Client Affairs

INTERVIEW: Governance And Education Are High On The Agenda At GenSpring

Eliane Chavagnon Editor - Family Wealth Report 13 December 2013

INTERVIEW: Governance And Education Are High On The Agenda At GenSpring

Family Wealth Report speaks to Daisy Medici, GenSpring's managing director of governance and education, about the firms recent push in these spaces.

GenSpring Family Offices, the ultra high net worth wealth management firm, recently expanded its family governance and education resources in a move which it believes is symptomatic of a rise in demand among clients for these services.

The move by GenSpring also reflects the idea that in addition to the heavy emphasis on the financial side of wealth management, there is a trend towards an increased focus on the human and intellectual capital and the “softer” aspects.

Family Wealth Report spoke to Daisy Medici, managing director of governance and education, about some of the related trends she has seen during her nearly eight-year tenure at GenSpring and some 20 years in the wealth management industry.

Medici began by saying that the initial move by GenSpring to appoint her as director of governance and establish the director of education position around eight years ago was a “giant step in our field of business” because most other firms were subcontracting that service.

Medici's role now includes oversight and management of the education and governance resources, which now includes 11 governance and education specialists in total. GenSpring also named family wealth advisors David Herritt and Sheila Stinson as family governance director and family education director, respectively.

“The best part is that what we’ve done is move to a regional capacity. We have 12 offices across the US and now have people across our footprint that are trained and experienced in delivering education and governance. We’ve been in the process of developing them for about five years,” Medici said.

As previously outlined by GenSpring in its ten elements of a family office, the term “governance” takes into account: family meeting facilitation; family mission statement development and implementation; family governance system development, including development of a family constitution; and succession planning.

Education, another important element, comprises: development of individual and family education plans; delivery of educational programs focused on all aspects of family wealth; next generation education; trustee and beneficiary mentoring; and learning events.

Financial literacy

One of the main trends Medici said she’s seeing is increased awareness among families regarding the need to ensure that the next generation is financially literate. Indeed, the financial crisis has emphasized the importance of financial literacy among clients and their heirs, as demonstrated by a number of firms that are now offering next generation educational programs and have made related hires.

“Parents are now coming to us because they know that they need to start a process for doing this,” Medici said. “We can provide that education for both children and young adults, but we also have clients in their forties and fifties who have raised their hand to be mentored around financial literacy. That’s one area where there is growing awareness.”

Families are different in how much wealth they allow their children to access and at what age. Some individuals might have access to trust income at very young age, for example, whereas others are living off the small income from their jobs while at college.

The first thing to do, Medici said, is to understand their current lifestyle and relationship with money. Start with the fundamental questions: how much money do they have and what are their sources of income? From there the firm can delve into personal money management, which includes budgeting.

“We consider it a responsibility shared by all parties,” Medici said. “Our advisors who deploy education programs have to make sure it’s engaging. When working with a young person, we use their own wealth and bills to make it as real for them as possible.”

The concept of family governance

Medici said she’s also noticing a growing awareness about the very concept of family governance.

“I think industry literature has helped us get to this point,” she said. “There is much more written and published about the concept of family governance. We have seen a greater demand in the last two or three years but I do think the whole financial meltdown that we experienced in 2008 created a ripple effect.”

Essentially, people are becoming more aware of their wealth and, importantly, advisors are encouraging their clients to focus on more aspects of it.

“For every family we’ve worked with, I would say eight in ten had not heard of the term family governance. For the most part, they had to be taught about what it all means,” Medici said.

Giving an example of this, she noted how, for decades, the focus among families on estate planning was around tax efficiency. But, now, they’re savvier when it comes to the impact that their estate planning is going to have on the next generation. When passing down assets through joint ownership, for instance, families are starting to think about and plan for how the next gen will make decisions with regard to the shared assets.

Women in wealth

Another trend related to governance and education – and indeed the industry as a whole - is the role of women in the wealth management process.

Highlighting that women will control two-thirds of wealth in the US within the next ten years, Medici said that advisors have really started to talk to their female clients about the importance of understanding their wealth. “But there are a lot of reasons why this is so important,” she said.

Importantly, it is crucial to understand that men and women have different concerns, although each of these are of course important.

For example, during a prospective client meeting involving a couple, the man will tend to appear more “energized” when discussing the financial aspects and investment side of things. However, as soon as a question is raised about the family, the children in particular, and whether or not there is any planning in place to bring them into the conversation about the family wealth, that is when the woman typically leans forward, Medici said.

Incentivizing entrepreneurial activity

On a final note, Medici has observed that a growing number of both existing and prospective clients are interested in finding out ways to promote entrepreneurial activity among the next gen.

“We are always talking to families about letting the financial capital sit in service to the continued development of the human and intellectual capital of the family,” she said.

Families could create a “family bank,” for example, which she explained is a fund structure that would provide low-interest loans as seed capital for an entrepreneurial venture, providing, of course, the proper criteria and governance of the family bank has been put in place.

Meanwhile, those in their twenties, thirties and forties are demonstrating a stronger willingness and desire to talk about the emotional impact of wealth.

“I would call it a sea change because wealth has always been the biggest elephant in the room for families,” Medici said.

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