Power Up Wealth podcast – Importance of Family Meetings – Episode 67 transcript:
Sharla Jessop 0:00
Passing money to the next generation can be complex. Today, my guest and colleague, Mikal Aune, will share the challenges and opportunities of addressing wealth with your family.
Welcome to the SFS Power Up Wealth podcast, where we provide impactful insight and expert opinions on timeless financial principles and timely investment topics, preparing you to make smarter decisions with your money.
Thank you for joining me today, Mikal.
Mikal Aune 0:45
Glad to be here, Sharla.
Sharla Jessop 0:46
Mikal is Vice President of Wealth Management at Smedley Financial. He holds a CFP designation and an MBA. He helps clients create and execute financial plans for multi-generational wealth. Mikal, you’re passionate about helping families transfer wealth to the next generation. And first many people listening to this podcast might think that’s for rich people. I don’t have enough money to worry about that. What would you say to them?
Mikal Aune 1:11
That’s one of the ironies of wealth is that nobody feels wealthy. You could talk to somebody that has 500,000, $5 million, $50 million. You’re asking them if they’re wealthy and almost always their answer is well, no, I’m not. I’m not wealthy, it’s the guy next door because he has a lot more than I do. He’s wealthy. So the definition of wealth, there is no definition. Nobody believes that they’re wealthy, and that’s one of the things that we have to change in mindsets of people is to understand that wealth is something entirely different.
Sharla Jessop 1:40
And wealth is more than just money. Sometimes we associate wealth in our mind with dollars,, but wealth is more than money.
Mikal Aune 1:47
It’s much more than money. But and I think that’s where people get hung up on those, that they focus so much on the money. And you know, there’s families that have fought over $10,000 of inheritance. And you know, by the time they’ve done with all the legal fees, that all the money is gone, and there’s no wealth to pass on anyway, at least not financial capital. So when people focus so much on the financial capital, that’s where a lot of the problems come in.
Sharla Jessop 2:11
I can see that, it’s hard. So as you’re getting people involving people with wealth and families, you had mentioned in your article, that family meetings was really important in my thought first thought was, what’s the difference between a family meeting and a family reunion?
Mikal Aune 2:24
Yeah, so family reunions are great, and they’re necessary. So don’t don’t think that okay, we’re all going to have family meetings, and we’re not going to have family reunions, they serve two different purposes, because a lot of the family reunion is to create the relationships, the connections, and to learn about each other, and hopefully intergenerationally. So you have an older generation learning about the younger, or vice versa, that there’s some communication. Most times, you know, it’s like, oh, all the old people get together and all the young people get together. And just because it’s easy to play or talk with people that are your own age. But hopefully, people take the time to spread out a little and find out a little bit more about the next generation either up or down. So that’s just in your family reunions. Create those connections. Family meetings are something where you’re going to make it specific and intentional. And you’re trying to be wise about communicating about wealth and what you see well is.
Sharla Jessop 3:16
I think that’s great. We’re all raised in families with money and around wealth. And, you know, our parents all had specific ideas that as we sat around the kitchen table eating dinner, you know, topics might come up, but maybe we don’t really understand what’s behind those ideas that our parents have about money that we’ve learned. So talk to us about that.
Mikal Aune 3:35
Every person comes with their own financial story. Some people are like, you know, what, my family came from nothing and we earn this. And so that’s why, you know, I want to make sure that all my kids have everything, you know, provided for them. Some people came from more affluence where they felt like they already had everything, and it was and they just keep going on and life is easy. We’ve talked before that there’s a proverb called shirt sleeves to shirt sleeves in three generations. And what that is, is the first generation rolls up their shirt sleeves and goes to work and they build wealth. The second generation usually maintains it, but the third generation squanders it and it’s gone. 90% of families, which is an astounding number, 90% of families follow that trajectory. And there’s only 10% of them that don’t that actually make it and have wealth pass on from one generation to another. And that’s where I go back to, it doesn’t matter about how much money you have. It’s about passing on your wealth, but wealth has to be redefined. And that’s one of the first steps that you have to do and, and usually that’s what we do. And one of the first family meetings to sit down with the kids and say wealth is not just financial capital. It’s not just money, but it’s also human and intellectual capital. And your human capital is just your physical and emotional well-being and intellectual capital is your knowledge, skills and experience. So if you use financial capital, it should only be to improve human or intellectual capital. And when kids and grandkids start to understand that, their mindset changes. It isn’t just, Oh, I get it, I get an inheritance, and I’m gonna go buy a car within 72 hours, because that’s the statistic that within 72 hours of receiving an inheritance, they purchase a new car and you talk to, you know, clients, and you’re like, what do you want your wealth to do for your kids? And you know, first a lot of responses, I don’t know, you’re like, well, do you want them to buy a car with it? Well, no, I don’t want that. Well, have you communicated that with your kids? Have you talked with them about it? And a lot of them want to avoid talking about it with kids, because they’re worried about all the challenges that might arise, if you start talking about money.
