Kaiser Partner Vaduz on securing family finances

Sorting through financial matters with relatives shouldn’t be a minefield


There are numerous situations that can endanger your fortune as a wealthy family or entrepreneur. Some are exogenous and cannot be prevented, but can at least be mitigated. For example, this concerns the area of government influence, from taxation to deprivation and inflation. There is also the vast range of disruptions that can affect society, such as revolutions and changes to the current form of government, and subsequent loss of property and income streams.

Similarly, fraud and embezzlement can be committed by virtually anyone advising the entrepreneur, family or someone employed by the family. Bad business development can be the cause of external factors, as well as not having adapted the business model to the current environment. This ties in closely with advisors, who could have a conflict of interest and therefore misadvise the family and follow their own agenda.

Preventing unwanted wealth attrition requires diligent planning and coordination across many areas, including family mission, wealth advisory, tax and legal

The best resolution
Another internal field is the area of divorce and family conflict, which can cause years of lost effort and resources being mis-allocated. Family governance is also relevant, where we have seen families that did not have a common vision – and therefore a mutually agreed world-view – losing sight of the objective and see that their assets would dwindle. In our practice we observe that entrepreneurs who have a family – following strong intrinsic values – will be more successful in keeping the assets together.

The question is, what should happen to my assets after I am gone? It is common for entrepreneurs to ask themselves this question at a particular stage in their life, usually when nearing their preferred retirement age, which can be as early as 45 or as late as 85. To name just two of the many possible options for wealth succession, should an entrepreneur go for dynasty or charity? Either way, preventing unwanted wealth attrition requires diligent planning and coordination across many areas, including family mission, wealth advisory, tax and legal.

One effective way of addressing this emotive issue is to conduct an off-site meeting with all the family stakeholders under expert guidance. Such ‘wealth seminars’ are often used as a platform to clarify entrepreneur and family aspirations, motivations, and future plans. It is a useful tool for understanding what an entrepreneur has in mind, where the family as a whole currently stand, what the environment looks like now and how it might develop in the future. This can help address questions that are delicate and often raised too late.

Structuring debates
These seminars can also provide essential education for family members who have not so far been exposed to wealth management issues. In an open discussion led by experts, various themes can be addressed and appropriate solutions made. Themes that are typically covered include succession and estate planning, wealth planning and charitable work, and identifying intrinsic family values. These values are the very foundations on which dynasties are built.

Options and their consequences are discussed openly, sometimes with the entrepreneur alone, sometimes together with their spouse, children, and partners or even with the family as a whole. A modular approach can help adjust planning to specific needs and ensure no options are excluded. An open but structured discussion will result in a plan for the development of the family’s wealth, together with a list of open issues and viable courses of action. If the fundamentals can be agreed, the threats to a family’s wealth can be mitigated.