Latest / Making Cents / How Some Kiwi Families Keep Their Wealth for Generations

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How Some Kiwi Families Keep Their Wealth for Generations · Making Cents

• 0:00
  Building a comfortable money life for yourself is one thing.
• 0:04
  Building wealth that could outlive you completely different game.
• 0:09
  The problem is, if you get this wrong, it's not just the money that could disappear.
• 0:13
  Families often fall apart trying to figure out the money.
• 0:17
  Andrew Clements is a private wealth and succession lawyer from Grayson Clements.
• 0:21
  He's spent his career alongside some of the wealthiest people you can meet, helping them figure out how to make that wealth last without ripping their family apart.
• 0:33
  But it's not just the uber wealthy who need these tactics.
• 0:37
  It's all of us who want to build a better life for our kids.
• 0:41
  The most powerful thing Generation One can do for Generation two is to equip them for the responsibility of whatever it is they're receiving.
• 0:51
  Because Andrew reckons we should think about wealth differently once we take a wider view on it.
• 0:57
  How to handle the dollars and cents becomes clearer.
• 1:00
  You're investing that attitude and mindset into your kids too, right?
• 1:05
  And it's that attitude and that mindset that is as much resources.
• 1:09
  Here's a thousand dollars to help with that business.
• 1:12
  So welcome to Making Sense.
• 1:13
  It's the podcast for people who want financial freedom without giving up their coffee.
• 1:17
  I'm Frances Cook, financial journalist and fellow financial freedom seeker who makes money simple for you today.
• 1:25
  How to build generational wealth even when you're not a billionaire.
• 1:29
  This episode of Making Sense is supported by Odoo, the all in one solution to make running your business smoother and more affordable.
• 1:36
  Go to odoo.com that's odoo.com for more.
• 1:41
  I want to help as many people as possible build a better life for themselves by understanding and taking control of their money.
• 1:48
  You can be part of how that happens.
• 1:50
  First, make sure you're subscribed wherever you like to listen, whether it's YouTube, Apple Podcasts or Spotify.
• 1:57
  And then send your favorite episode to a mate.
• 2:00
  Then we can all level up with money together.
• 2:01
  The show grows and I can keep bringing you the money info that actually moves the dial.
• 2:08
  Welcome back, Andrew.
• 2:09
  Look, the last time we had an amazing chat about some of the great lessons we can learn from your ultra high net worth clients, but we touched a little bit on their family dynamics and I got absolutely swamped
• 2:21
  with people who were like, yes, yes, tell us more about handling money within the family and the idea of intergenerational wealth.
• 2:29
  So had to bring you back.
• 2:31
  Thank you so much for coming back.
• 2:33
  When you start talking to clients because of course your clients are often in a different sort of air than the rest of us.
• 2:41
  You do deal with people who have seen more money than the rest of us ever usually are around.
• 2:46
  But I do think there is that universal human thing of money can make and break relationships.
• 2:54
  So when you start talking to people about money, about their family, where do you even start that conversation?
• 2:59
  For me, in my experience, it doesn't matter whether you're talking with mum and dad, Kiwi or an ultra high net worth family, the challenges are all the same.
• 3:08
  At the end of the day, we're still people and we still have a family.
• 3:12
  And I've found the best place and the safest place to start the conversation is around purpose and values.
• 3:21
  And it's been interesting because I've had some people go, why would I want to talk about values?
• 3:26
  And it's been quite a interesting journey going through those sorts of conversations with people because of course it takes them back to the heart of who they are as a family.
• 3:37
  When it comes to helping them advise around the transition processes moving forward, it means you can do something that's fit for purpose.
• 3:46
  It's all about them.
• 3:48
  We talk about how in most areas of law you're dealing with some form of reaction.
• 3:56
  You're either being put in a position or you have a particular need that needs to be addressed.
• 4:01
  This is one of those really unique areas where every family member in New Zealand, whether they're wealthy or not, have the same power and that is the power to decide how they're going to pass things forward.
• 4:14
  I love that, that perspective where you're spot on.
• 4:18
  So much of law is situations landing on your doorstep and deal with it.
• 4:23
  And it's probably a fairly large situation and yet in this one you're getting the opportunity to think ahead, to start planning, to say what do I actually want to see happening and how are we going to put some
• 4:34
  structures in place for that to work.
• 4:37
  The idea of laying out sort of your values and your purpose though, those are the questions to ask people.
• 4:42
  And I imagine a lot of people, they might feel like they have an answer.
• 4:47
  It's often something I think you have to do a bit of soul searching.
• 4:50
  How do you prompt people along that to find truly what they value and what they want their purpose to be.