Sharla Jessop 5:36
That can be hard. Money can be a really touchy subject, especially when you’re dealing with a family because everybody’s position, financial position, in a family can be very different. Even though they’re raised in the same home, everyone’s situation can be different. So I can imagine there are a lot of landmines you have to navigate.
Mikal Aune 5:52
There are, and you have to understand your kids. And each one is slightly different and each one of them. You know, some are gonna be responsible with where you’re like, hey, let’s, I want to talk with wealth about you. And they’re like, great, let’s talk about it. And you know, that they’re gonna handle it wisely. And there are others that you’re going to be like, let’s talk about wealth, and they’re gonna be like, how much money do I get, you know, and you know, that they’re just gonna blow it as soon as they get it. And so there have to has to be a different approach for different children, as you talk with them individually. And then you have to take that into consideration as you start talking with your whole family and be like, okay, how do we present this in a way that is equitable, fair, open and honest, so that everybody can communicate and can communicate well, without causing a lot of pitfalls or landmines like you’ve talked about.
Sharla Jessop 6:34
You don’t want to ruin relationships because of a family meeting about money, but especially in where you’re talking about the four different types of family meetings. And the first one is wealth and values. Sounds to me, like you’re talking more in your first family meeting, not about transferring money, or how much you’re gonna get as an inheritance. But why money is important to you what values you have surrounding money.
Mikal Aune 6:56
Exactly. Because if you just talk about money, you’re focusing on the wrong things, right, you’re focusing on the quantitative and not the qualitative. The qualitative, again, is, how can we help you improve your human and intellectual capital. The quantitative is, this is money and we get to go do whatever we want with it. I have people on both ends of the spectrum, you know, some people are like, I want to help my kids out now because I went without, I want to help them get ahead. And which is a good mentality as long as it goes with communication. I have other people that are like, I don’t want to give my kids anything, because I don’t want it to ruin them. So I’m going to just hold this back, because I’m afraid that the relationship can be damaged. That their growth and their development can be damaged. So I don’t want to just give them money. And both of them have good thoughts behind them. Because you know, I’ve seen a lot of kids that or children that need to learn from the school of hard knocks, where you can try to teach them and they don’t really want to learn from you. And they just have to learn it on their own. And if you give them too much money, they’re going to be enabled. On the other side, if you have kids that could achieve a lot more and they just don’t have the tools behind them, they just may not be able to get ahead as far as they could have, if they had a little help. I had read a good book where they talked about giving a man a fish versus teaching them to fish. You know, we always talk about that in good terms, right that if you give a man a fish, you feed him for a day, if you teach them how to fish, then you teach him for a lifetime. But sometimes we teach them how to fish without giving them the proper gear to do so. And if you’re like, okay, we taught you how to fish, now go fish and they’re like, wait, I have to create my own pole and, get a real somehow and make, how do I make you know fishing line and a hook. And so if you can help give them some of the tools that go behind it. And it’s compounded with education and communication, then it can do much more good and can help them get ahead for their lifetime.
Sharla Jessop 8:45
I see so many families, and I’m sure you do and everyone’s probably knows of a family where money has caused some issues, especially upon the death of the parents. And when you’re talking about inheritance, and it’s so nice to have a conversation about it before. So everybody knows what to expect and what the values are. And it can probably help mend or prevent damaging family relationships.
Mikal Aune 9:09
And that’s one of the biggest things that I see is that people a lot of times they just don’t want to talk about it. Because they know if they do talk about it, that they will start to create rifts in the family. A lot of times they’ll reversals are going to happen when you pass anyway. So it’s better to get a lot of the information out, be open and honest about it. Not that you have to share what your total amount is what you have. But to start the communication early and often. And that’s why we say that there’s four fundamental meetings that you really need to have. But you know, the first one, like you said, is the wealth and values meeting. The second one is family education and enterprise meeting. The third one is ownership and inheritance. And the fourth one is, if needed, is conflict and issue resolution. And I’m sure that’s never needed.
Sharla Jessop 9:53
Maybe not on the Brady Bunch.
Mikal Aune 9:56
But in real life up with most families, you know, in some of it, you know that that last one, you know, conflict and issue resolution, sometimes it’s teaching people how to communicate with each other in good form and ways to so it’s not attacking or being aggressive, but saying, trying to understand each person and their own needs and be like, okay, I can see where you’re coming from, because you need this. And I’m coming from this point, because I knew I need this. Let’s communicate, let’s try to work together and still keep our family relationships intact and not burn bridges.
