Family Wealth Report speaks to Daisy Medici, GenSpring's managing director of governance and education, about the firms recent push in these spaces.

GenSpring
Family Offices, the ultra high net worth wealth management firm, recently
expanded its family governance and education resources in a move which it
believes is symptomatic of a rise in demand among clients for these services.

The
move by GenSpring also reflects the idea that in addition to the heavy emphasis
on the financial side of wealth management, there is a trend towards an
increased focus on the human and intellectual capital and the “softer” aspects.

Family
Wealth Report spoke to Daisy Medici, managing director of governance and
education, about some of the related trends she has seen during her nearly
eight-year tenure at GenSpring and some 20 years in the wealth management
industry.

Medici
began by saying that the initial move by GenSpring to appoint her as director
of governance and establish the director of education position around eight
years ago was a “giant step in our field of business” because most other firms
were subcontracting that service.

Medici's
role now includes oversight and management of the education and governance
resources, which now includes 11 governance and education specialists in total.
GenSpring also named family wealth advisors David Herritt and Sheila Stinson as
family governance director and family education director, respectively.

“The
best part is that what we’ve done is move to a regional capacity. We have 12
offices across the US
and now have people across our footprint that are trained and experienced in
delivering education and governance. We’ve been in the process of developing
them for about five years,” Medici said.

As
previously outlined by GenSpring in its ten elements of a family office, the
term “governance” takes into account: family meeting facilitation; family
mission statement development and implementation; family governance system
development, including development of a family constitution; and succession
planning.

Education,
another important element, comprises: development of individual and family
education plans; delivery of educational programs focused on all aspects of
family wealth; next generation education; trustee and beneficiary mentoring;
and learning events.

Financial literacy

One
of the main trends Medici said she’s seeing is increased awareness among
families regarding the need to ensure that the next generation is financially
literate. Indeed, the financial crisis has emphasized the importance of
financial literacy among clients and their heirs, as demonstrated by a number
of firms that are now offering next generation educational programs and have
made related hires.

“Parents
are now coming to us because they know that they need to start a process for
doing this,” Medici said. “We can provide that education for both children and
young adults, but we also have clients in their forties and fifties who have
raised their hand to be mentored around financial literacy. That’s one area
where there is growing awareness.”

Families
are different in how much wealth they allow their children to access and at
what age. Some individuals might have access to trust income at very young age,
for example, whereas others are living off the small income from their jobs
while at college.

The
first thing to do, Medici said, is to understand their current lifestyle and
relationship with money. Start with the fundamental questions: how much money
do they have and what are their sources of income? From there the firm can
delve into personal money management, which includes budgeting.

“We
consider it a responsibility shared by all parties,” Medici said. “Our advisors
who deploy education programs have to make sure it’s engaging. When working
with a young person, we use their own wealth and bills to make it as real for
them as possible.”

The concept of family
governance

Medici
said she’s also noticing a growing awareness about the very concept of family governance.

“I
think industry literature has helped us get to this point,” she said. “There is
much more written and published about the concept of family governance. We have
seen a greater demand in the last two or three years but I do think the whole
financial meltdown that we experienced in 2008 created a ripple effect.”

Essentially,
people are becoming more aware of their wealth and, importantly, advisors are
encouraging their clients to focus on more aspects of it.

“For
every family we’ve worked with, I would say eight in ten had not heard of the
term family governance. For the most part, they had to be taught about what it
all means,” Medici said.

Giving
an example of this, she noted how, for decades, the focus among families on
estate planning was around tax efficiency. But, now, they’re savvier when it
comes to the impact that their estate planning is going to have on the next
generation. When passing down assets through joint ownership, for instance,
families are starting to think about and plan for how the next gen will make
decisions with regard to the shared assets.

Women in wealth

Another
trend related to governance and education – and indeed the industry as a whole
- is the role of women in the wealth management process.

Highlighting
that women will control two-thirds of wealth in the US within the next ten years, Medici
said that advisors have really started to talk to their female clients about
the importance of understanding their wealth. “But there are a lot of reasons
why this is so important,” she said.

Importantly,
it is crucial to understand that men and women have different concerns,
although each of these are of course important.

For
example, during a prospective client meeting involving a couple, the man will
tend to appear more “energized” when discussing the financial aspects and
investment side of things. However, as soon as a question is raised about the
family, the children in particular, and whether or not there is any planning in
place to bring them into the conversation about the family wealth, that is when
the woman typically leans forward, Medici said.

Incentivizing entrepreneurial
activity

On a
final note, Medici has observed that a growing number of both existing and
prospective clients are interested in finding out ways to promote
entrepreneurial activity among the next gen.

“We
are always talking to families about letting the financial capital sit in
service to the continued development of the human and intellectual capital of
the family,” she said.

Families
could create a “family bank,” for example, which she explained is a fund
structure that would provide low-interest loans as seed capital for an
entrepreneurial venture, providing, of course, the proper criteria and
governance of the family bank has been put in place.

Meanwhile,
those in their twenties, thirties and forties are demonstrating a stronger
willingness and desire to talk about the emotional impact of wealth.

“I
would call it a sea change because wealth has always been the biggest elephant
in the room for families,” Medici said.