• 4:56
  It's giving them permission to go away, do some homework, do some thinking and to come back, but to understand that it's all to do with empowering you to make the best decision in their situation.
• 5:09
  When it comes to structural design, particularly when it comes to succession modeling, there are two principles that you can't get away from.
• 5:16
  That is Philosophy breeds methodology, and purpose informs design.
• 5:22
  So if you can cover off who they are and how they tick, what's important to them, how they roll as a family, then that gives you real clarity on the methodology that you can approach with them.
• 5:35
  It's going to be fit for purpose because it's going to not change who they are, it's going to enable who they are, and it's going to mean that they can define and set those transitions and do it in
• 5:47
  a way that is meaningful specifically for their family.
• 5:50
  It's about giving them the power to make those calls.
• 5:52
  Do you have any examples you can give us in terms of how you've had that values conversation and how it might inform someone's approach?
• 6:00
  One was from a young tradie couple who didn't have too much to rub together, but they had three lovely daughters.
• 6:08
  And so what we did is we sat down and had these sorts of conversations, just talked about how do you.
• 6:13
  What are those conversations around the dinner table?
• 6:16
  What is it that you find important?
• 6:19
  Because we're talking often about performance, Saudis.
• 6:22
  And so classic examples to say, someone, right, I'm going to take a thousand dollars of yours and give it to one of the kids.
• 6:28
  They can go blow it.
• 6:29
  Oh, no, no, no.
• 6:30
  Ah, right.
• 6:31
  So we've got a value here, right?
• 6:35
  And people go, but why do we need to discuss this?
• 6:38
  And I said, because as a family, moving forward, neuroscience and psychologists will tell us that every upset is a rule broken.
• 6:47
  We've got to tease these rules out.
• 6:49
  What are these rules in your family?
• 6:51
  Because if we don't know what they are, we might be setting you up for failure.
• 6:55
  And so this couple pulled out these values, and one of them was about helping each other and resourcing each other.
• 7:02
  And we go 14 years now, and their daughters own a property together.
• 7:07
  They've helped them buy a home.
• 7:10
  And this is just from a couple from modest means and modest background.
• 7:13
  But just by deciding as a family and having these conversations early on, they've worked out how they can do it.
• 7:20
  And it's really great because it's an example of people starting with very little and seeing them build and grow.
• 7:28
  And the lovely thing about this particular family is they're building and growing in a way that will transition naturally to the successive generations.
• 7:36
  We've been able to set it up right from the start, and that's really cool.
• 7:40
  Other ones, you sit there and go, right, we'll get a counselor in, shall we?
• 7:43
  Yeah, I can imagine that you would run into some things where you'd almost be playing counselor a little bit yourself sometimes.
• 7:52
  I mean, do you ever have moments where you're sitting there and you're trying to work with people on this and you're thinking, oh, you've come in here saying you want to build intergenerational or multi generational wealth.
• 8:03
  And now the way we're having this conversation, I don't know if that's gonna work.
• 8:09
  Do people get things wrong in their sort of approach to multi generational wealth?
• 8:14
  Often it's mismatched expectations.
• 8:18
  See one of the biggest challenges in New Zealand, we seldom have these sorts of conversations.
• 8:24
  And so often what happens is you have.
• 8:27
  If things come to light after the fact, there's been expectations built that we're going to do this or I'll get this or I'll inherit that.
• 8:35
  And so when you sit down and having these conversations going, let's re prostinate the conversation, let's look at it from a different perspective, let's actually understand who you are as a family, where you want to go.
• 8:47
  Sometimes it's actually the next generation that have to give up some of the sacred cows, not the parents.
• 8:53
  And that can be quite a struggle.
• 8:56
  That can be quite an interesting journey to go through.
• 8:58
  And so then it's about giving them some tools and helping them understand that they will have voice as part of this process.
• 9:06
  And so it's separating then out assets and operations and family and saying, right, how do we actually set some models and give you some tools to work through this process?
• 9:15
  And we had one family where on the face of it, Mum and dad said, oh, our family are already good.
• 9:21
  We're all on the same page.
• 9:22
  Started the conversation.
• 9:24
  They weren't on the same page, right?
• 9:26
  But we worked through the process and we created a family advisory board.
• 9:30
  And we put the fan in and said, right, we're gonna build strategy.
• 9:33
  It's gonna take two years, but we're gonna build strategy.
• 9:36
  So it was a long time, right?
• 9:37
  They thought they'd come and just sell their business to one of their kids.
• 9:41
  And instead I'm getting them, challenging them to embark on this process.
• 9:45
  And it was the mom who had the courage to do it.
• 9:48
  And credit to her, because now, 10 years down the track, she has a family who absolutely look forward to catching up with each other.
