Transcript | Purposeful planning

Sarah Widmeyer: Welcome to Conversations on Wealth, hosted by Richardson GMP, a podcast dedicated to helping Canadians navigate the complexities of wealth with a multi-dimensional approach to planning and wealth management.

I'm Sarah Widmeyer, Director of Wealth Strategies at Richardson GMP. Joining me today is Sylvia Azoulay, Vice President of the Private Family Office at Richardson GMP. Sylvia, thank you so much for joining me today.


Sylvia Azoulay: Thank you for inviting me.


Sarah Widmeyer: Sylvia, at our firm we believe that the best approach to wealth planning is not only multi-dimensional but also multi-generational. Our tagline, the next generation of wealth, speaks to a number of scenarios our clients go through, including the sale of a business, passing the business on to the next generation, planning for the transfer of wealth, the list goes on. In order to effectively protect grow and transfer your wealth decisions need to follow a well thought out, deliberate approach. What we like to call purposeful planning. Sylvia, what do you think are the key concerns for families with significant wealth wealth?


Sylvia Azoulay: Wealth owners have a number of key priorities and often they differ from what their Advisors are focusing on. For example, many professional Advisors are focusing on the investment returns or tax minimization, maximizing the growth of the wealth or putting legal structures in that manage or protect the wealth. In other words these are technical issues that I'm going to refer to as quantitative issues. These are important for wealth creators and wealth owners. But in addition, we find that they're actually more concerned about how the wealth impacts the family and in particular the next generation. Will the next generation be to handle it; how do I prepare them? Mostly I see fear and trepidation around this, actually.


Sarah Widmeyer: And I would say a lot of these families don't know who to turn to to have these conversations. It's almost like the dark side of wealth. And where do they go?


Sylvia Azoulay: There's this fear of disclosure yeah and there's an aversion to talking about money. Talking about money's taboo in some families and they don't want to disclose the extent of that wealth because they're afraid that it's gonna demotivate the next generation, they're afraid it's going to create an entitlement attitude and they're worried, actually, about the conflict that can arise later on around the money and that it will tear the family apart. And there's good reason to fear these negative impacts of wealth on inheritors because if you inherit a large amount of wealth unexpectedly you're just like a lottery winner, and lottery winners don't usually manage to preserve that wealth very well.

So, we think of it as really preparing the next generation to be good inheritors, and that's where we want to help. We want to help because the parents or grandparents want to make sure these good inheritors are going to use the wealth to enhance their lives, that it's not going to destroy their lives. Or they may want them to contribute to their communities or steward that wealth for the next generations as well. And this kind of preparation really needs deliberate, strategic thinking. It takes a lot of effort and you need experts to help you. Like you mentioned, Sarah, people don't know where to start and they don't know who to turn to for that type of help.


Sarah Widmeyer: What does it mean to plan with purpose when it comes to your wealth?


Sylvia Azoulay: Planning with purpose means starting with a purposeful mindset. It's starting at a different point in your thinking. To do this you really need to start by articulating your values. We all have values, we know what they are, but sometimes we need a little help kind of putting them into words and articulating them clearly.


Sarah Widmeyer: So do you mean values like working hard, like doing good? Those types of things.


Sylvia Azoulay: Exactly, sure. It can be about work ethic, it can be about family and closeness and keeping family unity. It can be about continuing a legacy that the family has. There are so many different values it's about integrity, honesty. There are many, many words that are different types of values and people have lots of those values and they need to articulate what the most important ones are for them and to use that as a framework to help articulate what the purpose of that wealth is. What do we want to do, what's important to us, and having that as your framework and as your criteria helps you make decisions to make sure that whatever you're doing with your wealth, and the planning that you're doing, is aligned with those objectives. So, purposeful planning is about thinking of it from a values perspective and having the right criteria and not just having you know your advisor say oh well we can minimize tax.


Sarah Widmeyer: Right, the quantitative issues.


