Mar 19, 2024

A Guide to Facilitating Family Financial Conversations

Mar 19, 2024
Mark T. Johnsen
Chief Wealth Architect, CEO & Founder
In my 30 years as a wealth advisor, there are few conversations I have observed that create greater trepidation for clients than talking to family members about money. Because of that, we decided to hold our first two Wealth Architects University (WAU) events over a decade ago to address this subject and its nuances.

I felt it would be helpful for our clients to have a simple 10-point framework for structuring these conversations and navigating them with intention. I shared at that inaugural WAU how my perspective had been shaped by my own life events as a youth. My mother had not been prepared to deal with our family finances when my father was suddenly diagnosed with a brain tumor and died of lung cancer. We had not talked about any of this as a family and it caused a lot of stress, which instilled in me the importance of these ongoing discussions for the well-being of everyone involved.

A few years ago, I was asked to talk to the American Bankers Association in San Francisco about the framework I had developed for WAU and some best practices for facilitating these financial and emotional family-money conversations. I realized, in speaking with them, just how prevalent questions about navigating these discussions with family had become.

So I thought it would be helpful to delve a little further. Below I address how to approach these conversations most effectively by fleshing out the purpose behind the meeting, the people who should be involved and the action plan.

PURPOSE

As you start to think about holding a family-money conversation, start with your “Why.” What is your vision for the meeting, what values do you want to share and what goal or outcome do you hope to achieve?

Vision – Setting clear intentions is important. Ask yourself why you are calling for this meeting in the first place.

      • What do you hope to achieve?
      • Do you want your family’s input or do you simply want to educate or inform them?
      • Do you have information you need to share, such as a decision you have made or an anticipated change in your family’s financial or health circumstances?
      • Are you open to input or feedback?
      • Is there a chance you might change your mind during this meeting based on what you share and receive back?

Answering these questions beforehand will help you articulate your intention and provide the foundation for a fruitful discussion.

Values – Think about and articulate the core values that are important to you and what you are trying to convey through this conversation. Here are some examples:

What values do you want to communicate that can’t be done through the language of an estate plan or will?

For example, a large charitable bequest or leaving assets for heirs to give away to charity might be misunderstood as not trusting or loving your heirs because you are not leaving the money to them. Perhaps you want to convey the sense of duty you feel to give back to your community with your good fortune and want your heirs to continue to share that value and do the same when you are gone.

What are the values behind some of the financial decisions you have already made?

For example, having your children get a job in high school or college even though you could have fully supported them financially could be expressed as “we want you to learn to be self-sufficient – to learn the value of earning your own money and the tradeoffs to do so once you graduate.” Or perhaps you intend to leave assets in trust to your children so they have some asset protection in the event of unforeseen situations (e.g. getting sued or divorced). It can be helpful to articulate to them that you structured things the way you have because their security is one of your core values.

These subjects are nuanced and often very loaded. There can be gray areas that often leave people feeling bad if they lack a deeper understanding of the values behind certain decisions. In my case, I will never know why my father chose not to have life insurance for our family, forcing my mom back to work after 16 years at home raising children. It could have been a core value he espoused from his own life experiences, or it could have simply been neglect and being uninformed. Either way, we will never have answers to these questions. I believe it is better to not leave these things unsaid. Clarity of intention is powerful for both the sender and receiver and articulating our values is the first step in that process.

If you find you’re getting pushback from family members when you bring these conversations up, foster a positive dialogue by talking about the experiences and values you hold–and that your family collectively holds–that led up to this conversation. If you thoughtfully and transparently explain your goals for the conversation, your family members have the opportunity to voice their opinions and possibly get on board with an idea they may have initially seen in a negative light.

PEOPLE

Determining the purpose and nature of the meeting will help you figure out who needs to be part of that particular conversation and what the expectations for those who are participating might be.

We need to ask: Do I want to conduct this conversation myself or do I want to include someone outside of my family, such as an advisor, to help facilitate an effective conversation? Secondly, what would be an ideal place to have this conversation so that everyone feels most comfortable?