• 9:58
  They come from different parts of the country and they have a meeting as a family every year.
• 10:05
  And I know this because they all come at various times of that day, come charging through my office, catching up, and all the kids come with them and they're all excited to see the grandparents.
• 10:14
  And those are really, really cool.
• 10:15
  And that's been consistently the journey for many years now.
• 10:19
  And I look at that and I think that is so cool because we've taken a family who had all the right values and we've created an opportunity for them to succeed because we took the time to understand who
• 10:32
  they were and to help them be part of designing the solution.
• 10:37
  I love that.
• 10:37
  Okay, so when you were dealing with that, why was it a two year plan?
• 10:42
  Like, what sort of things did you have to get in place to build a structure, to change course?
• 10:47
  So it's going through a process.
• 10:49
  So when we're dealing with private wealth, one thing to realize is that wealth doesn't come from the word money.
• 10:56
  Wealth comes from the word wellness.
• 10:58
  So we're actually talking on a wellness journey here.
• 11:01
  Right.
• 11:01
  One of the world authorities on succession is a guy called James Hughes, and he talks about five capitals and he says, look, lawyers and accountants, we always cut to financial questions, but we forget the human, the intellectual, the
• 11:14
  social and the spiritual.
• 11:15
  And he said, really all this is about is a fuel.
• 11:18
  If you think of it like a plant, you plant it in the ground.
• 11:20
  That's fueled to grow these areas here.
• 11:22
  It's a really nice way of seeing it.
• 11:25
  And so two years is great because it allows, as a process, it allows the family to actually onboard, to integrate with it and to actually come up with their own flavor and their own input to it and to
• 11:37
  work through all the sorts of questions that come up and the odd road bump that see.
• 11:41
  And because you're journeying with them over that two year period, you're able to work through that, talk through things and just be available as a sounding board.
• 11:49
  And it's so cool because then you've got leaders.
• 11:53
  You don't just have people who are following along a prescribed path of paperwork.
• 11:59
  You've actually got people that own it.
• 12:01
  They own their own vision, they own their own identity, they own their ability to frame their own legacy that they want to leave.
• 12:08
  So that when the next generation step up, the heritage they're receiving is beyond just financial resource.
• 12:16
  It's so much more than that.
• 12:18
  Yeah, yeah, exactly.
• 12:19
  Because it's a classic saying that I come back to all the time that money itself isn't important, but it impacts everything that is.
• 12:25
  Right.
• 12:26
  And so that's a really beautiful way of making that saying more tangible, being like, what are the things that it actually hits and it actually does impact and what things matter to you when you reframe it.
• 12:39
  Like that for people, what sort of ways do you see clients sort of change course a little bit?
• 12:45
  What can be the real ways that they change?
• 12:49
  So clients, once they're thinking about this way, might change, where they start to sort of, instead of going, all right, we're going to split everything up and divvy up the next generation.
• 12:57
  That's all on their head.
• 12:58
  They start to understand that, in fact, the most powerful thing generation one can do for generation two is to equip them for the responsibility of whatever it is they're receiving.
• 13:09
  And what we're really looking at there is the generation one then taking on a leadership mindset.
• 13:14
  We talk about the functions of leadership, we talk about governance, we talk about servant leadership, we talk about all sorts of different functions of leadership.
• 13:21
  But reality is, leadership is actually about purpose.
• 13:24
  It's about mixing purpose with values or purpose with why, philosophy.
• 13:29
  And it's saying, if I've got a whole bunch of chairs that I want to move out of this room here, how do I do it?
• 13:35
  I can throw them out, I can do all sorts of things, or I can go, right, our objective is to get the chairs out there.
• 13:40
  This is how we roll as a family.
• 13:42
  We want them to be useful out there.
• 13:44
  That frames how you do everything.
• 13:46
  It's the same context with succession.
• 13:48
  Here we go, right, we want to.
• 13:50
  And this is why we talked about the power of purpose and we wanna do it how that's the power of the values.
• 13:57
  And then we step in as a leadership and say, this is the path we're going to go down.
• 14:01
  And so that way it's empowering, it's building up, and you're still doing all the practical, sensible things you need to do.
• 14:07
  Protecting Generation 1 and their retirement and then their elderly age.
• 14:12
  And then you're managing and you're setting that next generation up for success.
• 14:16
  Whether that generation will ever be involved in the family business is not the point, because you're setting them up to be the best who they can be.
• 14:24
  Not everybody's going to be involved in a managerial role or a business role when you're dealing with business families.
• 14:31
  In fact, I think it was UBS bank says that less than 40% of us of Generation 2 are involved in the same industry, let alone the same business as their parents.
• 14:42
  Based on that factoid, that same factoid that next generation is still building on what they've been passed forward.
