The Best Process to Transition Wealth to the Next Generation Starts with People
People, Purpose, Process. At Park City Family Office, we believe that human capital is often the most under-valued asset on either a family’s or a company’s balance sheet. Indeed, the importance of human capital and the ability to recruit, train and retain talent has become a hallmark for major corporations and a subject of increased regulatory scrutiny. Families do not have the ability to “pick” from a pool of candidates, but many go through great efforts to hone their human capital by setting expectations, leading by example, and fostering education.
For those not familiar, Human Capital is an intangible asset or quality that includes things like education, training, timeliness, skills, and things even harder to put a value on like loyalty and commitment. The idea of human capital recognizes that not all labor is equal.
Our experience is that the most successful families start by taking an “inventory” of the People who make up their family- and that is why it is the first component in our motto; People, Purpose, Process. Purpose and process are secondary, they can be researched, learned, and taught, however, the “raw material” in any family is the “People” component.
A recent poll we took suggested that many of our clients feel that it should not be axiomatic that wealth will be inherited. Instead, there is a growing sentiment that wealth will be passed along to the next generation if they have the capability of being good stewards of that capital and can support a shared vision of the family’s legacy. As such, family patriarchs or matriarchs may wish to ponder the following questions:
1. What values lead to wealth creation?
2. How can I identify and hone similar values in family members?
3. What is the definition of success for the family’s legacy, and can I achieve multi-generation alignment?
4. If a business is the source of wealth creation, does the next generation of family members have the intelligence, passion, work ethic, and tenacity to sustain or grow this business?
In sum, the ability to sustain family wealth, provide for others, and do good in the world all rests on PEOPLE. Families need to “invest” in their human capital to ensure that they have the “right stuff.” These talents may or may not be innate, but they can be taught and encouraged. Once the PEOPLE part of the equation is solved, it will inform and shape PURPOSE, then PROCESS both of which we plan to address in upcoming briefs.
Park City Family Office has the experience and resources to start these conversations and to provide guidance as family’s traverse this journey. We hope this missive helps you understand that our process is People, Purpose, Process, – in that order, for a reason.
Morgan & Bruce