Family Governance: Building a Legacy Through Management and Communication

By Michael Schneider on February 19, 2025

Managing wealth across multiple generations can be difficult. In a traditional company, there are rules and guidelines that make up corporate governance. With families, the idea of governance can still apply, with just a slight twist. There is still going to be an overarching framework of policies, structures, and best practices in place that will allow families to make uniform decisions and give the family the best chance of future growth. We like to look at Family Governance as having two parts: Management and Communication. We are going to break down those parts below:

Communication:

• Roles and Responsibilities: One of the hardest parts about managing wealth across multiple generations is defining roles and responsibilities. It is imperative that the right family members are put in positions to succeed. For instance, someone who enjoys following markets could have more a wealth management role and someone who is more of a people person could help with organization and group discussions. What is also important is to make sure that everyone involved understands what is being asked of them and that they are willing to do the work.
• Decision Making: While many family members can be involved in the overall management of the family wealth, there should be rules in place for not only who can make decisions, but also how decisions are made. Following a specific guideline for rules regarding investments, distributions, spending, etc. can ensure that the family wealth is being used in ways that everyone is comfortable with.
• Conflict Resolution: In any family environment, whether it is sibling rivalry or a family business, there is always going to be some type of conflict that arises. At the end of the day, breaks within the family are the last thing that anyone wants. Having an agreed upon process for resolving conflicts can provide a neutral platform for parties to disagree and work out issues.

Management:

• Wealth Management: Managing a family’s financial capital can take many forms. If the family wealth is tied to a business, the management aspect is running that business and identifying objectives, whether they be growth or cash flow oriented. Wealth Management can also include working with different money managers and advisors to help build a diversified investment portfolio. The important thing within this part is to understand what the family needs and how much risk the family can tolerate.
• Business Succession: Business Succession doesn’t necessarily mean who will literally take over a family business. It also means who will step into different roles within the family once matriarchs and patriarchs pass on. It is important to determine who wants to take on more responsibility and who is capable of making the right decisions for the family.
• Accountability: Within Family Governance, accountability is knowing that everyone is looking out for each other’s best interests. It is also understanding that by taking on a role, you have a responsibility to the rest of the family to put forth your best effort. As the Three Musketeers would say, “All for one, and one for all”.

Family Governance is not something that is set in stone and depending on the situation, some of the discussed pieces of framework may or may not be necessary. The key for success is that everyone in the family is on the same page and that goals are clearly communicated and agreed upon. If you would like to discuss how Family Governance can work with your family, please reach out to your Lerner Group advisor.