Sharla Jessop 10:28
How valuable. Mikal, let’s spend a little more time talking about wealth and values meetings.
Mikal Aune 10:32
So the wealth of value meeting is probably the biggest thing that can help bring a family back together, especially if things have started to fracture. Because in the wealth and value meeting, the importance of it is starting with where did the family come from? We talked about this a little bit earlier. But what is your story behind it? And if you can share that story, it’s so much more powerful, and to say we believe in hard work and education because of these values. This story that brought us here, right? If you just say we believe in hard work, and education, people are like meh, okay, good to know. But if there’s a story that goes behind it, that’s why you know, that wealth and values meanings, you can talk about the family history, and this is why we are here. And this is how we’ve built our wealth, again, defined as not just financial, but also human and intellectual capital. And if you can share those values, you start to bring people together, then you start to have a discussion to say, okay, what are the values that we really share together. And a lot of times, you can do this through, you know, putting things up on a board and have all of the values that are up there, and you can weed them down. Sometimes one generation will hold on to a value when the younger generation doesn’t value that. And so they’ll get stuck. And you’re like, you know what, try to find the common values and things that you can talk about and say, okay, maybe this isn’t as important to the younger generation, and is it critical? If it is critical, then you need to teach about it and teach why it is critical and again share a story, if you can, if it isn’t critical, let it go and find the values that do mesh, and try to communicate with the younger generation about those values that do mesh.
Sharla Jessop 12:04
I can see how that could be very, very helpful, especially when you realize that different generations look at things differently. They have different experiences, they have different education, different tools available to them, life is just different. It is I think about my parents who were babies of the Depression, and some of the life lessons that they had to live with, and some of the values that they have, and things that they’ve done that are so different than the way that I live. Not that there’s are better values, just different values, but I appreciate them. And I want my family to appreciate what my parents went through. Because it was difficult times.
Mikal Aune 12:41
Yeah, I think is really critical to hear about those. Because when you hear those stories about the Great Depression, or when you’ve been to a third world country, and seen how people live down there, and you realize, wow, we’re blessed, we have a heck of a lot more than what they had. And so our life is really good, you know, that goes into our understanding of what is wealth and what we have received.
Sharla Jessop 13:03
So what would be the next lesson? Or the next meeting that you would after you’ve done the family? You’ve talked about wealth and values? What would be your next meeting?
Mikal Aune 13:11
So family, education and enterprise? Right? So some of this could be if there is a family business, then you need to talk about the family business? And how things are running? And who’s running it in? How do you educate the next generation so that they can run it and not just run it into the ground? Some people don’t have a family business, which is just fine, you can still have a lot of education, because a lot of people are like, gosh, I don’t even know, what should I be doing with my savings account, or what’s the difference between an IRA or Roth a 401k? They just I have no idea. And so we start with a lot of times just the 101. So the basic topics of hey, this is you know, so education from beginning to end, you know, things that you need to be worried about when you’re starting out maybe middle of the career, maybe as you’re getting towards retirement, and just to picture things or to understand them differently. So there’s a lot of education that can go with it from a business standpoint, or even just general education.
Sharla Jessop 14:02
I see that help that you know, a lot of things that you learn, by the time you’re deciding how you’re going to share your wealth and your values. You know a lot! You know all the things and but the younger generation might not have experienced some of the things. Might not be in a position where they will ever experience it. So they need to be educated about it.
Mikal Aune 14:18
Yeah. So they need to be educated, they need to learn. And sometimes they will learn it from their parents, and sometimes they don’t want to hear from their parents, and it’s easier to bring in a third party, say, hey, we have this person that can give you education about it. A lot of learning happens better that way through third party than it does through the parents.
Sharla Jessop 14:35
I can see how that would be. Okay. The next type of meeting you have is ownership and inheritance. Talk a little bit about that.
Mikal Aune 14:40
So the ownership and inheritance meeting is as you’re getting on in life and you realize that time is not limitless, that there will be an end at some point in the future. It’s better to communicate this sooner rather than later. Like don’t wait till you’re on your deathbed and be like this is what I want to have happen because then you know one person remembers one thing and one person remembers another. And this is where people can start sharing what they do have and can start sharing some of their desires in educate the kids to say, this is what we have, this is what we want to pass on to you. This is what we want it to do for you. We want you to get ahead and some of this goes with, you know, there’s seven steps to be one of the 10% of families that passes on their wealth to the next generation. The first one we already said is you have to redefine wealth to mean not just financial, but human intellectual capital. The second is that you need to take a seventh generation mentality. So as we pass this money on to you, it is not just so that you can consume it, it is so that you can use it to get ahead and that you can help set up the next generation so that they’re further ahead of you. And they have more wealth than what you do so so the generation mentality is critical in the whole thing in thinking like, what am I going to do to pass on to the next generation. So as you start those ownership and inheritance meetings, it’s what do we want this to do for you so that you can get ahead.
