The Trust Fund Baby Formula || Peter Wachira

0:00 in a period of 10 years uh just within the family alone. >> Yeah. >> You can cut up without compounding interest just from a,000 bob each. >> Yes. >> Uh kit 15 to 20 million is easy. >> Very easy >> from a,000 bob. >> From a,000 bob. >> That's exactly what you what they are doing. But now they've made it sweeter. Internet problems. Who the hell is buffering? Say goodbye to all your internet problems by plugging to the Sigmoid Group. Professional installers especially come in stalling. You're looking for installation in an apartment block single dwelling home whichever corner of

0:46 this country you're looking for professional installers consultation to the whole process. Contact details to group. Consider yourself good. Our guest for this episode on a whole new level. It's a very interesting concept. We've not covered that on set before. Our guest Peter Wash is the CEO of the Lions Trust. They found a way in my words to make you live forever and uh make your money reach your great great great great great

1:31 grandchildren. So uh bless up and I trust uh this conversation will prove me right as the trustee and representative of the people as far as good vibes is concerned. >> Thank you. Thank you Dr. >> for now I'll give you two stories. >> Yes. something that caught the attention of people on Twitter. >> Yes. >> A guy said that cash. >> Mhm. >> The landlord used to come for the money in cash. Yes. >> And the setup is in Lington if I'm not wrong. >> Yes. >> Uh and at some point the landlord just disappeared. >> Yes. >> He stopped coming. >> Mhm. >> So the guy had tweeted that Ala the rent aside

2:17 >> for 2 years. So he had two years worth of rent >> just in case the landlord shows up. >> Yes. >> So there was a lot of speculation around that. One of them was this probably one of those people who does not trust uh their wife or the marriage setting of their family >> and probably something bad happened. >> Yes. >> Okay. >> And number two that was the main that was the main. >> So people were like oh you are lucky man. Because in this sense if someone owns a property like that and it's only you that knows about it >> in a claimed asset but not necessarily claimed assets because the family cannot claim it true >> they don't know about it. What do you

3:04 think in your history in your in your experience and generational trust >> uh what do you think happened there? Wow. There are a lot of scenarios that you can actually bring up that may have happened. >> Mhm. >> Uh but I think one of the unfortunate scenario you can think of is for those two years after >> maybe the family is struggling >> somewhere. >> Maybe. Yes. >> The father owned some property in Lington >> that used to be one of the revenueas for the family. >> Yes. >> Most probably because he stopped coming. He either may have fallen sick or worse still he have may have passed on >> and maybe he was the bread winner for

3:49 the family. >> Yes. >> And the source of his revenue was this property in Lington. >> So chances are >> that revenue to the family may have stopped >> because chances are that the family maybe wife now to >> have no idea >> where those properties are. >> Okay. And incidentally, I think it looks like uh this is a very common story in this country. >> I mean I can give you almost 100 stories >> of uh some guy who used to own properties. A very similar scenario in Mombasa. >> Mhm. >> Uh there's a Kate in Mombasa. A guy comes from somewhere let's say in Kimu somewhere. So once in a while

4:40 but all of a sudden now he stops but he knows that he came from somewhere in Kiamu. >> So this stops coming then over time he realizes okay for some time. So after many years he goes looking for him. So he goes and says, "I am looking for Mr. Ashira. >> I am his employee. Now I've been taking care of his property, but he has not shown up in the last 5 years. >> Where can I find him?" >> Then of course the family is confused because they have no idea that Dim had assets in Mombasa. Uh they don't know

5:26 where to even begin the conversation with this guy. >> Mhm. Because this muzz passed on 5 years ago. >> Yes. So much wealth in Mombasa that this guy has probably just been taken care of. And unfortunately or fortunately it is only by this guy showing up that they get to realize that there's this wealth here. There are so many of those stories that we get to interact with and and uh one of the thing that comes to mind and uh the the conversation is about the family wealth conversation is more a family people conversation >> Mhm. >> than a love a wealth conversation. In

6:12 fact incl. >> Mhm. Because when wealth is not properly managed before the wealth gets lost, it is the family that starts to suffer. It is the love that gets to to to to be messed up. >> It is the conflicts, the struggles about where will the next meal come from or if Dr. Kakimori and I are brothers. >> Mhm. >> It is now the rift between me and you that will start now getting lost >> because I'm looking at maybe Buddha our father has probably that property in Lovington. >> Mhm. >> And maybe another property somewhere where I would say

7:00 you know across the road. >> Mhm. >> That is not as premium as Lington. >> Mhm. >> Then I'm looking at Dr. King. thinking h this guy is not going to take the property in Lington. >> Mhm. >> I want to push him to that other property. >> Mhm. >> So that some of the issues that we've started experiencing is that the issue of wealth transfer before the wealth transfer fails. >> It is the communication and the trust within the family that fails. It is the love that tends to fail. >> So what do you think? Um first of all this guy going to Kimu and announcing >> Yes. >> that first of all that could do more harm than good >> because first of all the families may enter

7:45 >> Yes. >> a war they were not prepared for. >> They may enter a war that they were not prepared for. >> Mhm. >> And then they may have access to information >> that they probably even regret having access to. >> Yes. because it is information that all of a sudden brings a lot of value to them >> that they have probably not prepared to handle or >> they have you know what you may call some bad feeling how could do this to us did he love us enough to let us know that there's some wealth here and questions like so where are the titles because those are the other things that uh uh families are struggling with. You

8:31 have assets somewhere in Mombasa, Lovington, Camulu, Kila Mahali. >> Mhm. >> But possibly your titles are somewhere under your mattress or they are scattered somewhere where you're hiding them because you're feeling like if my son knows of this title, >> they may come to probably grab it away and uh you know maybe liquidate this property. But besides that, I think the bigger or the most uh depressing aspect that you've experienced is the aspect of when the family now gets to know this wealth. >> Mhm. They have no idea how to pick up that wealth and utilize it now for their benefit. Because in most cases because

9:19 this Muz was operating you know Chinyamai, he had not trained any of the children or the family members on who manages this wealth, what did it take for me to create this wealth, how do I sustain it, how do I maintain it? and you find that the best that the family can do is to receive that wealth and do what they know how best to do. Sell it and enjoy the money because most people know how to use money but they don't know how to manage and maintain assets. >> So when we go into the mind of the person who does that, >> yes, >> on the flip side, you would say that uh they are probably they probably right in knowing family turns against you at some

10:05 point. Okay, >> that's right. So by the time they log out of this world they probably in the mindset of >> he has run his race because for the people who get a chance to know they are going they probably would have told the family >> but some of them probably consciously yes >> did not tell the family for reasons known to them. >> Mhm. So you would say that um what is this attachment with uh him leaving it to the family compared to at the point of running his race >> as long as you judge him for that? >> What do you think goes on in his mind?

