Why You Should Manage Your Wealth Like A Business
Why You Should Manage Your Wealth Like A Business
A more structured, business-like approach to investing, can benefit families across the board, regardless of the amount of wealth they hold.GETTY
The number of high-net-worth and ultra-high-net-worth individuals (UHNWI) is growing. A considerable percentage of these populations is made up of entrepreneurial families who’ve created wealth by developing their businesses. For the majority, there is a distinct contrast between how they manage their business versus how they manage their wealth.
What’s perplexing is that the very entrepreneurs who’ve spent years tirelessly professionalizing their businesses and generating wealth, often pay considerably less attention to ensuring that their personal wealth is protected and productive once their businesses are sold.
Numerous factors, both internal and external, can play a role in the erosion of family wealth. These include lack of strategic planning and long-term multi-generational vision and purpose development, fragmentation of inheritance, excessive risk-taking and bad investment decisions, unresolved family disputes and division, inflation, taxation, a failure to develop an entrepreneurial spirit across generations, as well as an insufficient separation between business and personal wealth.
Despite the widely-held “Three-Generation Wealth Rule” axiom, a total loss of wealth by the third generation doesn’t have to be inevitable. However, if family wealth is to continue to grow and survive across generations, it should be managed like a business.
What does managing wealth like a business mean?
Families that own large businesses are usually extremely engaged in these operations, both physically and emotionally. Once these businesses are sold, familial wealth, in real numbers, remains the same. The only difference is that instead of owning physical businesses worth specific monetary values, the families hold the same values within their bank accounts. Still, according to Jan van Bueren, Co-founder and managing director of UBP’s FOSS Family Office Advisory, how the proceeds are engaged with is often physically and emotionally different from that of a real business.
