fractional CFO, hire a full-time personal CFO, and eventually expand the staff as financial and legal work increases.

Summary & Key Takeaways

• Family offices involve discussions on mission, vision, and values, as well as facilitating operations and property management.

• Family offices help families navigate wealth generation and growth, especially when the next generations lack the founder's skills.

• Estate planning, including gifting, managing estate taxes, and considering charitable donations, is an essential aspect of family offices.