10:50 I met someone I've met someone I was in one of the I met don't put all your eggs in one basket. >> So this particular person what goes on there >> I think there's some element of fear which is probably out of lack of knowledge. fear from the family or the people around >> they say that >> and essentially because our fathers who are probably the boomers >> Mhm. >> the best they knew of how to create wealth is to own it directly. Peter

11:37 Ashira the title must read my name. >> Mhm. and I want to protect that title because it's the most valuable document that tells me that I own that property. >> Mhm. >> And the fear I have is that if Dr. King is my son and he gets hold of this >> Mhm. >> document, he can collude with whoever in uh the land's office to transfer this property to themselves or to to liquidate it. I think it's the fear of I want to own it and I can only protect it if I can see it. >> But there's nothing wrong with that mindset because there's a certain in fact a friend of mine dropped that >> there's a a certain comm community a

12:24 certain neighborhood. Yes. >> A certain neighborhood >> where when a man outlives their usefulness in the family life. Yes. >> They get rid of them. and their usefulnesses for your children. So you go in installments. >> So if of that generation have seen some of their friends going because what you have becomes a threat to you and blame them. >> You cannot blame them and there's absolutely nothing wrong with having that title in your name. >> Mhm. The only challenge would be >> you will not live here forever.

13:11 >> You would desire and that's why I was saying that it's a story of love. You would desire that in your absence then your family has a way of now picking up what you have built and taking it to the next level for one simple reason. A family will not remain static. BBT maybe he may be what we are calling generation one you know started from zero >> and he hustled he got those properties in you know the areas that he has so he's you you may call him a generation one >> Mhm. >> He will get a family probably by the time you know his family before you and the children get married there will

13:57 probably be five members that are part of him. >> Yes. But the next generation is coming in probably just about 20 30 years the family tree would have grown to probably 30. >> Within a very short time >> it would have grown to a much bigger number. >> Yes. >> At the heart of a lot of the because I have actually talked spoken to very many of them. >> Mhm. Their desire would be that I would want whatever I have benefits my immediate family, protects my myself and my immediate family, but also I leave it as an inheritance for my children but not just for my children, for my grandchildren. And because the family tree will will grow, the idea

14:43 would be how can they nurture this so well so that it grows to meet as many generations as possible. You know the way uh the scripture says that a good man lives an inheritance for their children's children. >> True. Yes. Yes. Yes. >> A lot of people deep down in their heart actually wants to fulfill that naturally because it's a natural setting. >> Mhm. >> That whatever I am doing today, I'm not just doing it for myself. >> Mhm. And I'm not just doing it for my children. I'm actually doing it for their children. In fact, that scripture talks of not my children, but my children's children. >> Mhm. >> Because whatever I have, I will use it to actually raise up my children. By the time I am going, they will probably be

15:29 able to stand on their own two feet. >> Mhm. My greatest call is to prepare them so that they can take care of their children and so that that loop can continue growing. That's what I'm talking about the story of love. So the question then the problem with that muz holding on to that and not building structures to pass on that wealth in an effective manner is you realize if it's not properly handled then that wealth becomes the problem to the family. Okay. >> Yeah. >> Um I I I also saw something very interesting where they say >> uh the setup was for you to create a certain level of wealth. >> Yes. >> There are things you have to sacrifice.

16:16 >> Yes. >> And uh there was a circle for friends, circle for family. >> Yes. >> A circle for your own personal things for you to access a certain kind of money. M it sounds like a rich people problem like wealthy people problem there's a certain level of money there's a certain level of wealth that the children are not okay they didn't get the attention they needed to grow cuz you have to go hard for you to make that money is there a correlation between certain levels of wealth >> and uh how your children turn out and I'm saying this because as you are making that explanation >> uh I have a friend and I hope he doesn't watch this. >> Yes, >> he's a senior >> citizen. >> He has a very very big uh hotel. So, he

17:04 had called me. >> He wanted me to partner with him >> because he wants and his exact words were >> uh he wants uh someone he can trust to continue doing what he does. >> Yes. >> Because he does everything by himself, but he has a family. >> Yes. And one he called me for a meeting. >> Mhm. >> And we excused ourselves. >> Yes. >> He introduced me to his son and his wife. Yes. >> And they didn't like me from the onset. >> And I started avoiding him. >> Mhm. >> And I'm I when I look back in retrospect, I'm getting the vibe. Yeah. >> Yes. >> He he he was willing to go external. >> Mhm. >> Than. >> So I started avoiding him deliberately because I felt like I don't want to put

17:50 myself in that situation. >> Yes. to be business partners on that level >> whereby I'll be in crossfire in a crossfire >> with people who >> like we just hit a relationship >> okay but then again when when you come back to someone has made a certain level of money >> yes >> and it's almost like a superstition like >> how comes his kids are fine I'm just saying but now for for other cases the only link deal he's willing to go external >> and there's also the element yeah sometimes maybe your children are not interested in your line of business >> that's also could be a thing >> that's right

18:35 >> so now it comes to >> uh does one have when you say it's love that has failed >> yes >> right can you build wealth and love at the same time or these are the things that you have to sacrifice That's actually a very interesting angle to bring it out. >> Um there's some corollaration with the scale of wealth and the challenges that that wealth brings to the family. >> Mhm. >> But our experience has been the intensity of battles that families have >> in succeeding wealth that is vast. It's the same intensity that we see someone hacking their mother to death because they want that e of an acre and their

