“Who invented money?”

My daughter and I were driving home from the grocery store earlier this week when she dropped this bombshell. It was a natural follow to my most recent, “we don’t have money for that” speech in reference to something frivolous like toys or fancy soap.

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I’d take anything over this question. Something about how babies are made or where hamburgers come from would be preferable to talking about money.

Before I get into today's blog, I just wanted to let you know that a podcast of an interview I conducted with Collin Glassco will be posted in the coming weeks.  Collin is the founder and CEO of the Glassco Foundation.  I interviewed him for a book I am currently researching on Strategic Philanthropy.  This is my first foray into podcasting so learning as I go...

But onto a topic that has come up in recent conversations.  What would a diversified portfolio look like if one of its objectives is to generate social capital?

Of course there would have to be charitable investments.  Ideally ones that not only resonate with the individual, but also have greater impact on society.  How do other businesses play into this portfolio?

Here are my thoughts - a social capital generating portfolio would include general revenue generating funds/shares/stocks.  Some people feel that change can happen from the inside, so by holding a piece of an oil company's assets you are providing them with the means to make change.  Fair enough.  Others feel that social capital can only truly be generated by investing in companies that have society's interests at heart (i.e. green energy).  That's fine too.  Whatever the motivation, there should be some source of revenue generation in the portfolio.

The second piece would be investing in a social enterprise.  I see social enterprises as companies that have social interests at the core of their business model.  They are for-profit enterprises and can be in any industry.

I was recently speaking with a woman who is looking at opening up a restaurant that is sourcing its food from local farmers.  Her approach to seeking investors has been the traditional business model (except that she is only asking those who align with her personal values).  Of course, as many of us know, investing in the restaurant business is high risk and therefore difficult to attract investors.  We talked about her changing her message from restaurant investment to a community enterprise investment.  By buying a share of her company you will not only be bringing a new eatery to her city, but you will be supporting other local businesses.  Most specifically, your investment will provide a foundation for local farmers to continue to strengthen their own farms in the shadow of the major agri-businesses that are cropping up around North America.

Of course, this positioning only works with those who already have a social bend.  But if you are reading this blog my guess is you have already given some thought to the idea.

The final piece of the social generating portfolio is charity (as mentioned above).  Charitable investments do not have to be to a specific sector or organization to have meaningful impact.  The most important thing about your charitable investments (aside from the fact that they align with your values) is that you know where your money is going and how you can best get it there.

How are you communicating yourself to your family (and/or business partners)?  Did you know that approximately 60% of failed business transfers occur because of lack of trust and miscommunication?  Imagine all that you worked towards getting eaten up in legal fees.  Knowing that you can prevent this from happening early on is critical to your wealth management and legacy plan.

Here are a few ways that you can begin the process of talking to your family and business partners about your financial expectations and wishes.  This conversation will open the door to a larger discussion around how you want your wealth to generate ongoing positive impacts on society.

Let's do a little self-reflection:  How do you use your wealth?  Is it to mentor the next generation in your family or to guide the future leaders of your company?  Do you use wealth to control your heirs and employees?

I strongly advise that you not let money be the elephant in the room.  You can start the conversation of money by leading by example.  Engage your family in MAJOR financial decisions.  Just like the African adage about teaching a man to fish... If you provide your children and other family members with the tools in order to make sound financial decisions you can rest assured that they will use those tools. 

As Randy Ottinger states in Beyond Success, "If the discussion of values beyond money has not been a part of the dialogue between parents and children at a young age, then money will ofen become the perceived goal for personal success." 

How are you measuring success?  Will your heirs know what to do with the money you leave them so that it can generate the greatest possible return (both financially and socially)?  What tools are you leaving them?  Please share these tools with the rest of the readership.

In one of the firsts posts I ask how you define family.  Family no longer is the nuclear 2 adults, 2 kids, a dog and a cat.  How are you communicating with your ex-spouse, your step-children, your ex-in-laws? All of these people, especially if there is a family business involved, should be a part of your communication strategy. 

I was recently at a CAFE event in Calgary and the President of Superior Windows was a speaker.  She is the ex-spouse of the son of the patriarch who started the family.  In other words, she married into the family business and now she is President.  It was because of the family's open paths of communication that this transition from her ex-husband to her was possible.  It was also possible because of her business savvy and leadership skill-set (not to underplay her talents and strengths).

So what would this conversation look like from a business perspective (not family owned)?

Start the conversation with successors now.  Just like your children they will need to know what kind of business legacy you want to leave behind when you transfer the company.  In many cases, a strong community identity adds value to a company and at the time of sale is something that is a bargaining chip (depending on the value of the community partnership).

For more reading on this topic I recommend Beyond Success by Randy Ottinger and Preparing Heirs by Roy Williams and Vic Preisser (both of which are available through this site - click here).