How to Create a Strategic Financial Plan
KEY POINTS
A strategic financial plan is key to creating an enduring legacy
Your legacy is about more than just wealth. Your values, customs, and traditions will leave an everlasting impact on your family, society and the planet.
A family mission statement can guide your family through financial turmoil, volatile markets, relationships, philanthropic endeavors, and much more
Financial Plan and Your Legacy
A legacy can be defined as the transfer of wealth from one individual to another. Or its essence could be based on measuring the enduring impact of a person’s life. Ideally, your legacy is a combination of both.
We accept these legacy aspects but view them through a slightly broader lens.
Families should steward their wealth with the goal of sustaining the family and its philanthropic initiatives across future generations. The values, principles, and ethics you embed within these initiatives will transcend the family and extend beyond borders.
Success will be measured through the family’s generational influence as opposed to focusing on the impact of an individual and their solo accomplishments.
These contemplations are often left to the domain of the wealthiest 1%.
Great news - these concepts are just as applicable to the 99%.
Financial Plans – What can we learn from the wealthiest 1%?
The world’s wealthiest families create family offices as distinct legal structures through which they manage and administer their wealth. This crowd will often reference the following quote:
Shirtsleeves to Shirtsleeves in Three Generations
〰️
Shirtsleeves to Shirtsleeves in Three Generations 〰️
So, what does that mean?
At its core, it is about complex family dynamics and the difficulty in sustaining wealth across multiple generations. Family wealth requires more than money. Wealth only exists to the extent a family can strategically structure its financial and legal affairs while managing competing, often divergent, directives from an ever-growing number of family members.
The first generation creates the wealth through a committed and focused approach marked by sacrifice and risk taking. The second generation brings more family members into the fold. The prior generation’s cohesive and focused approach to wealth accumulation starts to breakdown. The third generation witnesses continued wealth disintegration. The impact from a lack of strategic and tactical wealth planning is compounded as the growing number of family members ensures complete wealth destruction.
Does wealth planning really apply to the 99%?
Yes, it does.
The 99% have opportunities to become educated, take risks, earn income, grow their investments, and pass their estate to the next generation while they are alive or through their wills upon death. Such inheritance may include a modest investment portfolio or principle residence. Subsequent generations can build upon this wealth through their own unique cycle of learning, earning, sacrifice, risk taking and growing.
So how can your family avoid the trap of shirtsleeves to shirtsleeves in three generations?
Create a Family Mission Statement
The first step is to create a family mission statement, also known as a family charter.
This is a different approach than most advisors will advocate. Advisors often start with goal setting or skipping straight to investing your assets based on quick assessments of risks and time horizons. These are necessary steps, but they lack the support of a strategic plan that can provide long-term discerning guidance to the family.
So, what exactly is a family mission statement?
Your family’s mission statement can be likened to the North Star. A clear, concise, and profound statement will navigate you through a lifetime of difficult decisions. The journey will not be a straight line. You may even tweak your mission statement over time.
A quick reference to existing family offices is a great place to start when drafting your own mission statement. Wealthy families often evolve into philanthropic endeavors. Such philanthropy can provide a glimpse into one of the ultimate goals of wealth accumulation: giving to the greater good.
We selected the following related examples:
The Rockefeller Foundation
We improve lives and the planet, and unleash human potential, through innovation. We are dedicated to the principle that all men and women – dignified and resilient as they are – have the right to health, food, power and economic mobility. We seek to advance those goals with a better use of science and data and through collaboration with partners and grantees. By identifying and accelerating breakthrough solutions, ideas and conversations. The Rockefeller Foundation works to improve the well-being of people everywhere.
Bill & Melinda Gates Foundation
Our mission is to create a world where every person has the opportunity to live a healthy, productive life.
Bill & Melinda Gates Foundation.
Walton Family Foundation
The Walton Family Foundation is rooted in several generations of family, where no voice is louder than the next and different opinions are valued. By applying this legacy to our work, we are redefining the way philanthropy collaborates with grantees and communities to take on some of the world’s biggest problems.
We do this by bringing diverse perspectives to the same table: caregivers and conservationists, educators and entrepreneurs, farmers and futurists, doers and dreamers. By listening to and learning from their experiences, we can reach a shared understanding and create innovative solutions that achieve true impact.
We work in three areas: strengthening the connections between K-12 education and lifelong opportunity, protecting rivers, oceans and the communities they support and advancing our home region of Northwest Arkansas and the Arkansas-Mississippi Delta.
There are some common themes across these three mission statements. They all take a global approach to improving the lives of others. They also focus on individual health and productivity. Such health initiatives also extend to the planet at large.
These goals are lofty and often others centric.
None of the mission statements specifically reference money, investing, or continual wealth accumulation. However, the stated goals require an implicit dedication to strategic and tactical wealth management.
How does the philanthropy of billionaires relate to my more modest financial situation?
This is a case where the typical issues that separate the 99% from the 1% do not matter: degree of wealth, power, influence, privilege, access, etc.
Yes, you will need a degree of wealth to facilitate some aspects of your unique mission statement. However, the core of your mission statement is comprised of qualitative traits that are universally shared by the 100%.
