The real estate business, which for years was the mainstay of the family's wealth, is now going through difficult times. Rental income has decreased, capital gains have stagnated and selling is not as easy as it used to be, due to the current economic circumstances.

Or perhaps, the family had a very active very active stock portfolio that had been performing well, but the market changed drastically due to some of the recent global events. Now, those risky bets generate more doubts than certainties.

But it can also happen the other way around: the family remained too conservative and missed out on unique opportunities, such as those offered by technology withonservative and passed up unique opportunities, such as those offered by the technology with Magnificent 7 (a select group of large technology companies in the U.S.).or, in the local context, decided to remain 100% in pesos in a period when international equities had incredible performances.

When this happens, reactions are usually immediate: "Why was this decision made; Who got us into this investment? We missed an incredible opportunity because we didn't have a clear mandate; Who approved this investment; I didn't agree to this.".

This is where family governance comes in. Because when everything is going well, no one questions anything. But when the decisions start to weigh, the problem is not only financial, it's also a family one..

Separate water

In many families, wealth management falls to a single person. one single person. This figure, who is usually a natural leader or simply the person who assumes responsibility by defaultis not questioned as long as things are going well. However, when unexpected results arise, this person becomes the center of all criticism.

Why is this a problem?

• Lack of clarity: If clear roles have not been defined, decision making feels arbitrary.
• Emotional overload: A single person takes on the emotional burden and responsibility, which can be wearing.
• Personal conversations: When problems arise, discussions tend to become discussions tend to become personal rather than strategic..

The solution: Separate strategic leadership from operational management.

1. Strategic direction: The family sets the general rules, the vision of its wealth and key decisions on asset allocation (investment policy).
2. Professional management: An internal or external team proposes and executes decisions, always with technical criteria, and reports to the family in monthly committees.
3. Supervision, transparency and monitoring: Periodic reviews are conducted to assess results and make adjustments if necessary.

Key point: The family leader, who is usually the person most involved, can be supported by a professional team that explains decisions and their rationale. This helps avoid unnecessary tension and allows decisions to be based on strategy, not emotion.

The worst time to talk about family governance is when the problem is already on the table.

Many postpone the discussion of wealth management until something goes wrong. something goes wrong. However, at that point the conversations are no longer rational, but emotional, making it even more difficult to arrive at effective solutions.

So when is the best time to talk about the asset structure? When everything is in order.

How to get started before it's too late?

Here are small steps that can make a big difference:

• Structured family meetings: Not waiting until there is a problem to initiate conversations.
• Define roles and responsibilities: Anticipate and assign tasks clearly, avoiding improvisations under pressure.
• Create an Investment Committee: Have internal representatives and external experts to evaluate equity decisions objectively.

In Summary: Family First, Heritage Second

Preserving wealth is essential, but preserving family harmony is even more important. A family governance system not only serves to manage resources, but to ensure that family members enjoy the estate without it becoming a source of discord.

• Clear rules: The family can enjoy their heritage without falling into unnecessary arguments.
• Progressive implementation: A good family governance system is not implemented all at once, but step by step.
• Small changes: Establishing regular meetings and defining an investment committee can generate big benefits in the long run..

Nelson Haase

MFO Senior Advisor Fynsa