19:21 mother is not going fast enough. >> Yeah. >> The intensity is the same. It's only that you're probably dealing with now different scales of wealth. >> But what you say now brings another twist to it. >> Yes. >> That having that thing that your children hope to inherit when you're gone >> Yes. could be the reason you're going in the first place. >> It could be. But you see like that situation you've talked about your friend. >> Maybe the reason why the family is feeling uneasy >> is because the your friend has brought in you and they seem to give you a lot more information about their wealth. >> Yes. >> Than they have given the family. So they are feeling uneasy. >> Yes. And and that's a scenario you see

20:07 of business friends knowing more about my wealth. >> Mhm. >> Than my actual family that I will actually leave this wealth to. >> Okay. >> And actually that is studies as as as one of the dangers that most families are facing. >> Mhm. In fact, um, a lot of families end up losing a significant value of their wealth from one generation to the other when they are transitioning. >> In fact, almost 70% of their wealth is likely to be lost. >> Mhm. >> Primarily because of those kind of scenarios and the cause of that, of course, the little part of it is on how you structure. You set up structures to say that do I have a will

20:53 >> or do I have a trust uh to sort of now transition that wealth to my children. >> Yes. >> Which and we can demystify what trust and wills are. >> Mhm. >> But that contribution is usually very small. In fact, you can even combine that to do I have a prudent investment structure or a legal structure to actually secure my wealth. >> Mhm. A lot of people when they're talking about now wealth transfer they focus on that >> but the contribution of that in as much as is very important is usually very small just about 3% >> of the reason why the failure to have that would cause you to lose 70% of your wealth >> or people lose up to 70 or probably >> 70%. I mean Dr. Kari let's say you have

21:41 uh by the time you're going you have your 50 million as your net uh wealth. Mhm. >> You are not there and you've not done your structures right. 70% of that may disappear. >> Mhm. >> And what causes it to disappear? The biggest cost >> is not the wealth itself. It's the information that the family has. >> Mhm. >> And that actually that what that's what you're talking about. Your business partners know more about your assets than your family. >> Mhm. And because your family is closer to you and closer to your wealth, >> they feel entitled. But that entitlement now uh and lack of the information that is critical for them to get to understand how to pick up and move on

22:28 >> now creates a problem. >> Mhm. >> And what shows up in most families is issues of trust and communication >> because of information within the family members. So that the people who are who have a lot more information about the wealth are likely to probably take advantage of those who do not know. >> Yes. >> So one of the things that we help families to understand is that you've got to actually help the people who you are trusting to leave this world to to get to understand what is all these wealth about. What information should they know? >> Mhm. How should you replicate yourself to that person? What are the things that

23:15 you used to do? What are your business networks? >> Yes. >> So that trust in communication actually is the biggest cause of family wealth transfer or failures. It actually contributes up to 60% of the reason why they fail. There are two others that are usually very critical that I think it's probably part of our cultural structure that we have not adopted that >> which is >> very interestingly failure to train the recipients of that wealth on what to do with it >> is a problem >> is a big problem. Let me give you an example. Assume my father owns a shoe making company. >> Mhm. So that shoe making company the value of it of course it has assets and it has the value that is being created.

24:02 >> So um I run that company I make shoes. So there is information that I need to to to that my father knows that I probably do not know. They know where they get hide from. >> And they have created that network and to the to give them a constant supply of their raw materials. They know the skill of making the shoe and they know that at different times these are the shoes that are on fashion. >> Mhm. >> And they actually know how to put together a shoe. They know how to store that shoe. They know who supplies their shoes to the market. They have built relationships with that.

24:47 >> So the question would be if my father falls dead today and I show up as his son and says that I am the father of Dr. King the son of Dr. Dr. King who owned this shoe making company. >> Mhm. >> So I have come in to take on my father's asset. >> Mhm. >> How long will that business survive? >> Not long. I have no idea where he gets hides from. >> I have no idea how he makes shoes. I have no idea who supplies those shoes to the market. I have no idea what it takes to take this business to the next level. So, one of the things that that uh we are training families is to actually bring the key stakeholders who are the family members who would now take on this because you're talking about

25:33 generational wealth. >> What if they are not interested? Well, that's also a factor. >> That's also a factor and it's an important factor. >> So there's there's there are situations where they are not interested. But the most critical aspect is on how do you preserve that information because one of the things that you need to hand over >> whether you're handing it over to your heirs or you're handing it over to a professional that will take care of it on behalf of your family is you you need to hand over not just the assets or the wealth that you're passing on but you also need to hand over the knowledge around that wealth. You need to hand over the relationship around that wealth. >> Mhm. you need to hand over what it takes

26:18 to actually maintain that wealth and draw value from it. In fact, one of the things that uh we we we we are seeing in most families is that a lot of families when they are fighting over the wealth transition amanda and the family is going to court to uh now take over their wealth. They end up fighting over the assets. >> Mhm. and they end up killing the value of the wealth. >> Mhm. >> And it's exactly what I was saying. You own this shoe making company. The asset may be just the land that you that that land may be probably a ka or half an acre, the building, the machines and the

27:04 stock, raw materials. >> Eat that money go back to where you were before the assets. But the value of that business is probably 100 times more than just that asset >> because the value of the business the knowledge to keep making shoes is a lot more and that is what has been the bread winner for the family probably for for very many years. It is that value that you need to protect. So that now when you're handing over assets or when you're handing over wealth, you're not just handing over assets. You need to also train those who are to receive wealth on how do they continue sweating this asset to create value so that it flows into the future. >> So that's number two. That's the other. So the failure to train them the

27:49 recipient of that wealth on what to do >> is another big big failure. And of course if you don't train them the best thing is exactly what you have said what they know how to do is to convert this into cash and enjoy the cash. But you end up probably only getting let's say 5 10% of what you'd have gotten. >> But there's levels of money without losing your train of thought. There's levels of money >> when they talk of figures like a billion where you can eat 100,000 per day for 27 37 years. H do they care? Should they care? >> They should actually. And globally we've actually had experiences of families that have done that.