• 14:50
  That's the sign of success for those parents because they've been able to frame what's important for them, what they want to Achieve how they want to achieve it, and they can actually see their kids and their grandkids stepping
• 15:00
  up and achieving it.
• 15:02
  It's really rewarding for them.
• 15:03
  I quite like talking to you.
• 15:04
  I find it very reassuring because, you know, I've often thought with my kids, I truly don't mind what they go into in the future.
• 15:13
  I will mind if there's someone who doesn't know how to work hard, you know, And I think that's definitely a value for me, is it's not necessarily about what area you go into or even how successful you are.
• 15:25
  Are you doing something that's meaningful to you, and are you putting your best foot forward in that area?
• 15:30
  And I think that's my big value that I'm trying to teach them.
• 15:34
  And it's very much that mindset in general.
• 15:38
  It must be hard, though, surely, for some of those families who you're dealing with if they've built a lot in a certain area and they.
• 15:46
  I don't know many parents who don't want the best for their kids.
• 15:49
  So they're looking at saying, well, I was super successful in this.
• 15:51
  I can give them this business.
• 15:53
  It's great.
• 15:53
  Do you ever find a little bit of resistance from the parents and trying to be like, no, but this is the right path, and my children should follow what I did.
• 16:03
  Oh, yes, you do.
• 16:05
  How do you navigate that?
• 16:06
  That's hard because it comes from a beautiful place.
• 16:08
  It comes from a really caring place.
• 16:10
  Yeah.
• 16:11
  And what's interesting is when you sit down and talk with those parents and unpack where they're coming from is the realization in their eyes that what are they really saying there?
• 16:20
  They love their kids.
• 16:22
  They want their kids to do well.
• 16:24
  They want their kids to be successful, and that they want to empower them to achieve their potential.
• 16:30
  The fact that they might at that point be focused on a specific business that the family owns is a process that they've got to work through.
• 16:38
  And that's kind of where our job comes in, is to help them understand that and see that bigger picture.
• 16:43
  And the fascinating thing, and we're having some quite deep and meaningful conversations there, is that when you see that tipping point, you know that they've gone from being a family that own a family business to a business family.
• 16:56
  And it's really encouraging because at that point, you see a weight actually come off mom and Dad's shoulders.
• 17:02
  They're going, I don't have to be totally myopically focused on fitting my kids into this company.
• 17:09
  If they don't, that's okay.
• 17:12
  And as soon as you see that mental tipping point happen, you're away.
• 17:16
  I was at a business panel recently where one of the mums who'd actually helped set the company up, and she's the md, was talking about how she'd always focused on running this company professionally with professional values, and it
• 17:33
  was never just about the family.
• 17:34
  It was a business first and foremost.
• 17:36
  And then she said, it's in the last year, she started to understand that it sits there as a resource to enable her family.
• 17:44
  Doesn't mean her family have to be involved in it, but it is there to enable her family.
• 17:48
  I thought, wow, you're amazing.
• 17:50
  You're amazing.
• 17:51
  Because at that point, you could see that she'd got over that tipping point and now she was a business family, not just a business owner, but she's a business family.
• 18:00
  And at that point I thought, mate, the world is here.
• 18:02
  Oyster.
• 18:02
  It's funny, isn't it?
• 18:03
  Because there is that saying of, you know, wealth being lost in three generations.
• 18:07
  First generation builds it, second generation at most holds onto it, and then the third generation loses it.
• 18:13
  Do you think there's truth to that?
• 18:15
  100%.
• 18:15
  And the scary thing is, you could point, look at any single country in the world and you would see example after example after example, cross cultures.
• 18:25
  It's really tragic.
• 18:26
  And the only way you can do it is to step back and actually engage in as a process.
• 18:31
  I suppose it's one of the biggest challenge, as in New Zealand, we have this understanding that, oh, it's just an event.
• 18:39
  They'd understand that in the same way that we work to prepare and to grow our business, we need to put that same amount of effort into how we work, prepare and grow our family and prepare them.
• 18:52
  So some people have done an incredible job of building a business, and they have.
• 18:56
  There are some phenomenal examples around this country of people who've built incredible businesses, are building incredible businesses.
• 19:04
  My challenge is to encourage and support them in preparing their family.
• 19:08
  In the same way, each person that walks in through our door has the power to make a decision.
• 19:15
  And the reality is, at some point, we will pass away from this earth, right?
• 19:21
  So are we going to let what happens to our family happening by default, or are we going to sit down and choose to do it by design?
• 19:31
  That's the power that every single Kiwi has, is the ability to sit down and say, you know what, I'm going to do this by design.
