Effective Planning: Quality of Thought is What Matters

When making any number of important life decisions, such as moving to a new neighborhood or taking a new job, we tend to mull over the potential scenarios ad nauseam. We think about it lying in bed at night. We think about it during our morning commute. We even think about it in the shower. Such is the type of exhaustive thought that is required before one even begins to embark on the journey of planning.

In last month's article we looked at your motivation to begin the process of planning based on your ideal scenario – ? versus simply trying to avoid a negative outcome. Now it's time to jump to the first lily pad. What is this process supposed to look like? What is your role in getting this work done? Not knowing the answer to these questions creates an excuse that makes it is easy to put off progress. Recall that this work is always important but never urgent, so we tend to welcome excuses-especially legitimate ones!

There is an easy place to start, and it begins well before you come to the planning table. It starts with your quality of thought. Consider these questions: What do you fear about money? What do you appreciate about money? Looking back, what decisions are you glad you made, and which do you regret? What is it about your life that gives it meaning and purpose? What about your children makes you proud to be their parent? How has your heritage or culture had an impact on your life? You need to create a thinking environment where questions like these can swirl around in your brain. They will give form and shape to something that is general and nebulous, i.e. "Estate Planning" or "Business Planning."

When it comes to spending time with an adviser it should be with one who will ask you questions like these – no matter the topic: family, business or community. Can you have a conversation with your adviser without having that person respond to you with a technical solution? In fact, the adviser doesn't have to respond at all, but rather should gently spur your thought with acknowledgment that you have been heard. To not interrupt you or finish your sentence is the most valuable thing the adviser can ever do. Because it is only after these hopes and concerns from your head and heart get put on the planning table that any adviser can objectively evaluate which "tools" might be appropriate.

When real thinking does not occur every situation gets treated with very similar recommendations and planning. All too often the adviser is holding a hammer and looking for that elusive nail. And just as often a client accepts this outcome, naïve to a better way.

Numbers-based-planning will ultimately fail because it is driven by simply that: numbers. Advisers need to line-item those balance sheets, but the financial assets probably shouldn't control everything. An important study found that the survival of a family business into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions; Morris, Williams, Allen, and Avila; Journal of Business Venturing 12, 365-401, 1997) Say what? The tax surgeons were killing the patients they were hired to sustain.

Recall from the first article that your family has not only financial capital but also human and intellectual capital. How can you use the individual talents and unique abilities of your family members? How can you use the specialized knowledge each has gained through education, experience and relationships? If these intangibles are part of your thought process and they can be elicited by your advisors, the creativity and effectiveness of your planning can increase exponentially. So will your contentment with it!

We in the related service industries have been part of the problem at times. The established business models have revolved around planning for the financial assets, so clients have most often been approached in regard to the money or tangible property. Have you given more thought to how you leave the assets, or to how you leave the heirs? The focus of your role in the process is to be able to articulate the non-financial principles of your family in the presence of an adviser who will hear them. Another way to begin or just facilitate your thoughts is to craft a family mission statement. This can be nothing more than a single paragraph explaining 1) What you are attempting to do. 2) Who you are doing it for. 3) Why you are doing it. This is your "true north" that will help you refocus if the process goes off track. Need guidance? I'm happy to e-mail you a few samples. [See address below.]

Gruber is a Member of Sagemark Consulting, Private Wealth Services Group. Erik and his team concentrate on the development, implementation and sustainability of Family Wealth Transition Plans. 231.668.4147, Erik@ErikGruber.com.