28:35 >> I mean there are global examples that are given. >> Yes. >> Or families that were once the wealthiest in the world. >> Mhm. >> And within just two three generations they are >> then bankrupt. >> Yes. I mean um I think we can talk about this because they in the in the in the public sector like the Vandalbe family respected in their times >> and did not even get a taste of it. under Son Kooper. >> Exactly. And under Sona is probably that generation. >> Yes. Yes. >> Yes. But what happened? So there was a lot of wealth. He was the wealthiest in the world when at his time big in his industry in railway and steel industry. Left his wealth to the next generation. William took over and doubled the wealth

29:21 in just six years. >> Mhm. >> In a very short time. But by the third generation the world the family was declared bankrupt. And you see three generation is a very short time. It's only just about 100 years because a generation is usually just about 30 years. >> Does that validate the poor people motivation you vanity? >> No it doesn't >> look for it because >> they will eat it or >> it doesn't but I think the lessons are what happens. How do you come from the wealthiest in the world to bankrupt in just three generations? It is exactly what I was talking about. The generation that are coming after have not been given the materials to hold on to that wealth

30:07 because what happened is the second generation takes over the wealth and because there's so much wealth the best they can do is to just consume it. You see scenarios of uh you know Dr. Kangori because he has received a billion shillings >> you know uh buying a birthday gift for your for your spouse >> Mhm. >> worth uh 200 million because you can afford it. So how many of those gifts will you buy out of a billion and for how long will you keep buying those gifts? >> But you see number two. Yes. But let's let's let's play a scenario here. >> We may blame the spending >> but we may forget the strategies of wealth preservation

30:53 >> and strategies of wealth preservation includes uh how people marry >> at a certain level of wealth. >> That's right. >> Which would mean that um M is the richest person >> uh in the world now. >> That's right. But he could drop down that list very fast in his life lifetime by just like four marriage decisions. >> Yeah. >> Does that make sense? >> It makes sense. >> Just for marriage decisions. >> Yes. >> So you would say that probably the second generation because these people are very very very there's a certain level of money that they vet even the people you you interact with and then probably the laws loosen. >> That's right. >> In the third generation. So it's nothing to do probably with spending only. So it's not only a factor, there's also the

31:41 factor human relations. >> It's true. It's true. And that's why the conversation of wealth transfer is not just about the wealth. It's actually a holistic conversation. And I'll talk about that uh on a holistic uh in fact I can give you an example. Um I was asked by a gentleman uh a very senior gentleman in this country uh because of what I do. We were having a conversation. He asked me Mashira IC Lion has been helping families to preserve their wealth through trusts and estate planning solutions >> for close to 50 years. >> Mhm. Would you tell me of a family that has structured their wealth properly and

32:27 they've succeeded for three, four, five generations in Kenya? >> In Kenya, the truth is there are many examples that you can give but >> Mhm. That question is not just about wealth. It's about the family. >> Because the success of generational wealth creation is not just the success that you're actually transitioning billions and you're growing those billions across generations. >> Mhm. That wealth is there to take care of the family and it's there to because you see if the wealth is there without the family most people that's that's actually what you call vanity because all you're doing is just to create wealth and it's useless.

33:14 >> Mhm. >> So we sat down and actually said yes we'll give you an answer but the answer is actually not just about wealth. It's a holistic answer. It's about the family and we came up with a structure called the family system where you're saying every family needs to actually preserve that family system, holistic family system across generations and you're balancing three key elements. I know there's a there's a there's a there's a train of thought that uh I stopped on at number two. >> We'll go back to it. >> Yes. So there are three key uh elements that every family need to balance. Element number one is the family members

33:59 because you're planning around the family. So the family needs to understand who are the members in this family. How many generations do we have? Where are they? Because all that >> this sounds like having sex on a budget as okay but carry on. >> So the family membership who are you as a family? >> Which generations are represented there? >> How do the family members relate with each other? >> What are the relationships within the family membership? >> Because the way our fathers think >> Mhm. >> they are in uh the boomer's generation.

34:45 Mhm. >> The way their fathers used to think in the sen generation is very different from the way they think. It's very different from the way Gen X think. >> Mhm. >> It's different from the way as millennials we think. It's very different from the current gen Z and the alphas will think. >> Mhm. >> Our fathers used to love land very much because that is the thing that they came from, you know, the struggle to actually own land. >> Mhm. And when they got the opportunity to own land, they valued that very much. >> Yes. >> The current generation of Gen Z's have nothing to do with land. >> Mhm. >> Because for them there's a lot of more value they can create not just from land but from probably

35:32 other you know uh >> so how do you get to understand the family bank those kind of things. Then the other important element is that the family structure itself. I mean let me give an example. I come from somewhere in Moranga and assume my father owns uh or I own some coffee farm in Moranga somewhere >> or a tea farm in Moranga somewhere cuz I've done very well. uh I have sent my children to university to UK >> as to Australia and all that and I'm encouraging them because uh Kenya I want them to go there you know learn be exposed to the world get their jobs there and work

36:19 and work for as long as you you can then 20 years later when I am in my 80s I am thinking I want these guys to come back and actually pick up this coffee farm and take it to the next generation what are the chances that they will come back from UK and behold that 100 acres of coffee farm and manage it. >> Mhm. >> The chances are very slim. But the truth is there are families that have actually been able to connect their children wherever they are. >> Mhm. >> With the core assets of the family and that is where information dissemination now becomes critical because you're planning around these people. It is part of the wealth because you will not carry this wealth, this land and go to heaven with it.