• 19:38
  I'm going to take the time to listen to what Francis prepares in terms of the podcast right in the learnings that you're doing, because you're doing a great job in bringing in financial literacy, which is crucial to this.
• 19:49
  But I'm also going to then take it on board and actually start to do something about it.
• 19:53
  I'm going to think about it.
• 19:54
  What does it mean for me?
• 19:56
  What does it mean for my family?
• 19:58
  Because at that point they're taking a leadership role.
• 20:00
  Too often we have leadership positions, but it doesn't mean they've got leaders in them.
• 20:06
  And this is what we're doing here today.
• 20:07
  Francis is empowering Mum and Dad Kiwi to be leaders in their family and say, right, we are going to do something about it.
• 20:15
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• 21:08
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• 21:12
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• 21:25
  Head to Francisco Co NZ/Invest.
• 21:30
  I'll also pop that link into the show notes for you.
• 21:32
  Right back to it.
• 21:34
  I think what you're saying there in terms of having these open conversations and getting it all out on the table and regularly, I think that's crucial.
• 21:41
  I also wonder, and this is something that's on my mind as I work to build financial independence and practice what I preach.
• 21:50
  Of course you want to make life easier for your kids.
• 21:52
  Of course you want to give them opportunities you didn't have.
• 21:54
  But there's also the argument that hardship and failure is part of what builds that scrappiness that helps people succeed.
• 22:06
  Where do you think the line is on that?
• 22:08
  What have you observed with your clients?
• 22:10
  Yep, we've got Gen1's done a great job of building a business.
• 22:14
  So how do we get Gen 2 prepared?
• 22:17
  Right, because you 100%, it's not just about getting resource.
• 22:21
  Because if you just give them resource, they become entitled little toads and loosely categorized.
• 22:27
  There are three types of generation that you'll have.
• 22:29
  You can have the entitled, which is what happens.
• 22:31
  We just give them everything.
• 22:33
  I didn't have it.
• 22:33
  I worked hard, I fought hard, had it real blessed with great success.
• 22:38
  I don't want my kids to have to suffer what I suffered.
• 22:40
  That's going to create entitlement.
• 22:42
  What you want is you don't want entitled kids, you don't want neglected kids, you want the rising generation.
• 22:48
  And that's where you're going to have to say, right, creating wealth, creating this breakthrough requires one set of skill sets.
• 22:55
  But stewarding and continuing to grow, that, that's a different skill set.
• 23:02
  And that requires each kid having to learn the ropes on business, having to learn and sometimes failing.
• 23:09
  Giving them that controlled rope where you're not letting them ruin their reputation, you're not letting them completely fall over and make their life a misery, but you're giving them enough scope to actually realize, hey, there can be consequences.
• 23:22
  There can be consequences.
• 23:23
  And that's exactly what we talked about, isn't it?
• 23:26
  How do you help train them to understand the concept of responsibility?
• 23:32
  With great power comes great responsibility.
• 23:36
  With great resource comes great responsibility.
• 23:39
  And this interesting enough, loops back down to that UBS stat where families are saying, right, you go out and give a crack, we're not going to give you any money.
• 23:48
  You've got to come up with an idea so that they'll come up with an idea or run it through all the advisors to make sure it's sensible and say, we'll lend you the money.
• 23:58
  You gotta get out there and make it work.
• 24:00
  And they get their own bumps, their own bruises and their own learnings.
• 24:03
  But it's in that controlled environment and it's constantly with the challenge for mum and dad ringing in the back of their heads, which is, what's your reputation gonna be, succeed or fail?
• 24:13
  What's your reputation gonna be with the people you're interacting with?
• 24:16
  I like that reframe this call.
• 24:20
  I really like that reframe because it's again, bringing it back to the values and it's very transposable to different situations.
• 24:31
  And it's sort of that general idea of you want to leave the world a little bit better than you found it, but framing that to what's your Reputation going to be.
• 24:39
  We are all social animals.
• 24:41
  We do need to work together and reframing it to reputation, I think that's really smart.
• 24:45
  And it's kind of empowering too because then they've got the ability to build their own and surprise, surprise, they get out there.
• 24:51
  This is one of the tools we use for that family I mentioned earlier in that two year process.
• 24:56
  And every single one of those kids built a successful career on their own.
• 25:01
  Right?
• 25:01
  Brilliant.
• 25:02
  And it was so cool to see at work they had their bumps and bruises, they had their bad days, you know, they were human.
• 25:09
  But the thing was that what mum and dad did more than giving them some resource to kickstart was to actually be there to talk through it and going, right, what are you learning?
• 25:19
  I can't afford food this week.
• 25:21
  Okay, what are you learning?
• 25:23
  It's just kind of like at the end of the day we're never going to let them sink.