Sharla Jessop 15:59
Make sense. And it’s so much better to talk about it while everybody’s not in an emotional state where it’s hard to deal with things like that.
Mikal Aune 16:07
Sometimes health plays a factor into that too. Because sometimes as we get older, we start to experience cognitive decline. And so people are like, you know what, I’m gonna wait to tell my kids about this until I’m 85, or 90. And sometimes you don’t have that chance. And sometimes the cognitive decline happens at 70, or 75. And so you have to be thinking about this and communicating in advance. You know, some people want to share their money with their kids and be like, hey, this is how much we have, you may get some you may not get any, it depends on whether we use it or not. But we want you to know about it. So that if you do receive it that you use it wisely. And as parents, you have to be wise about your own kids to understand the two ends of the spectrum. Because if you start giving money away to kids, some people are like, you know what, I want them to only use it for good purposes. So I’m going to put all these restrictions on it. That’s controlling. And if you try to control the money and how it’s used, people usually resent it, and they fight back against it. The far the other side of it is enabling where I’m just giving them without any education restrictions or anything, it’s just, here’s money. And a lot of times the kids are like, great, but I just get to go spend it. And pretty soon they do become enabled, and they’re not independent. So the end goal should be that if whether they receive money or not that they’re fine, they’re independent enough that if they don’t receive money, they’ve taken care of their own affairs, they saved for retirement, and they’re going to be okay. Or if they receive money that they use wisely and just don’t go blow it and buy a new car within 72 hours.
Sharla Jessop 17:32
And it seems like this isn’t something he’s just done in four meetings in a year. So this is something that’s going to take time, I’m going to spend years developing this.
Mikal Aune 17:41
It should be. It should be done over years. So we talked about, there’s four meetings, but it’s not like you have four meetings and you’re done. It’s more like the values discussion can be ongoing, right? The education can be ongoing. Talking about inheritance can be ongoing. The conflict resolution, the fourth meeting that can be ongoing. All of them will probably need to happen. And sometimes they happen all at once. And sometimes you have just a very specific meeting. So for some families, like if you’ve already started talking about it, you can just kind of keep the ball rolling, and you can say let’s talk a little more. And then you can talk about all four pieces if you wanted to in one meeting. If this is your first time jumping into it, then a lot of times it’s easy to start out with the values and wealth discussion.
Sharla Jessop 18:21
Okay, so let’s say we’re there, and we’re at the beginning. I’m going to sit down with my family, what am I going to say? How am I even going to bring this up? Where do I start?
Mikal Aune 18:30
It’s best to start back at the beginning. And just say, I first want to talk about what wealth means to me. And here’s my history of why I’ve come to be this way and think this way. And here’s the stories that illustrate the values that I want to communicate. So now that I share my story, I want to hear from you. I want to learn what your values are and how you’ve come to those. So tell me what your values are what you’re thinking about. And then let’s come to a consensus and say what are our family values? What are our goals as a family and I think that’s one of the most powerful things because you know, as people families are faced by so many issues. And families can fracture so easily. And wealth can be one of those things that fractures families unless you have discussions where you can bring the family together and talk about your values that are shared, and things the relationships that are most important.
Sharla Jessop 19:16
I like it. Mikal, thank you for sharing this information.
Mikal Aune 19:17
Glad to be here.
Shane Thomas 19:26
Thank you for joining the Power Up Wealth podcast. Smedley Financial is located at 102 S 200 E Ste 100 in Salt Lake City, UT 84111. Call us today at 800-748-4788. You can also find us on the web at Smedleyfinancial.com, Facebook, Instagram, Twitter, and LinkedIn. The views expressed are Smedley Financials and should not be construed directly or indirectly as an offer to buy or sell any securities or services mentioned herein. Investing is subject to risks, including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should only be relied upon when coordinated with individual professional advice. Securities offered through Securities America. Inc., Member FlNRA/SIPC. Roger M. Smedley, Sharla J. Jessop, James R. Derrick, Shane P. Thomas, Mikal B. Aune, Jordan R. Hadfield, Registered Representatives. Investment Advisor Representatives of Smedley Financial Services, Inc.®. Advisory services offered through Smedley Financial Services, Inc.® Smedley Financial Services, Inc.®, and Securities America, Inc. are separate entities.