37:05 But you can actually connect them, get them to understand what do you do on a regular basis. What are some of the practices that you carry out? How do you manage this farm? >> Mhm. >> They probably you may you may even expose them to you know because they're in a position where they can actually get global experiences on how farms are managed. Could you actually give me experiences of how do people manage farms in Australia in UK? Can you come and help me implement some of these things markets there >> and look for markets there? You're basically involving them in the in the and you're creating information that connects them. That's part of the family. >> Okay. >> Cooperation, connection and also getting to understand who are the people that you're planning around. Then number two aspect that most families needs to have

37:51 is an aspect of the value system. Who are we as a family? What are the things that we believe in? And those are probably some of the areas where you you think of um you talked you talked of probably the wealth can be messed up by just four marriages. >> Mhm. >> So it's the conversation of what are the values that the family have? What are our practices? And some of those practices would be you may say that as a family we want to have a family gathering on some level of frequency. Maybe at least every year can we meet together once or twice or race as part of our practice as part of our you know uh the things that we value. How do we handle complex issues within

38:38 the family? If there's a disagreement within one of the family members, you know, that disagreement is likely to affect the relationship within the family, it's likely to affect how we deal with each other, how we work together in probably preserving the wealth. How do we solve that disagreement? >> Mhm. >> Other issues like what are our shared goals and visions? I can give you anam another example. I did a presentation somewhere and called me >> to his home in Karin. >> Mhm. And he told me, "Washira, you have a very good message for families, but there's one thing that you may need to refine." He told me that the problem that most families have right now is that every family member is trying to

39:23 fight for their own interests. And that's the reason why you'd find brother fighting brother, sister fighting brother, you know, because you're fighting for number one. and he said, "How can we help families to actually think of shared interests that may be a lot more valuable than the sum of our individual interests?" That is part of the value system. And what most families are doing right now is to draft what is known as a family constitution. A family constitution is basically a document that you're putting down. You're actually writing down this is who we are as a family. These are our values. There are some things that you want to put down as the things that you want to see. >> Believing in Jesus is not enough.

40:10 >> Believing in Jesus is not enough. You may want to actually break it down to if there's a problem. One of our values is honesty and openness. So that if there's a problem, we want to put it on the table to discuss. We want to have one as one of our values that we actually respect each other as family members or we cover each other's dirtiness that you do not speak about things of the family out there but you would want to address them here. There are families that actually go to the lens of actually writing those down and it's actually something that we advocate and I can actually contextualize it this way. One of the most important value systems we have is the scriptures. >> Mhm. >> Imagine

40:58 the scriptures are not written down that they are passed down through the word of mouth. >> Then that corrects the statement to me. Yeah. Believing in believing in Jesus is enough. Just practice what he preached. >> Ex. Exactly. Exactly. 4,000 years ago there was a tribe that were slaves in Egypt. >> Yes. Yes. >> Somehow >> even importance of putting things in writing. >> Yes. Somehow through they got out of slavery they managed to actually you know there was some force or some uh mighty person. >> This point is very important. Yes.

41:43 >> Records. >> Yes. >> I mean you you you you're trying to sort of imagine how that story would be. >> Yes. >> That they took Egypt or capita Red Sea. They went through the Red Sea. >> Then were kind of desert for a whole 40 years. >> Then they came out of those 40 years and they are still the strongest nation and they conquered other bigger nations today. That story will not be believable. >> It will change. In fact, >> do you know by the way that is the story of Africa because the value systems of our families in Africa has been passed down through the word of mouth and because of that we've actually lost a lot of the values that brought the families together and this conversation is actually connected with the wealth generational

42:31 wealth creation Yeah. >> And it's the reason why most families are saying you don't just define what our values are as a family. >> You want to write it down >> so that you create a reference and in future the future generations can say that we want to grow these values to the current setting but there's a reference. M m >> you know what you're doing the intersection between that value system and the family is you're basically defining the culture of the family because the culture is essentially the behaviors and practices of a community. You're saying as Dr. Kimori what is the culture that I would want to define for my family and what culture would I want

43:16 to preserve and pass it down the generation line so that now people who will come three four five 10 generation would say that as the Kangori family this is how we behave these are the things that we consider important this is the things that we practice >> that's an interesting thing to say yes just to back up your example Yeah. >> For movie fans, there's a series HBO called Game of Thrones. >> Yes. >> And let me give a a good example of a bad example. >> So there's a family called the Lannisters. >> Yes. >> And uh they managed to be the strongest and the wealthiest families. >> Yes. >> In that movie. And you can see what you're saying as a thread

44:02 >> in that context because >> uh the father the father says as in the father dictates the family rules. Yes. >> The legacy. Everyone knows how to align with the family. >> Yes. >> If someone from the family is attacked. >> Yes. >> Uh in fact, people are afraid to attack because the repercussions >> Yes. >> will come down as a hole. >> Yes. >> And then there's some there's a philosophy they have that helps them gain out of certain situations. >> Uh like one one of the one of the sons Lannister gets kidnapped. >> Yes. Alafu heains his way out of a difficult situation. >> Yes. >> Uh using the family name. He does not have the cash. >> Yes. >> Like he promises people like I can pay you all the money you want. >> But he got himself in that situation a

44:49 lot. He can pay you. Where is the money? I don't have the money but a Lannister always pays his debts and it's a reputation that the family is known for such that it's actually currency. >> That's the thing. That's the thing. You must have a family philosophy for that's the thing. And you've got to define it. And how to define it? Put it on a document known as a family constitution. >> Mhm. >> But you don't just write it down, then make it alive. Live it out. Help the family to live out. I I was uh there's a family that I really admired. I visited their they invited me to talk to them. It's a big family. They they have five generations between them. They have uh

45:37 grandmothers who are in their 90s, two of them that are remaining and then they have children who are below 10, five generation between them. >> They have created this culture where they meet three times every year. >> So they have a gathering in April during the school holidays. They have another gathering in August. Then they try and to go on holiday together in December. Two, three times. Of course, it's a very large family being given that there five generations between them and not everyone will be there in every meeting. But some everyone tries to be in one of the meetings. >> Mhm. >> But what that has done to that family is that they've become so united.

