alt="c01f002"/>Figure 1.2 The Multiple Dimensions of Corporate Management
Figure 1.3 The Multiple Dimensions of Family Wealth Management
Now, let's apply the same analytical framework to a family, assuming that a family is no different than a corporation. Making this assumption requires us to leave aside a number of important considerations, but the case can simply be made that these are not crucial to our point here. Let's imagine the head of the family as the CEO of his or her family's wealth, a company Charlotte Beyer calls My Wealth, Inc. Just as was the case for a corporation, there are multiple dimensions and the successful high net worth individual must first realize the multiplicity of these dimensions, and, second, be able to deal with all of them. Figure 1.3 illustrates this point and recalls a number of the dimensions we mentioned in the introduction for this chapter.
Just as it would be silly for a corporate CEO to focus on a single aspect of the business, it is equally misguided for an individual to consider just one aspect of the wealth management challenge. And yet, the traditional approach would be exactly that. For years, the industry had us and many of our clients believe that their focus should be solely on managing their financial wealth, their financial assets. This may have made sense when financial wealth was primarily inherited and in the form of stand-alone trust structures; but it certainly no longer applies when these financial assets were created by the current senior or immediately preceding generation.
Multiple Interactions 9
Now, if the challenge was simply to recognize that the problem is more complex and has more dimensions than initially thought, there would be little need to make dramatic change. Yet, just as is the case in a corporation, all these various “divisions” within the family structure do not exist in isolation. They have both their own issues that have to be addressed directly and a variety of tentacles that extend toward and into other dimensions. This is what makes it impractical for any service provider to the wealthy to argue that he or she can serve the family by simply focusing on a single aspect. I vividly remember the time when we first introduced the concept of tax-aware investment management to J.P. Morgan's clients: I could be my own wealthy client if I had a penny for each time I heard people tell me that “the tax tail should not wag the return dog.” Most individuals who were raised in a world where taxes did not matter simply could not understand that there was a need to change the traditional investment process if one was going to focus on maximizing after-tax returns or terminal after-tax wealth at some future point in time.
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