Sylvia Azoulay: Exactly, back to the quantitative issues, which again are not unimportant. I'm not trying to diminish those, but I think we need to change the conversation.


Sarah Widmeyer: It's almost like reverse ordering it. It's – let's start with what's important to me, to us and then the quantitative issues will spill up from that. As opposed to starting with the quantitative issues, which is how most financial planning dialogues and investment planning dialogues start. And then you end up at a place where you now have to say, okay well how are you gonna handle the wealth. You still haven't got those questions answered.


Sylvia Azoulay: Correct, yeah. So we're trying to help people think of it that way and in that order.


Sarah Widmeyer: So a question I’ve got, which may seem like a really simplistic question. Is this really only just for the ultra, ultra high-net-worth or can components of this type of approach be really applicable for anybody starting to go through the financial planning process.


Sylvia Azoulay: Purposeful planning and having a purposeful mindset it is for everybody. Whether you have a lot of money or just a good amount that you want to pass on. I think estate planning is a great example of how you might approach purposeful planning.

How do you do purposeful planning when you're doing your estate plan because there's so much out there that's kind of cookie cutter estate planning. There's even do-it-yourself kits. Those say nothing about your own values and your own purpose. They are just really pigeonholing people into a structure.

We like to start, when we're talking about purposeful estate planning, we like to start the conversation with, “What do I want to pass on to my heirs to help them have a good life?” Is it just money is, it just assets that you feel you're passing on to them? Likely not. Likely you want to pass on wisdom, you want to pass on guidance and family values, the family legacy, the family history. You're not just handing them a check. A lot of people feel that way but the documentation and the estate plan doesn't reflect that. So, it's not just about the legal documents. We ask questions when we're trying to do the estate planning: What's the purpose of your wealth; how do you want your heirs to use it? And we go through a series of questions that help them articulate that and their values.


Sarah Widmeyer: I would think that's something that a lot of people haven't thought about – what's the purpose of your wealth. What’s the money for?


Sylvia Azoulay: Yes, it's a hard question but, we help them. We get a little deeper into that conversation and help them think that through, and ideally you would have a commentary that supplements your legal will, your legal document. A commentary or a verbal communication that talks about your hopes and dreams for your heirs and the values you're passing on.


Sarah Widmeyer: I know I'm jumping in with with these questions but it's triggering another conversation that I had with Maureen Glenn, who is our Vice President of Tax and Estate Planning. She talked about gifting with warm hands. But the other concept that I think is important is, for some reason we think that discussing the contents of the will, and the will is something that should happen after death. But really the best estate transfers that I've ever been witness to have been started, initiated with conversations before the death. So to your point, explaining, the commentary – why certain decisions have been made. Don't leave people, your most loved ones your beneficiaries, it's best not to leave them in a position of wonderment at the end, why not provide them with clarity?


Sylvia Azoulay: You don't want surprises and you don't want misinterpretation. A great example of that, Sarah, is when you create a trust for your child, for example, even adult children – because if there's a lot of wealth you may want to spread out the distribution of that wealth rather than giving them a lump sum inheritance that could be very large – you may want to create a trust that distributes that inheritance over a longer period of time.

If you haven't explained the purpose of the trust and the rationale, you could have a misinterpretation there that “my parents didn't trust me” and “that's why they put it in trust,” when in fact it could be completely the opposite. It's “I actually trust you. I want this there for you for the long-term because I want you to always have access,” or “I want to make sure it's there for your children as well because I you know I love the grandchildren too.” It may have nothing to do with trust at all, and so articulating that ahead of time and actually thinking of when I'm doing this trust, how would I create this trust if I were the beneficiary? What would I want as a beneficiary? And that's a very different approach and needs to be I think done more often.


Sarah Widmeyer: Yes, I agree. I agree. What are examples, or do you have any examples, of what can happen to families when their planning is not thought out?


