For wealth creators who have the responsibility of creating the structure around generational wealth, it can be easy to fall into the “strategy trap.” This involves implementing strategies that are intended to increase assets or reduce taxes – topics that often make for great cocktail party or golf course conversation. However, these strategies can be implemented without considering future complexities, limitations, administrative costs, and the loss of flexibility and control. Worse, they may not actually align with the family's goals for their wealth.
At Lake Street Advisors, we prioritize understanding what our client families' deeper goals are, beyond just increasing wealth or saving on taxes. While all our clients are unique, there are common themes we see among our families' stated purposes. We encourage our client families to think of their goals, or their purpose in three key areas:
Self
The first goal here is often financial security – ensuring not to outlive personal assets and be able to sleep well at night knowing they won't run out of money. Additionally, families often express the desire for simplicity or flexibility. Finally, many families who engage our firm seek to optimize their time and energy to its highest and best use, by delegating the complexities of their wealth management.
Family
Commonly we hear families express a desire to help the next generation become good stewards of family wealth, even before they consider tax efficient wealth transfer. Many families also prioritize having a family home or creating shared experiences that will bring generations together.
Philanthropy
This area tends to be the most tailored to a family's beliefs and often includes a mission statement specific to the causes they care most about. The concept of "doing good" with their wealth is a common theme.
Aligning Strategies with Long-Term Wealth Goals
Even among these goals, there can be conflicting interests. For example, funding an irrevocable trust to use up a gift exemption before it expires may achieve efficient wealth transfer but could conflict with the goal of not outliving one's assets. Similarly, creating a private foundation may create a platform from which to achieve one's philanthropic mission, but could contradict goals around simplicity or reaching the specific charities the family wants to support.
By staying grounded in these goals, both Lake Street as an advisor and the family as the ultimate decision-makers can balance competing considerations before implementing a strategy. This approach not only makes it easier to identify the appropriate strategies that serve a family's purpose, but more importantly, helps avoid strategies that ultimately conflict with a family's goals.
Just as one wouldn’t go to a doctor and ask for a specific prescription or surgery they’ve heard of, they would first discuss their specific health concerns and objectives to determine the appropriate treatment. Likewise, seeking advice from a financial advisor should involve a similar approach – understanding and articulating one’s actual financial goals before exploring any new strategies or recommendations.
Conclusion
If you're navigating the complexities of wealth management and seeking strategies aligned with your family's long-term goals, Lake Street is here to help. Our team is dedicated to understanding your unique goals for generational prosperity and crafting tailored solutions. Reach out to us today to start a conversation.
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