Let’s take a closer look at the core of your mission statement.
We have developed our own proprietary approach to drafting a family mission statement. Please click here to download the file Mission Statement.
Mission Statement - Benefactors
It starts with defining the benefactors of your current and future wealth. The early stages of your wealth accumulation will focus on the needs of your immediate family. However, your wealth will have the potential to impact humanity and the planet as it grows and extends beyond the current generation.
As many before me have said,
With great wealth comes great responsibility
〰️
With great wealth comes great responsibility 〰️
Mission Statement
Pillars
We have defined five pillars that support each benefactor: health, spiritual, education, relational, and operational.
Each family will put different weight to each pillar. The key is to use our template as a tool to facilitate an open and honest discussion within the family. The forging of a mission statement takes time and will not likely come to fruition during your first family meeting.
You will notice that four of the five pillars are qualitative in nature. This is aligned with what we read in the mission statements above.
We listed health as the first pillar. The health and vitality of your family, humanity, and the planet is essential and self-explanatory. Without it, not much else matters.
The spiritual and educational pillars are foundational to acquiring your potential maximum personal fulfillment. They allow you to pursue teachings aligned with your interests. A healthy body, mind, and spirit allows your family and humanity to maximize relationships defined by the operational pillar while making positive contributions to the planet.
The operational pillar is quantitative in nature and is initially family focused. It is imperative that your family has a strong governance structure and operational infrastructure to grow your wealth so it can financially sustain your family, humanity, and the planet. Governance is the first step supporting this pillar. The drafting your family’s mission statement is a great first step toward implementing an effective governance structure.
The operational pillar highlights several key areas requiring integration in order to effectively manage your family’s wealth. Such details would not likely form part of the actual family mission statement as they would be incorporated into the financial plan and goal setting process.
We took the liberty of drafting a sample mission statement below that could be used by the 99% and the 1%. As noted, these concepts are universal.
Sample Mission Statement for Your Family
The Smith family will humbly serve while leveraging our education, experience, financial resources, and relationships to enact sustainable change. We will combine a “boots on the ground approach”, whenever possible, while partnering with not-for profit organizations that are serving countries afflicted with extreme poverty and subject to continual human rights violations.
Peace – Freedom – Equality – Access – Opportunity – Hope
Our family is committed to nurturing deep cross generational relationships. Every member is unique as are their contributions back to family. The whole is greater than the sum of its parts. We acknowledge and accept our wealth and the inherent duty which must be borne by each individual. Strong governance will be our cornerstone. We shall take an empathetic approach to all our endeavors while committing to a lifetime of stewardship on behalf of all family members, humanity, and the planet.
This mission statement starts with an others centered perspective focused on eradicating poverty and restoring human rights. The “boots on the ground” reference instills a desire to obtain tangible and relational experiences derived from immersing oneself into the heart of the endeavor. These experiences can be an invaluable resource when shared across the family.
As previously highlighted, the world’s wealthiest families often set up well funded foundations to facilitate their philanthropic initiatives. The 99% cannot afford to establish foundations on such a scale. However, the sample mission statement specifically references partnering with not-for-profit organizations. This allows active participation in serving the same philanthropic initiatives as the 1%.
The second paragraph of the mission statement references contributions back to the family. This creates a perpetual feedback loop that can fuel your family’s evolution. Families need to learn how to leverage everyone’s knowledge and experiences. Such are derived from the culmination of their personal, professional, and philanthropic endeavors.
The mission statement closes with a commitment to strong governance and stewardship. This is critical to the protection and growth of the family’s wealth. Such governance becomes increasingly important as the size of the family expands through the generations.
You may feel intimated or apprehensive by the concept of governance. What you must realize is that you have already taken a major step towards instilling governance.
How?
By reading this article and considering the merits of developing your own family mission statement.
We invite you to read our related posts Financial Advisors for the 99% and How to Choose a Financial Advisor - A Definitive Guide.
How does the Mission Statement impact daily decisions?
Let’s consider an example.
Your spouse approaches you and declares they want to enroll in a course to obtain specialized training with the goal of gaining a promotion at work. The new role will come with more recognition and managerial responsibility, an insignificant increase in pay, and longer hours including evenings and weekends.
At the same time, your son is about to start his inaugural football season and your faith-based family is launching a new fundraising campaign to fight human rights violations in a foreign country.
This qualifies as a significant life decision and the mission statement should be referenced accordingly.
The mission statement prioritizes serving countries afflicted with extreme poverty and subject to continual human rights violations while simultaneously nurturing deep cross generational relationships within the family.
The proposed training and promotion are contrary to the family’s commitment to philanthropic initiatives and building strong family relationships. The promotion should not be pursued as presented. Alternatively, the recognition sought may be attainable in other areas. Such could include volunteering and taking on a mentor role for the son’s football team. Or taking on a managerial role within your faith-based organization.
Bottom Line – Congratulations
If you made it this far, you are one step closer to managing your wealth like the top 1%. The creation of your family mission statement will provide the strategic direction necessary to navigate your legacy journey into the next generation.