Sylvia Azoulay: Absolutely. First of all, one of the objectives in any planning is to avoid conflict and one of the things that I've seen on several occasions is planning around the family business and passing on that business. It's common for business owners to hang on to that business and own that business until death, so that they actually may have children involved in the business but they haven't handed over the entire control and the entire equity of that business. So often they're still holding that business and their estate plan is going to deal with.

It's common to have one child involved in the business and perhaps others not. And if that child is involved in the business, and the expectation is that she will continue that business, then does the planning reflect that, because I'll see that the estate plan will say, “Divide my estate equally amongst my three children,” and we've got one person deeply involved in this business who's going to carry on that business. Do we want the three children have controlling interests when two of them are not involved? And also, has there been a discussion around passive ownership? So, are the two children entitled to receive dividends from that business? That may be perfectly reasonable as part of sharing the family wealth, but that hasn't been properly laid out and it hasn't been properly discussed. And the last thing you want is estate litigation, because that's going to decimate not only the business, but the family relationships as well.


Sarah Widmeyer: I heard a frightening statistic, and I can't remember the exact number, but what I what I heard – the gist of this statistic is that, the area of litigation that's growing the most, sadly, is estate litigation. It dwarfs all other areas of litigation.


Sylvia Azoulay: Yes, it's sad yes because of all the emotional part of that and the family relationships that are destroyed.


Sarah Widmeyer: So then turning the page then on that, into something a little bit more proactive and happier.

What are some of the strategies that families can integrate into the way they communicate around the intended purpose of wealth? So, we don't want to end up in litigation, we don't want to end up with fractured relationships. We want a purposeful planning where we are incorporating our family values into the plans and decisions that we're making. What are some of the strategies that we can we can use to integrate this around, and communicate it, around the intended purpose of the wealth?


Sylvia Azoulay: Again, we want it we want to help with disclosure, that we talked about earlier, and we want to help around understandings around the purpose of the wealth. So, where do we start? We start often with family gatherings, and those family gatherings start with discussions around family history and stories to build a foundation in a non controversial way and start to talk about the roots of the family, the legacy, the stories, the history. From there, the values start to surface as well. And you've got everybody honoring the past generation, building on the legacy – that's important to a lot of family's – and you are articulating values.

Then you move towards finding common ground – and the key here is communication. The more we can enhance the skills of the family members around communication, the further we're going to get in finding that common ground, that shared mission, those shared values and that articulation around the purpose of the wealth. You might end up with a family vision or mission statement. If you want to get even more into it, a family Constitution if I could call it that. Guidelines around what everybody agrees are the purpose of the wealth, how it's going to be used, who gets to partake in it and the hopes and dreams for that wealth and for the community as well, because many families are quite philanthropic in their thinking, and they do want to make sure the wealth is also used to enhance the communities that they live in.


Sarah Widmeyer: Are there any strategies of families or wealth creators, and then certainly wealth passer on-ers, can they employ to make them feel more comfortable with entrusting the next generation with the wealth?


Sylvia Azoulay: Yes, so this is a big challenge for many wealthy families, is that discomfort they feel now. And again, it goes to this disclosure, but there's a discomfort that they don't feel that their heirs are able to manage this wealth, they're not ready for it, they're just not feeling right about that. So again, it boils down to communication and it boils down to preparing them.

How do you prepare the next generation? Well firstly a lot of conversations, a lot around articulating the purpose of the wealth and good listening. Good listening skills to hear what they see, how they see the world, so that you can start to get comfort around them as thinking individuals and not children. It's hard to get past that and now see that these are adults with views, and a lot of very bright people, and and lots of ideas that are very good.

Then we also look for opportunities to educate the next generation, which is really important. Particularly financial education and learning about about investing, about budgeting and experiential learning around that. It's not enough to give them a book, or have them go to a lecture, or even listen to a podcast. Those are good, but that's not enough. They need hands-on experiences.


Sarah Widmeyer: How?


