Managing Family Wealth - The Stewardship Council

Managing family wealth becomes increasingly complex as capital grows across generations. To preserve both the assets and the relationships that sustain them, families benefit from strong governance and clear decision-making structures. Two essential tools in this work are a well-designed Stewardship Council, the governance body responsible for overseeing family-owned assets, and a disciplined Investment Policy Statement (IPS) that guides the management of investment capital.

Together, these structures ensure decisions reflect family values, align with long-term goals, and maintain transparency for current and future generations. This first article explores the Stewardship Council, including its purpose, composition, and best practices.

The Stewardship Council

As a family enterprise's pool of capital grows in complexity, the need for structure and governance becomes increasingly important. Transparent decision-making processes help ensure alignment with family values, risk tolerance, and multi-generational goals. One valuable governance structure is the Stewardship Council, a select group of owners who oversee the family’s assets.

While many families and advisors use “Stewardship Council” and “Ownership Council” interchangeably, I prefer “Stewardship Council” because it better reflects the role. Stewardship emphasizes the responsible, prudent, and forward-looking management of assets to ensure continuity and preserve family wealth for future generations.

The Role of The Stewardship Council

The Stewardship Council provides governance and oversight, as well as strategic guidance, for the family enterprise. Its purpose is to ensure family-owned assets are managed effectively and remain available to support both current and future generations. Council members steward wealth in all its forms, using shared family values and vision to navigate the complex relationships between the family and asset owners.

The Stewardship Council provides governance and oversight to manage wealth.

When assets are held as investment capital, the Stewardship Council may oversee the work of a family office or multi-family office on behalf of the assets' owners. In cases where the asset base is insufficient to employ a family office, an Investment Committee may be formed, with the Stewardship Council interacting directly with that group.

Transparency and accountability are essential to minimizing conflict and ensuring that capital remains available for future generations. Key governance documents, such as the Stewardship Council Charter, the Investment Policy Statement (IPS) and the Request for Proposal (RFP), help provide clarity, structure, and consistency in decision-making.

Stewardship Council Charter

The Stewardship Charter, drafted by the Stewardship Council, serves as the guiding framework for the Council's responsibilities. The Charter translates the family’s shared intentions into practical direction by defining roles, decision-making expectations, and the principles that anchor the Council’s work.

Essential components of the Charter include:

• The composition of the Council,

• The goals behind the management of the family assets,

• How success will be measured over time,

• How decisions will be made,

• The desired responsibilities and required skills of Council members, and

• A standard Council meeting agenda.

  
  

It is also essential that the Charter addresses potential conflicts of interest that may exist when making decisions.

Best practices for Stewardship Councils

Stewardship Council best practices ensure the group operates with clarity, consistency, and accountability. They help the Council translate the family’s intentions into effective governance and maintain high standards as responsibilities evolve.

Structure

As with many governance structures, the Council should consider an odd number of members to avoid tied votes, with the number of members reflecting the size and complexity of the family assets being stewarded. Smaller families with fewer assets may operate effectively with only three members, while Councils responsible for managing a large amount of assets may require more members to assign responsibilities and oversight to individual members.

Councils with fewer than five members may have difficulty achieving a quorum and a desired level of diversity of opinion and experience. In comparison, Councils with more than seven members may struggle with too many opinions and ineffective decision-making.

Large Councils benefit from staggered member terms, which bring in fresh perspectives while maintaining continuity. Because onboarding new members can be time-consuming, developing a standard onboarding process is beneficial.

Qualifications

When selecting members, the Council should assess current members' skills and seek complementary expertise to enhance diversity. Investing on behalf of family members is a great responsibility. Council members should be educated owners of the family enterprise who understand the unique attributes and dynamics of the family, the ownership group, and the operating businesses. The Council should maintain open communication channels with both the Family Council and the Board of Directors to ensure decisions are aligned and in the best interests of the whole family.

ESG

Many families increasingly want their investments to align with their environmental, social, and governance (ESG) values. The Stewardship Council must ensure that the family office or Investment Committee has the knowledge and expertise to incorporate these critical components.

Record Keeping

Family members or beneficiaries may have questions about asset performance, management, cost, or alignment with family values. The Council should maintain comprehensive records of meetings where decisions were made and maintain consistent communication with asset owners and broader family members, often through the Family Council.

Regulatory

Given the constantly evolving regulatory environment and variations across jurisdictions, the Council should regularly engage legal counsel to review the Stewardship Council Charter, advisor qualifications, and legal contracts to ensure compliance.

With a clear Family Stewardship Council Charter in place, the likelihood of family wealth being managed prudently for future generations increases significantly.

Our next article will outline the key elements of an effective Investment Policy Statement and Request for Proposal (RFP) process. Combined, they offer a roadmap for families seeking a thoughtful, principled approach to managing wealth across generations.