This can be the most challenging part, as we may feel like other family members are not ready to have the conversation, even if we are. We often have the perception that our family members are too young or too old or it’s not appropriate to share this level of detail with them. I believe starting the conversation in some form is better than not as it allows us to step into the other party’s perspective. We can take baby steps toward our goals just by being vulnerable and starting the conversation to see what unfolds.

If you have young children, you may feel some conversations are appropriate for them to join, while others – walking through a parent’s advanced health care directive or last will and testament, for instance – might be too complicated or emotionally triggering. You may come to the conclusion that certain discussions should be kept between you and your partner and others make sense to extend out to your children, siblings and/or parents.

There may be a discussion in which you do not want even your partner or some other beloved family member to be present because you feel it could be detrimental. For example, you might not want to share certain financial information with a loved one with severe dysfunction, a substance-use disorder or a gambling or shopping addiction. While that may feel uncomfortable or unfair, as the initiator of the meeting, that is your prerogative.

You could decide to involve a professional advisor as your facilitator (e.g., a financial advisor, estate attorney or tax advisor) if you feel confident in their leadership. There may also be an outside party you’d like to include because of a vested interest, such as a charitable organization you plan to substantially support. Think about who would be best to have around the table for this discussion to provide the most clarity to what is being discussed.

Some benefits of having a professional facilitator are:

      • They can help you prepare for the conversation
      • They can offer an objective perspective
      • They can be an equalizer for the group; everyone can be a neutral participant
      • They can help explain complex financial topics
      • Their outside presence may serve to assuage moments of emotion or tension among the family

As you prepare for a given conversation, whether facilitated or not, take care to consider the expectations of the other parties and be curious about what they have to say. After you have expressed your intention for the discussion, first seek to understand, then to be understood. Encourage every participant to have a voice. Asking questions opens doors, brings new information to the surface and demonstrates to others that you value them. Check in with your family about how they feel, if they understand and if they feel understood. Ask any elders or outside advisors who may be present if they have wisdom they would be willing to share based on their experiences and successes.

PLAN

It’s always best to wrap up your conversation with an agreed plan of shared responsibility with action items. Make sure everyone is assigned an appropriate next step and set the expectation that you will be checking back with them on their progress within a specific time frame. Appropriate next steps will of course depend on the subject of the family meeting and what came up in conversation.

Examples of post-family meeting assignments (dependent on meeting topic):

      • Research a charity to be a potential beneficiary of the family’s giving
      • Complete important outstanding paperwork and share it with applicable family members
      • If someone disagreed with an idea brought up in the meeting, return with a “pitch” or suggestion for an alternative approach

While it may feel uncomfortable to give your family members “homework,” if presented in the right way, they may see it as an opportunity to play a bigger role in the family’s decision-making, become more invested in their own health and wellbeing or find something they are passionate about championing. Giving them some agency over family financial decisions and their future can foster an emotional investment and build confidence.

COURAGE, CONTROL, CONSISTENCY

Sensitive conversations like these can bring about feelings of dread or stress. It’s natural to have concerns and emotions. You’re potentially entering new territory with uncertain results and you may fear stepping on toes or setting unfair expectations. I strongly believe you will be successful as long as you: 1) find the courage to have the conversation in the first place, 2) keep in mind you are only in control of your own words and 3) make it a consistent practice.

Practice and learning from that practice is the key to growth and eventual mastery. Focus on specific, timely financial topics as they come up in your lives and make  family-money conversations a regular occurrence. While the actual subject at hand will vary, the same framework will apply and I encourage you to revisit it as needed.

At Wealth Architects, we believe that to construct a solid financial-life building, you need a clear vision; a strong foundation of values; and a blueprint to help determine which people, strategies and tools you’ll need in order to make that vision come to life. The same applies to leading an effective family financial conversation. When we start with a strong foundation, we build structures that can weather future challenges.

So instead of avoiding it altogether or getting sidetracked by the discomfort, think about ways you can come to win-win solutions and keep this framework at the forefront of your mind. The family-meeting process will get easier with consistency over time. I hope this guide provides you some peace of mind and, ultimately, helps you arrive at the successful outcomes you seek.


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