Legacy planning done right
Legacy planning done right
Legacy planning is about passing on what you know. When people plan a legacy, the most important thing they want to bequeath is values and life lessons, not personal assets.
A rich opportunity, therefore, awaits advisors who revisit vision and values in the family, thereby re-establishing and developing trust on an inter-generational basis, said Enzo Calamo, CEO, Lugen Family Office Inc ., speaking in the Distinguished Advisor Conference 2010 in Orlando, Florida.
Calamo shared key principles advisors can use in helping families build a dynasty. “We have to rethink what we’re doing when it comes to legacy planning and helping families actually build their family dynasty,” he said. “Only 10% of what advisors do - including estate planning, family planning, tax planning, investment planning - includes a direct impact on legacy planning,” he said.
Calamo’s insights underline the need for exploring an additional way to engage clients while embarking upon legacy planning. A household business is a complex model and for that reason family dynasty planning provides extensive moving parts. An advisor’s role, he said, is critical in those parts.
Among the issues Calamo drew attention to is the client`s sense of propriety that makes it hard for the business owner to let go. The possible lack of confidence in the ability of the next generation to run the business successfully presents another hurdle.
Very often these affairs get further complicated because of sibling rivalry. “We face a lot of sibling conflicts; there’re also siblings who just don’t want to be involved in the business,” he said.
Longevity doesn’t make it any easier, particularly when there are more than three generations to utilize. Calamo said increasing life span is revolutionizing legacy planning like never before. “We have four, five, and six generations living at the same time,” he said. “In fact, researchers say that the person who’s going to live 150 years is already born today.”
Calamo stressed the requirement for going beyond conventional planning tools. “As advisors we may look at it from an estate planning, business succession planning, insurance, investment; but there’s lots of other tools with regards to legacy planning.” A lot of tools employ human psychology and knowledge of family dynamics.
Emotion comprises a big part of legacy planning. An economic advisor’s job is to be grateful for that and keep things inside the realm of reason.
“When you’re dealing as an advisor with these clients, you’re the voice of reason,” said Calamo. “Their brain will always focus on their desires and what’s vital that you them, but you’re the ones who have to also let them know there are still financial and business principles that have to be followed. “
Another emotional aspect that compromises financial and business principles is the mistaken belief that business should be handed down to the next generation. “A business should always be for sale,” asserts Calamo reminding that longevity isn’t the reason behind setting up a business.
“As far as I remember the core of the business is to make a profit; to achieve success, to grow.” Longevity is but a side event,” he said. “Business should always be for sale and business people should always remember that “succession planning means without you”. Many people who run a successful business notice as important to be involved every step of the way and are usually controlling. The reality is, you’re dead, or you’re retired, it can’t be based on you.”
Philanthropy, he said, was another important, but underutilized, competent of legacy planning. “The reason a lot of wealthy people do philanthropy is because it’s a great way to get the family to begin working together and sharing ideas.” It forces members of the family to start working together.
Calamo drove the purpose home rather philosophically. “Remember, financial success and a strong business cannot create a strong family, but a powerful family can build a sustainable business which brings financial success.”
Legacy planning is about passing on what you know. When people plan a legacy, the most important thing they want to bequeath is values and life lessons, not personal assets.
A rich opportunity, therefore, awaits advisors who revisit vision and values in the family, thereby re-establishing and developing trust on an inter-generational basis, said Enzo Calamo, CEO, Lugen Family Office Inc ., speaking in the Distinguished Advisor Conference 2010 in Orlando, Florida.
Calamo shared key principles advisors can use in helping families build a dynasty. “We have to rethink what we’re doing when it comes to legacy planning and helping families actually build their family dynasty,” he said. “Only 10% of what advisors do - including estate planning, family planning, tax planning, investment planning - includes a direct impact on legacy planning,” he said.
Calamo’s insights underline the need for exploring an additional way to engage clients while embarking upon legacy planning. A household business is a complex model and for that reason family dynasty planning provides extensive moving parts. An advisor’s role, he said, is critical in those parts.
Among the issues Calamo drew attention to is the client`s sense of propriety that makes it hard for the business owner to let go. The possible lack of confidence in the ability of the next generation to run the business successfully presents another hurdle.
Very often these affairs get further complicated because of sibling rivalry. “We face a lot of sibling conflicts; there’re also siblings who just don’t want to be involved in the business,” he said.
Longevity doesn’t make it any easier, particularly when there are more than three generations to utilize. Calamo said increasing life span is revolutionizing legacy planning like never before. “We have four, five, and six generations living at the same time,” he said. “In fact, researchers say that the person who’s going to live 150 years is already born today.”
Calamo stressed the requirement for going beyond conventional planning tools. “As advisors we may look at it from an estate planning, business succession planning, insurance, investment; but there’s lots of other tools with regards to legacy planning.” A lot of tools employ human psychology and knowledge of family dynamics.
Emotion comprises a big part of legacy planning. An economic advisor’s job is to be grateful for that and keep things inside the realm of reason.
“When you’re dealing as an advisor with these clients, you’re the voice of reason,” said Calamo. “Their brain will always focus on their desires and what’s vital that you them, but you’re the ones who have to also let them know there are still financial and business principles that have to be followed. “
Another emotional aspect that compromises financial and business principles is the mistaken belief that business should be handed down to the next generation. “A business should always be for sale,” asserts Calamo reminding that longevity isn’t the reason behind setting up a business.
“As far as I remember the core of the business is to make a profit; to achieve success, to grow.” Longevity is but a side event,” he said. “Business should always be for sale and business people should always remember that “succession planning means without you”. Many people who run a successful business notice as important to be involved every step of the way and are usually controlling. The reality is, you’re dead, or you’re retired, it can’t be based on you.”
Philanthropy, he said, was another important, but underutilized, competent of legacy planning. “The reason a lot of wealthy people do philanthropy is because it’s a great way to get the family to begin working together and sharing ideas.” It forces members of the family to start working together.
Calamo drove the purpose home rather philosophically. “Remember, financial success and a strong business cannot create a strong family, but a powerful family can build a sustainable business which brings financial success.”
