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FAMILY WEALTH IN CRISIS

The turbulence in world financial markets confronts wealthy families with acute crisis management.

Some will call upon wise family organization to see them through. Family companies will rely on gifted outside directors. Family offices will coordinate crisis input from trusted advisors. Family councils will provide a vital forum for family deliberations and airing of individual concerns.

Families who are not well organized will flounder in these difficult times. A rising tide lifts all boats but draining the lake exposes the debris on the bottom. Families may relate well in rising markets but old discontents can emerge as markets subside and wealth shrinks.

Traditional outside boards, family offices or family councils can require a year or more to get up to speed. But the current turbulence demands families make critical decisions by year-end, by next week -- by yesterday. Without outside directors, family-only boards of directors will lack the perspective. Without a family office, there’s no mechanism to coordinate advisors’ input. Without family councils, family discussions may become heated and inconclusive.

There are viable interim alternatives. Experienced outside directors of other family companies can be included in family-only board meetings and participate fully in board discussions, but without a vote. Qualified persons can be retained to coordinate family office functions necessary to negotiate the crisis. Professional facilitators can guide productive family wealth discussions.

The success of any of these interim alternatives depends upon:
  1. Seasoned expertise. Football games are won or lost in recruiting. Family wealth in crisis demands the pros.
  2. Crisis focus. There’s one agenda item: successfully negotiate the crisis. There is no time to reinvent the company or redesign the family.
  3. Short term. Interim means interim. When the crisis subsides the interim alternative ceases. It doesn’t linger. Afterwards the family may want to consider adding permanent outside directors, creating an ongoing family office, or formalizing a family council.
  4. Advisory only. Crisis management is risky and uncertain. These interim alternatives maximize the family’s opportunity to access and organize important advice in a time of crisis and to enhance the quality of family decision-making under fire.

Each of these interim alternatives can be installed on short notice, and that’s a good thing. Crises aren’t long on lead time.

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