Purpose, passion and planning

Incorporating ‘purposeful planning’ into the wealth equation

Picasso once said, “Our goals can only be reached through a vehicle of a plan in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”

So, while the quality of the plan itself is critical and will ultimately determine how effective you are in achieving your goals, the artist’s insight also recognizes the importance of intangible aspects—the underlying values and objectives that give meaning to the plan. This is at the core of purposeful planning.

Having recently turned 58, Eli has developed a growing realization that life is full of paradoxes (“We can only change when we accept who we are”; “Sometimes, the more choices we have, the more paralyzed we become” etc.). With three strong-minded children in their 20s, Eli has come to fully appreciate that people are complicated and don’t always act as expected, and that one’s life journey can often stray from a demarcated path. Eli, for instance, started out as a science graduate and became a successful restauranteur for a time before launching a healthcare technology business 15 years ago. His children are also forging their own independent careers and ventures. As his own life evolves, Eli is thinking more about his legacy, including preparing his children for a sizable inheritance. This nest egg was accumulated from Eli’s own inheritance, the sale of his Montreal eatery, and years of saving and investing the profits of his highly successful IT business.

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How can an individual like Eli introduce and benefit from purposeful planning?

Sylvia Azoulay, Vice President, Tax & Estate Planning at Richardson Wealth, explains that the most effective wealth planning is never an accident; it is the result of the clearest of intentions; rigorous effort, intelligent direction and skillful execution. Moreover, it is multi-faceted and involves both technical considerations as well as understanding an individual’s deepest values and beliefs.

There are various forms of planning when dealing with wealth, Ms. Azoulay says. For the most part, individuals focus primarily on investment, tax, estate, insurance and financial planning. They are guided by professionals with expertise in these different areas. For individuals like Eli, purposeful planning can help to diminish any fears and concerns as he readies the next generation for wealth.

“Most of the time, people are led down a path of “technical” considerations such as tax minimization, asset growth and protection. These considerations often become the end goals,” Ms. Azoulay notes. Studies have shown, however, that wealth owners like Eli care substantially more about the impact of their wealth on their families and their community, living according to their values, meeting life goals and avoiding conflict among family, she adds.

“Purposeful planning starts with a ‘purposeful mindset’. For individuals like Eli, this mindset is about first articulating your most important objectives. This could start with an articulation of values, and expression of hopes and dreams for oneself and for one’s family.”

Estate planning

Start by thinking about what is most important to you and your family

• What is the purpose of your wealth and how will it be used to support those things that are most important to you?
• When you transfer your wealth to your heirs, think about it as more than just a transfer of assets. Think about the emotional and wisdom legacy that could be passed along with it that leaves long lasting messages of love, guidance and memories for your heirs.
• When doing your estate plan, put yourself in the shoes of your beneficiaries and think about what they would value most and how they would want to be treated as beneficiaries of long-term trusts.
• Retain Advisors who understand purposeful planning and the process involved in structuring your wealth transfer in a way that reflects and articulates your purpose and meaning and is not just focused on being technically sound and tax efficient.

Financial planning

Start by exploring and articulating your life goals

• Are you trying to grow your wealth? If so, for what purpose?
• Are you currently deploying your wealth in a way that is aligned with your values?
• How will your wealth be used to fulfill those goals and what are the options?
• What cashflow do you need?
• How long do you want to stay involved in the family business and what are the motivating factors for this?
• Determine what expenditures enhance your life – ie. travel, spending on others, eating out with friends. Build this into your cashflow needs.

Investment planning

• Are the investments you are making aligned with your personal values?
• Have you considered impact investing or socially responsible investing (SRI) as part of your strategy?
• Are liquidity options built into the structure of the portfolio for life events that you want to experience?

Philanthropic strategy

• There are different ways to give back. Often people give in a “responsive” manner – to friends and family who are fundraising for certain causes and have solicited their social circles for support. In addition, people have causes they support with ongoing annual donations.
• A third way to give back is through “strategic philanthropy”. This involves more purposeful planning that starts with your values and narrowing down the causes you want to support. You need to think about how you can have an impact by giving not only financially but perhaps through a gift of time and skills to support certain causes. Purposeful planning requires strategic thinking and is not simply reactive to requests for donations.

Succession to the family business and shareholder agreements

This is one of the most challenging areas that families face.

• In most cases, tax and legal Advisors get involved early in the process and the focus is mainly around tax minimization, appropriate retention or transfer of control and funding of the payments from the succeeding generation to the parents, if applicable.
• Purposeful planning involves developing first the “core values” that the family collectively agrees to. For example, shares must only be owned by lineal descendants of the matriarch and patriarch; or not all owners of the business need to be actively employed in the business. This process can involve several family meetings.
• Does the purpose of succession go beyond the financial aspects of the business, such as a sense of loyalty to customers, employees and the community?
• Once the values are articulated, then plans involving succession and shareholder agreements can be implemented that align with these core values.

“Purposeful planning has the potential to be much more meaningful and satisfying for all who are impacted by it,” Ms. Azoulay says. “It takes time, much introspection and communication and, most importantly, getting the right kind of Advisors involved who understand the concept and processes that are needed.”