• 25:26
  Right, but what are you learning?
• 25:28
  What are you learning?
• 25:28
  Yeah, that's a bit like I talked a few episodes back about, I didn't ask me anything episode and people said, what are my investing mistakes and what are my regrets?
• 25:38
  And I was like, I've got mistakes, I've got quite a few mistakes.
• 25:41
  But are you human?
• 25:43
  Yeah, right, very human.
• 25:47
  But I don't necessarily have regrets because my perspective is I've obviously never had a totally fatal mistake at this point.
• 25:56
  I'm still here, still going.
• 25:59
  And every mistake I've made, even if it's a big one, I did learn something from it.
• 26:04
  And who knows what that saved me from.
• 26:06
  Even if it's a big one, what it saved me from down the track could have been bigger, could have been the fatal mistake.
• 26:14
  And so I'm a really big believer of you don't know where those bad lessons have taken you and what the alternative was.
• 26:23
  So I just really, truly don't believe in regrets at all.
• 26:25
  And I think helping your kids talk through those things and creating an environment where it is safe to fail and where you're not reamed out for it, no matter what the failure is.
• 26:36
  I mean, help them find the lesson.
• 26:38
  For sure, you can say, you know, I love you a lot, don't do.
• 26:42
  That again or we'll be having a different conversation.
• 26:46
  Yeah, see the power of what you're unpacking there though, Francis, a hundred percent, is you're investing that attitude and mindset into your kids too.
• 26:56
  Right?
• 26:57
  And it's that attitude and that mindset that is as much resources.
• 27:01
  Here's a thousand Dollars to help with that business.
• 27:03
  That's what's going to frame us.
• 27:05
  You know, back to those five capitals.
• 27:06
  These are all qualitative.
• 27:08
  There's only one quantitative capital there, and that's the financial.
• 27:11
  But everything else is qualitative.
• 27:13
  And it's that mindset.
• 27:14
  It's that what do you learn?
• 27:16
  And it's families that have understood that, that have had those times talking together and working through that.
• 27:24
  They are the ones that endure and grow generation on generation on generation.
• 27:30
  Right.
• 27:30
  Because what is relevant financially will pivot and change constantly.
• 27:35
  But if you got the other ones in hand and you're working through training and preparing those next generations for responsibility, you're setting them up for success.
• 27:44
  No matter what the economy does, whatever pivot happens.
• 27:48
  I think of two interesting examples.
• 27:50
  There were these companies and they're all competing to make the best oak buckets.
• 27:53
  And this particular company was just the number one, the family.
• 27:57
  Who are we?
• 27:58
  What are our values?
• 27:59
  What's really important to us?
• 28:01
  And the board were getting a bit weirded out by this going, we're not into this touchy feely stuff.
• 28:04
  They said, no, it's not touchy feely.
• 28:06
  It's about who we are.
• 28:07
  What is it that we're really good at?
• 28:09
  And what they drilled down and understand in their business context is they were really good at building containers.
• 28:15
  And so they started building something stupid called shipping containers.
• 28:19
  They became the largest producer of shipping containers on the planet.
• 28:22
  What happened to all the other oak bucket companies?
• 28:25
  Gone.
• 28:26
  And it's the same concept in family is when you understand who we are as a family and what we're really good at.
• 28:31
  When you hit a change or an economy or the rules or something massive hits you, you've got the agility to pivot and to roll with it because you've got clarity on who you are and what your core strengths
• 28:44
  are.
• 28:44
  And that way you can, if you're empowering your kids with that same mindset, boom, they're away.
• 28:50
  They're set up for success.
• 28:51
  I was challenged recently.
• 28:53
  I'm a bit older now, and I remember when we were at uni and we're studying strategy and they would give you this image of this beautiful lake, the mists rising off the lake, and here's this Olympic prowess team
• 29:06
  of rowers, and they're just pulling in perfect unity and they're just flying through the water, just slicing through it, making it just look magical.
• 29:15
  And they say that's what you want for strategy and for teamwork, is everybody's in the same boat.
• 29:20
  They're rowing in the same direction, they're on the same page.
• 29:25
  The problem is that we're in a time in the economy, in the cycle that we're in globally where that just doesn't sync with who we are and what we're facing and what it is.
• 29:38
  It's more like the picture of a boat that's just gone over Whitewater Rapid.
• 29:43
  Right.
• 29:43
  You can see the picture immediately, can't you?
• 29:46
  And you got dad's hanging on there to the rope on the side and his feet up towards the sky and mum's sitting there with an oar keeping it off the rocks and someone else is lying on the bottom
• 29:55
  of the boat holding on tight, having a freak out meltdown and someone else is yet over the side trying to pull themselves back in.
