Is Your Family Truly Rich?

How do you build a successful family that prospers? Chairman and CEO Linda Davis Taylor 74C understands.

By Michelle Valigursky

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Linda Davis Taylor 74C

“Being rich means a lot more than having money,” says Linda Davis Taylor 74C, chairman and CEO of the nation’s oldest investment advisory firm, Clifford Swan Investment Counsel in Pasadena, California. “Being rich means having a sense of purpose, knowing where you came from, defining your value systems, and questioning how you’re living,” she says. “Smart financial strategies are only one part of the big picture.”

In her book The Business of Family: How to Stay Rich for Generations, Davis Taylor delves into family dynamics long before approaching financial strategies, drawing on her 25 years’ experience in working with multi-generational families. “I believe wise investing is only part of what makes families successful in preserving their wealth,” she explains. “I work with successive generations of families to increase their financial knowledge and establish a long-term mission that includes both money and broader family goals.”

In the Frank Capra classic movie “It’s a Wonderful Life,” hero George Bailey often remarks “I wish I had a million dollars!” But, as Bailey finds out, other aspects of life are far more important than the strength of his bank account. For Davis Taylor, wealth management should be viewed with a more holistic perspective than simple evaluation of profits and loss. “Money is only one factor in richness.”

“Attaining more money can be a hollow goal. Human capital is most sustaining in the long run. The secret to real success and happiness is found in developing one’s own skills and talents to be productive," she says. “A family will suffer if it puts its money ahead of members or ideals.” She notes, “Values are a real asset a family can build on. They must be defined and communicated so family partnerships can be built.”

Davis Taylor advises each family to begin the exploration with everyone in the family completing a survey to seek their views on personal and collective values, attributes that define success and happiness for individuals and the family as a whole, decision making, and difficult issues the family should discuss. "This process helps the family to focus on its fundamental purpose and articulate its mission. Once these aspects have been defined, the family should hold regular meetings to provide a forum for communication and support. Over time stories and traditions are passed on, and the family can pursue collective projects to encourage members to stay connected. Philanthropy is one such avenue," she says.

“There are over 9 million households in the United States worth at least $1 million,” Davis Taylor writes in her book. She goes on to say that “Over 70 percent of wealth doesn’t last beyond three generations. That means making the money isn’t the only problem. Keeping it is just as challenging.”

She points out that “Billionaires beginning with the Rockefellers set up family offices to do nothing but run their affairs. This same principle will work for any family, even if their version of a corner office is a laptop in the corner of their kitchen. Every family needs its own business plan to ensure its members know where they’ve been, where they’re going, and how they are going to get there.”

Fifty dollar bills

Crafting the Family Strategy

Davis Taylor suggests that it takes more than financial capital to make a family rich. She names human capital, social capital, and intellectual capital as other important resources. Financial capital helps each of the other components grow.  

In The Business of Family, Davis Taylor provides a roadmap for success. To begin envisioning a long-term legacy, she recommends a family meeting during which each member contributes goals and objectives. Drawn from chapters in her book, here are a few highlights of this important process:

  1. Start with a clear mission. “A strong business begins with a well-thought-out mission explaining the purpose of the enterprise.”
  2. Define values. “These are the guiding standards that provide a compass for how people behave. This is true for employees in a business or members of a family.”
  3. Provide benefits to family stakeholders. “Shareholders who get a return invest more and stay loyal. Family members will too.”
  4. Identify goals. “Whether financial or personal, wise families decide jointly what they want to accomplish then set about doing it as a team.”
  5. Strategize. “Reaching family success is a campaign of the highest order, so it needs a plan, a staff, a timetable, and markers along the way.”

Once a cohesive strategy is in place, Davis Taylor encourages individuals to “unleash creative power in the family.” Here’s what she recommends:

  1. Embrace the family’s diversity to expand its opportunities.
  2. Manage spending for today. Build new wealth for tomorrow.
  3. Sustain the world through philanthropy.
  4. Operate with a global perspective.
  5. Stay connected. Technology helps.
  6. Encourage members’ passions.
  7. Have fun together.

As Davis Taylor writes, “if these riches get passed on, succession won’t merely be about inheriting money. Truly staying rich can mean so much more.”

Editor’s Note: Davis Taylor is a frequent speaker on wealth transition, family governance, and philanthropy. In addition to her investment counsel career, she has had over 25 years’ experience in senior leadership positions at Emory University, Claremont McKenna College, Amherst College, and Scripps College. Davis Taylor has served as a trustee for numerous educational and non-profit organizations and is a co-founder of a private foundation. She and her husband are the parents of two adult daughters. The Business of Family: How to Stay Rich for Generations is her first book. Watch Linda interviewed on The Street here.



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Michelle Valigursky