46:23 >> Mhm. They've even created a welfare where uh the Changa money together and that they within that welfare they have defined that uh um if anyone wants to start a business they can actually come and borrow from this kitty and they would hold each other accountable to make sure that if you've borrowed then you'll actually be able to bring that business up. that kitty is able to take care of any financial needs that they would have. But more importantly, it has brought the family so united. >> Let me give you an example. I have love practical examples. And tell me if this makes sense. >> If a family has five generations between them. >> Yes. >> Uh I'll say there are no less than 100 people

47:09 >> in the family. >> Yes. >> There they are more than 100. >> There are more than 100. >> Uh 200 possibly. Let's say 100 plus thereabouts. >> 100 plus. Let's say 120. >> Yeah. >> So if it's 120 people, if they were to have like a welfare Yes. >> for the family because they say you are as strong as your weakest link. >> Yes. >> Uh and if each family member let's say contributes a,000 Bob cuz probably it's afford it's you can afford that. I'm assuming for example. Yes. Family this is 120,000 per month. >> Yes. >> Uh for them this is 1.4 million every year. Yes. >> And this is a kitty that you probably don't need but by just value of pooling resources per moss in a period of 10 years uh just within

47:57 the family alone. >> Yeah. >> You can cut up without compounding interest just from a,000 bob each. >> Yes. >> Uh kit 15 to 20 million is easy. >> It's very easy >> from a,000 bob. >> From a,000 bob. That's exactly what you what they are doing. But now they've made it sweeter. >> Uhhuh. >> Obviously the family needed to be together for them to actually achieve this. >> Yes. >> So for them what they've done and I think I really admired of course the individual members could be 120 but those are many families that are represented. So they've said in fact the number that I heard was they contribute 70,000 per home per house. You see a house may be Dr. Kori the spouse and the children. >> Yes. Yes. Yes. Yes.

48:43 >> And because they are in five generation, they probably have almost 20 homes. >> Now, what can that family do? >> If something happens to the family, those are now some of the structures that now families need to establish. So that's the value system. What is what is that shared vision shared goal shared practices that the family want to define and leave it out >> and it defines the culture that the family would have. The third aspect that we discovered that most families now need to define is what I was talking about the family wealth. What is family

49:29 wealth? >> I'll give you an example. Yes. >> When was president? >> That's what you mean. >> Okay. >> It's part of it. >> I'm just sorry. I'm not putting you on the spot. You You can speak as an office. I'll take responsibility for you. That's an example. >> Yes. >> Okay. >> That's an example. >> But now when you're talking of family wealth >> Mhm. >> In fact, I normally ask uh this question in most forums that I speak to. Mhm. >> When a family is fighting in the family court for wealth transfer >> Mhm. >> are they fighting over wealth or are they fighting over assets? And what's the difference?

50:16 >> There's a hotel in the CBD. Yes. >> That was valued at 4 billion. >> Yes. >> But it they caught Iluana Casey for years. >> Because two was it four siblings? >> Yes. Five five siblings cannot agree on how >> to to divide amongst themselves 4 billion shillings. >> Exactly. Exactly. So is that wealth or is that an asset? >> They are fighting over asset. >> They're fighting over assets. >> Yes. But in that hotel the value that can be created if that hotel as a business is running it probably may be a lot more than that 4 billion because when you're trans if you own that hotel >> Mhm. It's exactly the the the example that I was giving of the shoemaking

51:02 company. >> When you're passing over when you're considering that hotel as the wealth of the family, >> what are you considering? There's the asset that is probably the building, the furniture and the land where it is. >> Yes. Yes. Yes. >> That may be worth 4 billion. >> Yes. >> But there's the value that is created by virtue of that hotel operating. By that virtue of that hotel, you know, running, you know, its reputation being great, it has suppliers, it has clients, it has a strategy that it's running. What we have experienced is that the intangible value of the family wealth sometimes may be much greater than the

51:49 asset because in most cases the asset is just the core value. But you need to actually now unlock value from this asset. And the way you unlock value is making sure that >> it is running. >> It is running >> functioning at maxun capacity. >> It has relationships that are protected. >> Yes. >> So that now when you're passing over that wealth to the next generation, you're not just passing down the assets, >> but you're actually passing out the wealth itself >> and the value that keeps on giving >> and the value that keeps on giving. And that is where I was talking about when you're passing on that wealth, you're not just passing down the asset, but you need to actually train the people that need to receive that on. What does it mean? >> Number two, >> which was on our number two.

52:35 >> What does it take for this wealth to continue >> uh being and growing >> for one simple reason. You remember we talked about the family. >> The family will not remain static. >> Keeps on growing. >> It keeps on growing. >> Mhm. And the wish would be that this wealth also keeps on growing to take care of the needs of that family across generations. >> Mhm. >> And the value system that you are defining now lays the foundation on what are the principles that the family or the future generations need to adopt to now protect and steward this wealth into the future. Okay, >> those three aspects are very at the core of that is now what we now talk about the estate planning structure, the strategy that you put in.

53:23 >> Wow. You know, I I almost asked you uh but you've answered that question indirectly. So, I just point it out before we move on. >> Yes. >> I was very curious to know to share with the audience because this is one of our areas of exploration. That's right. Does Kenya offer the opportunities of creation of generational wealth? And we just talked about it. >> Like if people you make income, we are so obsessed with uh us looking better than the other. Yes. >> Whereas if you have a family that you've been blessed by let's say for example five generations and you look at the capacity of each family and agree on a kitty that you can be contributing to certain values of a family. >> Yes. and you can look out for each other

54:08 from that kitty >> in a certain emergencies you covered in terms of like growing as a unit >> you're covered and you also have an opportunity to multiply wealth because your example now I'm seeing it clearly as an individual as in from an individual per family but if you let's say if your if your extended family >> yes >> has 20 families >> yes >> not same you as per per household. >> Yes. >> 10K 20K. >> Mhm. >> In 10 years by God's grace if you can grow that money. >> Yeah. >> You are richer than as as a unit. >> Yes. As a unit. But remember because now there's the core wealth that helps you to afford now checking out