• 30:02
  That's more what life's like.
• 30:04
  You're a resonant.
• 30:05
  Cause I am too, right.
• 30:06
  Really identifying this.
• 30:08
  And so we.
• 30:09
  What helps those people pull together is back to this conversation we keep psyching around to is clear purpose and shared understanding.
• 30:19
  And that's why these conversations are so important for our families.
• 30:22
  Whether they're starting from a modest position or their ultra high net worth.
• 30:27
  When you've got that clarity, you can all respond to what life throws at you with confidence that the rest of your team are on the same page.
• 30:36
  When you are having these conversations, how early do you start?
• 30:41
  Because, you know, I'm thinking my 2 year old and my 5 year old, we're definitely, you know, having some open conversations about money in front of him and yet he's still working out the difference between $12 and $20
• 30:54
  when we're at the toy store, you know, so when do you start having these conversations?
• 31:00
  At what sort of level?
• 31:01
  I think the key thing is having them in a manner that makes sense for their age.
• 31:06
  I've probably told this, I don't know if I've told this story before, but one of my favorite ones, it's a true story, is where they put some funds on the table and said who we're giving it to.
• 31:14
  And so the kids were involved in engaging with different causes that they resonated with.
• 31:20
  And what I was teaching those kids over those period of years was not just about the family values of we are connected with our community and you know, we have food, we have shelter, but other people don't.
• 31:32
  We can be part of helping the solution, all that.
• 31:35
  Which was brilliant because they used philanthropy to instill family values and family lessons of working hard and being mindful of others.
• 31:44
  But they Also those period of time, over those years, learned how to function as a board without realizing that's what they were doing.
• 31:49
  Love it.
• 31:50
  But it was in a way that was meaningful to the young kids.
• 31:53
  Right.
• 31:53
  As you say, they can't tell the difference between 20 and 12, but they, they can tell the difference between, hey, we can help these people.
• 31:59
  And it gives them that sense of pride, of achievement, of pulling together.
• 32:04
  The raft's gone over a rapid, but we still help pull that other person out of the river back into the boat.
• 32:10
  Right down to sort of strategy and investment conversations when they're a little bit older and understand how it works.
• 32:16
  The nice thing is if you start with the philanthropy connection, when you get them to that investment, they've got purpose beyond themselves.
• 32:24
  That can help drive them when they're feeling a little bit tired and they're going, no, Mum says, there was one thing I want you to learn.
• 32:30
  It's working hard.
• 32:32
  Right.
• 32:32
  And working smart then.
• 32:34
  Right, okay, I've got some driver.
• 32:37
  I know that there's a kid down the road that actually needs a pair of shoes that can't afford it.
• 32:40
  I'm going to do this because of my return.
• 32:42
  Not only will I be making some money, but I can help them.
• 32:45
  That's the sort of thing that helps push some of that extra mile.
• 32:48
  And so having those conversations is early.
• 32:50
  What you don't want to have happen is that you don't have the conversations, the family don't have the conversations, and mom and dad pass away and they open up the world and, whoa, what have we got here?
• 33:01
  And I've had those sorts of situations and they're never nice.
• 33:05
  We've had a number one where we ended up with 18 months of negotiations and litigation and any of that for multiple hour mediation.
• 33:19
  And we got a settlement and they settled within five grand of what the original solution proposed was.
• 33:25
  But it cost them.
• 33:26
  I don't even think about what it cost them.
• 33:29
  And so in another situation where mum and dad had structured everything, they'd done the first part of thinking who the family were and what they needed and their purpose and their aspirations, and done the first design, but they
• 33:41
  never did the next bit, which we encouraged, which was to have the conversations.
• 33:45
  Fortunately, because they'd done the first part, we were able to get the fanny around and unpack everything for them.
• 33:51
  But it was me having to have the conversations which was kind of awkward.
• 33:55
  No, you can't have that car.
• 33:57
  Yeah, it must.
• 34:00
  You must have to have some very intimate conversations.
• 34:03
  I find that really hard.
• 34:05
  Oh, I Tell you, it was emotionally and mentally draining.
• 34:09
  But the one thing was, because Mum and Dad had set it up well, to start with, we were able to get the family around the table, map out their interpretation of what Mum and Dad's thinking was, and to
• 34:23
  a point where they could live with it and sign off on it.
• 34:27
  And it just meant that that family spent a month working through that process instead of spending the next two years paying lawyers and accountants to fight each other.
• 34:39
  All right?
• 34:39
  And the nice thing is now they're able to move forward with the resource that's being passed forward to them and actually get on with life.
• 34:46
  That's why the power of having those conversations earlier rather than later is so key.