Sylvia Azoulay: Well, for example, we could start a philanthropic project for the family. They could find a project or set up a fund and start to make decisions around which charities they're gonna support. What do they learn from that? Well, they learn about money and how the money is going to be used, about accountability for that money, about criteria that you might use to determine which charities are deserving and whether they use that money wisely. You might look at the financial statements of the charity. You'll learn, even more importantly, communication amongst the family and decision-making skills – how do we as a family make the decisions? How do we figure this out, because it can be a lot of really great causes and we can't support all of them? How are we going to narrow this down, and how are we going to make decisions, and what's the decision mechanism we're going to use?

And how do we handle conflict? Conflict management, learning how to handle conflict over things and decision making, and then all the financial skills. Another way you can do it is with a family investment pool. So, you'll create an investment pool and you'll make rules around that, and how we invest, and when do we get to take distributions out of that pool. Of course having an Investment Advisor helps so they learn how to work an Investment Advisor, they learn concepts around investing. There are lots of things you can do, there really are, to start learning about various things that are going to impact the family.


Sarah Widmeyer: In a hands-on kind of way and in a safe learning environment. Very good, very good.

As I mentioned at the top of our podcast, you're part of our Private Family Office at our firm. How can families use these services for a fulsome approach to managing their wealth?


Sylvia Azoulay: Well, we have extensive expertise in our Private Family Office dealing with all aspects of wealth. The quantitative, which I mentioned at the beginning right, which is still important - we do work around that, consolidated reporting of all their assets, a snapshot of where the net worth is and tracking that net worth and its performance, investment tax, insurance, estate planning cash, flow, budgeting – we do all of that.

But we also look at the qualitative aspects: the impact of the wealth, family unity and harmony, communication skills, education, decision-making skills – all those things so the wealth doesn't destroy the family and to prepare the next generation. We take that broad scope view and we do a lot of those things and we provide a forum and a facilitation for family meetings, for the learning and the communication, and all the things I mentioned before. We don't underestimate the family dynamic and how that impacts everything that's going on.


Sarah Widmeyer: Right, so you'll actually conduct the meeting, you'll have an agenda and you will be the facilitator of the meeting.


Sylvia Azoulay: Yes, it's important to have an unbiased facilitator who can keep the issues on track, identify the key priorities that the family has mentioned. We’ll often get feedback ahead of time to build that agenda to see what's important to each member of the family, what do they want to talk about, build that agenda and then facilitate to make sure that the communication is respectful, it's clear, it stays on track and also to learn new skills, help them learn new skills around communication where the dynamic may have been stopping them from going forward. So, now that we can be there to help them communicate in a better way we can get past some of the things that were stopping them, some of the blocks and some of the ways that they were communicating before that was not allowing them to progress forward into some of these deeper discussions.


Sarah Widmeyer: I can think of examples where someone might be dominating the conversation and so others may not feel they have the same voice or they're not being heard. So listening and reflecting back what is sad is probably a great skill to have.


Sylvia Azoulay: Our listening skills are huge, they really are.


Sarah Widmeyer: Communication is 80% your ears and 20% your mouth.

Very good, so our time is coming to an end. Sylvia, again I'd like to thank you for joining us today. Is there anything else that you'd like to add or any other thoughts that come to mind that you'd like to share?


Sylvia Azoulay: Well I think all I'd really like to say is start now, seize the day. Don't just focus on the quantitative aspects of your wealth. Work with experts to diminish that fear and the trepidation around the next generation and start helping them to get ready for the wealth.


Sarah Widmeyer: Excellent. It's so important to plan with purpose in order to ensure the longevity of our wealth that you have accumulated.

If you'd like to learn more about how to apply purposeful planning into your wealth strategy or looking for ways to help you think about how wealth generationally can be passed successfully on, visit our website for articles and videos, or talk to a Richardson GMP Advisor about how they might be able to help you and your family. Remember to subscribe to Conversations on Wealth wherever you get your podcasts and please follow us on LinkedIn for a broad range of information on wealth strategies. Thank you all for listening, thank you Sylvia, and join us again next time.


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