54:54 that 20k. >> Imagine. Yes. >> And and when you think about it, but still it's top shelf. >> That's a thing in the Kenyan economy. a certain constitution that you follow. Exactly. >> And being a member of that family, come there's an example was given and I know we going to get into that trust. >> Yeah. There are families that >> whoever is born of that name >> Yes. >> age 18 >> they get a house and a car. >> Yes. So whoever is born of that family >> they will never know the struggle

55:42 that is sorted >> for generations to come and that's possible to actually create. >> It is possible but with a caveat because you see >> you also do not want to raise people who only are enjoying you want their family members to also have the skills to add value to the wealth. That's where the philosophy of the family >> value that's a thing that's where the philosophy of the family wealth and in fact as I was talking about the you remember I was defining that family system >> that has the family the value system and the wealth >> at the core of it is actually now where you now say how do we plan this estate so that the system can now be stable across generations >> estate estate for for most Kenyans in

56:29 Guanga estate like we we relate it to real estate. So what is estate? Because I know you an estate is basically the value of the wealth that the family has. >> It's another word for net worth. >> It's it's another word for let me call it not net worth but the wealth of the family because you see that is what your it's it's the sum total of uh >> your money in the bank. your money in the bank, your vehicles >> to Shamatu including your people because your people are also part of your estate because the value will be created through people. >> So at the core of it, so the way you're managing that is you're actually achieving two critical objectives that

57:16 are one of the biggest headaches for most families. >> Mhm. >> Number one, ownership transfer. You own this wealth but this wealth is owned through companies where you have you are the shareholder >> or titles where the title is in your name or the log book is in your name and for you to make sure that it actually becomes generational wealth that ownership needs to be passed on from Dr. Kimori to Dr. Kori Jr. and to the other one and that's usually one of the biggest challenges that most families have. >> Okay. So how do you define that from a legal perspective because when you're not here, you cannot continue owning that title. >> Mhm.

58:02 >> It has to be passed on to someone else. >> Yes. >> And we'll be talking about that when you're now talking about now wills and trusts. >> Sour. >> Yes. So number two >> is you've defined the ownership and you've preserved it and you passing it down. Number two is now the management. How do you build governance structures to now manage that wealth, manage the value system, manage the family so that the structure now makes sense across generations. >> Okay. >> Yeah. >> So I was going back to our number two which was training. >> Exactly. >> Uh training of uh the relevant parties >> uh that are to benefit from what you've created. >> Yes. >> So number three >> So number three we talked about why do families lose 70% of their wealth. >> Mhm. Yes. So number one we said uh lack

58:49 of uh effective structures. >> Mhm. >> Which we said that it's a very small component. Number two which is actually now the biggest component is trust and communication within the family members. >> Mhm. >> Uh talked about >> we talked about training training the next generation. The last one is an interesting one that most families actually never consider >> is establishing a family mission or a family vision. When you're saying that as Dr. King >> Mhm. >> this is what I have as a family. This is my family wealth. These are the people around me. How do I visualize this situation

59:35 two three generations to come? I can give you I think something that I have observed as an example. >> Mhm. Most people in this country when they are thinking of financial planning in most cases they thinking of just at most the next 10 years because what they thinking of isometal maybe to acquire some assets including the family home and in most cases in your career in the next you know 10 20 years you'll be able to do that >> and that's why you see most of the financial solutions that a lot of people have is an insurance policy that has a maturity of 10 years. Very few people have a 15 year maturity. Meaning all they're thinking about is that in the next 10 years, I want to make sure that I can educate my children. >> Mhm.

1:00:20 >> But what they don't think about is that what happens in the next 25 years, the next 30 years when my children are now getting married and they establishing their own families. >> Mhm. That is now what we're talking about establishing a long-term mission or a family mission where you're not just thinking of short-term because I consider 10 years now when you're talking of generational wealth to be very shortterm we're not thinking multigenerational where you're saying as a family this is our balance sheet you see just like the way in a company I run a company in ICL >> Mhm. And so often every year or probably every 3 years we'll sit down with the shareholders and the directors and say that this is the balance sheet of the

1:01:06 company. >> Mhm. >> These are our assets. >> Mhm. >> These are our liabilities. >> Mhm. >> And the strategic conversation is on how do we grow this balance sheet >> to x amount in the next 3 years or in the next 5 years. >> Yes. >> In the next four years. And then we are basically looking at what are the opportunities that the company has >> to utilize to actually grow that balance sheet. >> It's the same conversation that families have. >> Okay? >> Because every family and uh I mean because you can talk of many different families. The balance sheet of the family sometimes is bigger than most company startups. >> Mhm. because you'd be looking at what is your net asset position and that net asset

1:01:52 position will be a factor of a bank balance. You have a money market account. You have probably some uh pension portfolio that you can value. >> Mhm. >> You have a revenue that you're earning out of your hustle, whether you're employed or you're doing your own hustle. That's your asset side. Then your liability side, you have your expenditures. could be education for your children, Medicare for your family, holidays, part of your expenses, or your general upkeep. When you look at that, that's your net position. >> Mhm. >> And so what families needs to think about is that that net position, how would you desire that to look like when the children are now getting married and your grandchildren are on board?

1:02:39 >> Mhm. >> And you would want to now take a much bigger family for holiday. >> Okay. you would want to probably uh you know, you know provide some assets to your children. What opportunities that does the family have using the asset structure that you have? >> Mhm. >> To unlock so that that balance sheet can grow to meet the needs of that family structure >> two three four five generations to come. >> Mhm. And how do you lay that base? And that's the reason why you talked of one of uh the serious families in this country and probably one of the strategies that may that may have made them that powerful and that solid. But you're saying so and so does not own anything is because they probably have a

1:03:26 strategy >> to grow that wealth to take care of the needs of the family members into the future. >> Okay? and their estate plan now that we've understood what an estate is has been structured to actually preserve that ownership but more importantly to now govern the growth of it so that it takes care of the future family members >> that will come in 60 years from now that will be two generations to come >> okay >> that will probably be three times the size of the family today >> okay understood yeah understood now uh to close I'd like to now check another area of >> of interest. I'll put it this way. >> Yeah. >> Um one >> I saw a very interesting comment again.

