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February 2, 2021 Article 5 min read

Starting important and often difficult conversations with the people we’re close to about money, family, and finances is hard. These five steps can make conversations easier than you expect —  and more productive.

A family sitting in a living room together looking at a handheld tablet device.Starting important, and sometimes difficult, conversations with the people we’re close to about finances, family, and responsibility is challenging for many of us. But following a few simple steps can make these conversations easier than you anticipate — and more productive.

Begin by taking the following five key steps.

1. Share your intention.

Why is having this conversation important? We typically go into conversations thinking the other person knows why we’re having the discussion, but that’s not usually the case. Your kids and loved ones aren’t mind readers. More often than not, they don’t know what you’re going to say or why you’re saying it.  Focus on the idea you’re trying to convey, and don’t overemphasize the “what” at the expense of your “why.” Information is crucial, but the reasons for sharing it are just as valuable to communicate.

We typically go into conversations thinking the other person knows why we’re having the discussion, but that’s not usually the case.

For example, what would your son or daughter need to know if a crisis or something unexpected suddenly occurred? Navigating an unexpected illness or death is emotionally daunting and draining.  Providing clarity about key documents you’ve created and your wishes alleviates this stressor for loved ones during an already difficult time, and it’s important to communicate that your intention is to prepare them.

2. Start small.

Look for natural milestones that can serve as a steppingstone to conversations around finances, responsibility, and expectations. There is a range of these opportunities as your children come of age and experience major life events. Take, as an example, parents who decided to contribute to the down payment on a first home for each of their children. This decision arose when their eldest son purchased his house. The parents used this milestone as an opportunity to provide a monetary gift to him, setting expectations around how much and why they were making the gift. The decision was also shared with their two younger children as an opportunity to set future expectations with them as well.

Look for natural milestones that can serve as a steppingstone to conversations around finances, responsibility, and expectations.

3. Take the pressure off. 

Oftentimes we imagine how a conversation is going to go — what we’re going to say and how our family member or friend is going to receive our message. While it’s good to think through — and even rehearse — what you’re going to say, you can’t anticipate someone else’s response. They’re likely hearing this information for the first time, while you’ve been noodling on it for years. Give yourself permission to be imperfect in your delivery — it’s ok to say the wrong thing — and take it slow. Let them know it’s all right with you to take time to process and revisit the conversation at a later date.

4. Invite input.

Keep the concept of dialogue in mind. Remember, this is a conversation, not a monologue. Make space for input from your family member, knowing they may not be ready to weigh in immediately or agree with you. If you’re asked a question and need time to think about your response, be honest enough with yourself to say: “I need some time to think that over. Let’s have another conversation.” Important discussions shouldn’t be rushed. Think of the process as a marathon, not a sprint. Also, consider the importance of further conversation in the future; don’t expect that one conversation will cover the gamut of important financial topics a family needs to cover. Communicate that open dialogue is important and more conversations on the subject should be expected for everyone’s benefit.

Important discussions shouldn’t be rushed. Think of the process as a marathon, not a sprint.

5. Be realistic.

Keep reality in mind when sharing new and important information. These are intense topics, and your loved ones might not respond as you’d hoped. Here’s an example.

We work with a family that recently made a significant distribution to their adult children from the family partnership. There had been “rumblings” around this idea for years but no distributions. The youngest son, David, wasn’t sure what to do with the funds, so he asked if they could stay invested in the family partnership. He felt the partnership provided better opportunity for investment returns, and he didn’t need the money. 

This complicated things because, at that point, all of the children owned equal percentages, and David’s request to leave the funds in the partnership would result in him owning more of it. David’s parents weren’t expecting his response and were caught off guard. They ultimately asked David to take the distribution to keep ownership percentages equal but left the door open for future distributions to remain in the partnership. 

We consider this type of conversation a win and perhaps an even more valuable experience than if the discussion had the expected outcome. Their flexibility in considering options for the future based on the suggestion is also a key takeaway.

Final thoughts

Less than 5% of wealth transfer failure is due to failure in financial planning, taxes, and investments. It’s the family dynamics that are more often to blame.

Just as many successful families engage technical financial advisors to assist with investing and estate planning, they also engage family wealth coaches to help advise on communication, governance, and philanthropy and to kickstart difficult conversations. We often serve in this capacity for our clients in addition to the investment-related side of wealth management.

Less than 5% of wealth transfer failure is due to failure in financial planning, taxes, and investments. It’s the family dynamics that are more often to blame.

Remember, while monetary gifts and distributions are valuable to family members, sharing your rationale and intentions behind them is what makes these gifts priceless. Show how much you care by taking the time and effort to talk about things that truly matter especially where there is an opportunity to positively shape the family dynamic. Long after you’re gone, your children won’t remember how much money you gave them, but they will remember evenings around the dining room table or on the back porch and the candid conversations you had together.

If you would like additional information or have any questions, feel free to give us a call.

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