• 34:51
  And getting people comfortable with the idea of talking to money, talking about money, talking about money with people you care about.
• 34:58
  And it's almost like building up a muscle, because I think this is money.
• 35:03
  Conversations are notorious for causing fights because money is often tied up with all these really big decisions.
• 35:08
  It gets emotional, of course, but if you build up that emotion, that muscle, where this is something we talk about, it's normal, it's part of daily life, and you all feel safe talking to each other about it, I
• 35:21
  think that can be a really good one.
• 35:23
  I really liked what you said right at the beginning when you said, behind every hurt, a rule has been broken.
• 35:30
  And I think that's a really good way to reframe it as well, is when you understand the rules of engagement with your family, you understand sort of what values they're bringing to things.
• 35:40
  It's gonna be so much easier to have these conversations in a way where people aren't yelling or crying or whatever else that we don't want to have happen.
• 35:48
  Exactly.
• 35:49
  And that's where sometimes helping facilitate that process for families is really quite good.
• 35:54
  And that's why it is a process.
• 35:56
  It's not an event.
• 35:57
  Cause you've gotta give them time to understand what it is.
• 35:59
  We're looking at the family as well.
• 36:01
  I think one of the tools we have for families in that situation is saying, let's create this family board.
• 36:07
  Because it's not about ownership and it's not about control, but it's about engagement.
• 36:12
  And so they actually feel safe.
• 36:14
  And I suppose in software terms, it's a bit like we talk about sandboxing.
• 36:18
  You create a sandbox where you can run programs in it, you control it, you can learn it.
• 36:22
  And so saying to the family, hey, we're going to create a sandbox, and you can be part of the design.
• 36:27
  And so Forth and we control different things.
• 36:29
  And for mom and Dad's peace of mind, they're not giving up the family purse yet, right?
• 36:35
  But they're able to see the family interact.
• 36:39
  And it's really, really important because it gives them that safe space, like you say, that safe space to have the conversations where they don't need to take on the hurt.
• 36:48
  They can talk about the issue and then work through it.
• 36:51
  Go, well, that idea won't work.
• 36:53
  Let's try something different.
• 36:54
  But it just creates that environment where they can engage, converse, refine, polish, toy with things.
• 37:02
  And then there comes a point of those conversations where they're actually coming onto the same page.
• 37:06
  And that's where you can start using other tools, like family banking, which is where you're helping.
• 37:11
  Mum and dad can help kids with different projects.
• 37:14
  And that's about having them step up, like we talked about earlier.
• 37:18
  They should learn to have their own bumps and bruises and get their own learnings, but in that controlled environment and because you've been to that board process and that conversational period, you're not just dropping them on it either,
• 37:31
  you're actually preparing them, you're training them and you're setting them up to get the best outcome.
• 37:36
  I love that.
• 37:37
  I love that so much.
• 37:38
  If someone's listening to this and thinking, I would like to start having this conversation, I would like to start forward planning, actually, like making this happen, setting my kids up.
• 37:48
  What is something that.
• 37:50
  That you talk about with almost every client and that someone could probably put into action this week?
• 37:57
  Think about who they are, what their priorities are and think about some of their family rules.
• 38:03
  Like I said, every upset is a rule broken.
• 38:06
  How do you roll in your family, the good and the bad?
• 38:09
  Just jot it down and have a think about it.
• 38:12
  And that's, weirdly enough, more important to me in that early conversation than what assets you've got, because we can manage the assets when I understand who we're dealing with and what their drivers are.
• 38:23
  And the key thing is make the decision to do something about it, because something will happen.
• 38:28
  It'll either happen by default despite you, or it'll happen because you've had a voice and you've had the ability to set the direction and the tone.
• 38:38
  Direction and tone is more powerful than anything you imagine in case of family succession.
• 38:43
  Love that.
• 38:44
  Well, on that note, then, if someone does want to get in touch with you, quick plug.
• 38:47
  Where do they find you?
• 38:49
  GCLegal Co NZ and we love to hear from you.
• 38:53
  Love it so much.
• 38:54
  Andrew Clements.
• 38:54
  It's always so lovely to have you on the pod.
• 38:56
  Thank you for coming back and answering all these questions.
• 38:59
  Now, we answered heaps of your questions on this from last time around, but you might have more.
• 39:03
  So if you do, then drop them in the comments.
• 39:05
  Let us know.
• 39:06
  Love having Andrew on so we can always bring him back if this episode was happening helpful, send it onto a friend.
• 39:10
  We can all level up our money together.
• 39:12
  Until next time, have a great day.
• 39:15
  This podcast can only give you general information about how things work in most situations.
• 39:21
  It's not individual financial advice.
• 39:23
  If you're after that, a financial advisor is always the best bet.