1:04:11 I reference Twitter a lot X >> uh where someone said >> there was an issue where one of I believe it was in reference to a for a former high court judge passed on. Yes. And uh there was an issue in terms of access to his wealth and the money was needed because I believe the father was not feeling well. The money could have really come through. There was an issue there. >> Mhm. >> So now it happens that I believe it is at this in this context that I see a tweet. Yeah. >> Why do people need wheels if wheels can be contested? >> Right. Trusts can solve all these problems. >> Yes. >> And then now my friend I have a friend who is a doctor. Mhm. >> who mentioned that uh the world is so

1:04:58 rotten nowadays in terms of the dating pool >> that he considers putting all his wealth in a trust. >> Yes. >> That way it is uh he's safe and he's covered. >> Yes. >> All through. >> Yeah. >> Then now uh in our first meeting by the way >> Yeah. >> Uh from the conversation I picked something. >> Yes. I I always I was looking for automation at some point whereby before I got introduced to the concept of a trust if you can live on autopilot. Yes. >> Like you can work as an individual. >> Yes. >> Uh you still make money but you don't own anything. >> Yes. >> Whereby uh you school fees gets paid, your rent gets paid, uh you can buy assets. >> Yes. >> H I was looking for at a certain point

1:05:45 you would think uh that a bank account can do that. >> That's right. Then the trust comes in. So as per the definition and you correct me if I'm wrong, >> a trust is creating another individual that is immortal who can live for hundreds of years >> and on automation. And I think that ties to uh the other examples of if everything you own is owned in trust, >> you never have to worry about interference. >> Break it down for us. >> Precisely. It's I I can actually begin with when we started you said that we talk about that you can actually almost live forever. >> Yes. >> So globally >> Yes. >> There are only two ways to transition

1:06:31 assets from yourself to others. >> Mhm. >> As what probably most people talk talk of succession, you know, succession planning. >> Yes. because you own this wealth >> and you want to hand it over across generations. >> Mhm. >> So the first way in what most people know of is a will. >> Mhm. >> A will is simply a document that you're writing down. I own asset A. I would want asset A to go to so and so. Asset B to go to so and so. You're basically listing out your assets and you're saying upon your demise, >> you're giving them out. >> How do you want that asset to go to?

1:07:16 >> Mhm. >> The problem in this country, I am not a lawyer, but one of the things that we've actually experienced in our life, you know, in our career >> is that wheels have become a problem in this country. It's actually a good solution but you're not there to actually effect what you had absolutely put down >> for one simple reason. There are some things that you may have done with very good intentions. For example, you have structured a will and you are saying that I am giving so and so but I am not not giving so and so because while while I was alive I was alive I probably gave them you know enough resources.

1:08:03 >> So the people that I have included in my in my will are the ones that probably I had not taken care of. But you see this person that you probably have not included in the will >> can easily come and say why have I not been included in this will >> and that in many case stalls the conversation one of the examples that have been given uh by my legal colleagues within the office is a scenario where as Peter I may be a very good-hearted person and uh where I live or we shall go there's a neighbor family that are very poor but they have a very bright child and I see as a good-hearted person I would want to take care of this bright child. So I offer to pay for their education for

1:08:49 their upkeep until they are of age. Then unfortunately when they've just finished university I pass on. >> Mhm. >> My intention was not to for them to be part of my family. It's just to take care of them. >> Mhm. that person can actually approach the court when my will is being read and say I have evidence that this guy was taking care of all my needs while I was growing up. So I am one of their dependent. So I need to be included in that will that has become one of the challenges because a will only becomes effective through the probate process or through the court succession process. >> Mhm. and it has become very challenging for most families. >> So the other option that now I think it

1:09:38 has never been a better time for this country to now structure generational wealth is where you now create a trust now unlike a will a trust now becomes effective immediately. So you can set up the trust today like Dr. and it becomes effective now. And just like you said, what a trust basically is is that you're creating a legal person almost like a shadow of yourself. So you create that legal person, you incorporate it just like the way you incorporate a company, but I'll differentiate between a trust and a company, but you now transition the ownership of everything that you own to that trust. >> Mhm. It's a very simple process, but you've done a very significant

1:10:26 um item. >> Number one, you have removed the risk of mortality on you because you see this legal person now owns the asset. It means that because the ownership is already protected there, whether you're there or not, no one would ever need to go to court to fight for ownership of the assets >> because you've created that legal person and that legal person owns the assets. >> But number two, it gives you an opportunity to now define the management structure of the assets. You see, a will not give you that because a will is just a list and when you're gone, it people go to court through that probate process. uh they fight it out and eventually the assets are executed and handed over.

1:11:12 >> But because the the trust has been created now and you structured consolidated that wealth within that you now have the opportunity of defining the management structure, the governance structure of that wealth. You now create a trust. You define now trustees who would be managing that. The good thing is that you can also be a trustee of your own trust >> together. You also get to benefit when you are alive and you're also in you're also in charge whether you are dead. >> Exactly. >> Technically you are you have you you you take control of your assets when you're alive. You can benefit when you're alive. >> Exactly. >> You don't have to wait for other people >> to benefit when you're dead. You choose

1:11:57 who benefits. >> You choose who benefits. And because you've created that and you're the one who has created that, you are the one who has the authority to define the rules that that trust operates. >> Yes. >> So you will define who becomes a beneficiary in that trust. So that if there's someone else that you feel like I've taken care of them, you can exclude them and there is no court in this world that can ever overrule that. So you define who are the beneficiaries, who are the caretakers of the wealth. So those caretakers will be the trustees and like I said because you've created it while you're alive. It is a living trust meaning that you are the one who have created it. You have defined the rules. You can become the trustee of your own trust but you also beneficiary. So

1:12:43 you're the creator you're also a trustee. You're also a beneficiary together with others. It also gives you an opportunity. You remember now when we talking about now training the stakeholders on how to the information about your family wealth and all that it gives you an opportunity now to now bring them on board take them through a training help them understand what is it that you think when you're creating this wealth how did you create it what are the things that you would want to be

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