1 of 16

Roles and Responsibilities of Board Members

2 of 16

AGENDA

Intro: Family Bank recap
Why a bank board?
Board member roles

Providing loans
Managing assets
Educating family on finance

Conditions of your trust
Powers and responsibilities
Communication plan

3 of 16

Why a bank board?

	Loan through traditional bank	Direct loan from family, i.e. a parent	Loan through the family bank
No complex underwriting, credit checks	X	✓	✓
Low interest rates	X	✓	✓
Low risk to relationships	✓	X	✓

4 of 16

Why a bank board?

“If a child asks for a loan, grant, or gift from a parent, for example, the parent can simply direct the child to the administrators of the Family Bank for such requests.The parent could respond, “Great! I’ve already set up a way to do that through the Family Bank. Jim and Carol are taking care of things in that area, and they will help you with what you need.””

5 of 16

Why a bank board?

Trustees can’t do it all themselves — you work with the trustees to make decisions and carry them out.
Combination of financial expertise with family influence
The bank board is what makes the family bank real to the family

6 of 16

Providing loans

Loans are the most important function of the Family Bank — they’re how family members benefit from the wealth in the family
As the board, you will handle the decision making on which loans to approve
Your trust sets the rules for how loans work — how much money can be lent, how long, etc.
If the loan is approved, you’ll decide which of the family’s assets to pull funds from for the loan.

7 of 16

Loan Process

Proposal and Application

Vote

Contract

Mentor

Funding

Repayment

8 of 16

Managing Assets

Your family’s Bank Board is responsible for managing the assets in your bank, your family bank founder should explain what those assets are.
Work with professionals to do the following (but educate yourself along the way! You set the example for financial literacy in the family):

Monitor the performance of existing assets
Review the strategy of the Bank’s portfolio — are the funds being used in accordance with the goals of the Trust and your family’s values? Is the level of risk acceptable?
Are whole life insurance policies being taken out on family members? If not, discuss the possibility of doing so

9 of 16

Educating Family on Finance

Your roles with respect to education:

Helping the family understand the role of The Family Bank — what can it be used for, what wouldn’t be appropriate — but help them to not be afraid of it
Creating educational experiences for the rising generation
Teaching family members of all ages sound financial principles
Invite family members to participate in and observe bank meetings

10 of 16

Use your charter!

Your charter contains all the details of your responsibilities and explains what you can and can’t do.
When you have questions about how to proceed, check your charter for clarification. It is your first resource

11 of 16

Communication With Family Members

Family councils: meetings to discuss any family topics including family bank matters
Board meetings: a regular meeting where the board makes decisions
Loan applications: a meeting with the board and a loan applicant to discuss the loan
Mentor coordination: meetings to council together about a borrower and how to help them
Quarterly update emails: an email update of any family bank news and the bank’s performance
Yearly report: an overview of the bank’s operations for the year.
Family event: representing the family bank at family functions

Some of these were covered earlier, but communication is really key, and there are many ways you’ll communicate with the rest of the family in your official capacity.

The most natural way to document a loan application process is for a family member, ideally one of the first to use a family bank loan, to consent for their loan application and contract documents to be made available for other family members looking to make a loan to see. You can imagine a student asking their parent about the loan application process, and a parent can respond, “here’s how your cousin did it last year”.

Family councils: usually all family members are invited to these. Anything can be discussed, not just the Family Bank, but topics related to the Family Bank and other financial principles will often feature strongly. Your presence in these meetings is important.

Board meetings Certain family members can join these as invited. These can be a powerful window into the workings of the family bank.

Loan applications: there will be one initial meeting with the applicant to discuss their loan, you’ll have to communicate quite a bit, formally and informally with the borrowers

You’ll want to work closely with the mentors assigned to each of the loans, They will be able to identify problems that the borrower is having and you can work together to help the borrower

Quarterly emails are a way to update the family on any important changes.

Your yearly report will help you to track how well the family bank is doing and share data with the rest of the family.

You’ll want to give the family opportunities to engage with the bank at reunions and other appropriate family events.

12 of 16

Terms of Service/Choosing New Bank Board Members

Your charter may tell you that board members are supposed to rotate in their roles. Learn those guidelines and follow them
If your trust doesn’t specify how long board members serve, you as board members can choose-- Do you want a rotation of the Bank Board? Will Board members have specified terms of service? Some things to consider:

Pros of rotation: Rotation gives more family members the chance to gain financial, administrative, and leadership skills that come with Bank Board service
Cons of rotation: Bank Board members get better at their jobs the longer they serve. Sometimes the family needs really good expertise during times of crisis and can’t afford to train new members.
Pros of set term lengths: Board members know what they’re signing up for
Cons of set term lengths: Some Board members may be just getting good at their jobs when they’re released while others are already burned out

13 of 16

Terms of Service/Choosing New Bank Board Members

If your charter doesn’t specify how to choose new members, here are some ideas to find new board members:

Have a signup sheet for family members to volunteer to be on the Bank Board
Keep track of different eligible family members, their willingness to serve on the Board, and what they bring to the table; consider their education/experience, aptitude for leadership, finance, and strategy, and how responsible they are in all areas of their lives.
A simple rotation of eligible adults in the family, based on random selection or on names in alphabetical order, could allow diverse perspectives to be considered.

14 of 16

Committees Within the Bank Board

If your charter does not specify any committees, you may want to start some.
Committees can help your Bank Board use its time most effectively.
Decisions to make:

How many committees you create, and what types: which areas of the Bank Board’s responsibility need more focused time?
How often they meet: will they meet regularly or are they called as-needed?
Which Bank Board members sit on which committee? Consider both the members’ formal education and career experience as well as their natural aptitudes
Will Board members double-cover? I.e. will the same person be on two committees?
Who will head each committee? Will the committee head be a rotating position?

15 of 16

Committees Within the Bank Board

Common types of Bank Board committees:

Loan committee: Oversees the loan review and approval process and decides where to allocate funds
Investment committee: Evaluates the health of existing assets and makes decisions about new investments to make
Nominating committee: Scouts the family for financial and strategic talent and chooses new members for the Bank Board, other committees, and other Family Bank administrative roles.

This committee is more likely to be assembled on an as-needed basis
This could include representatives from different sides of the family, i.e. different children of the Family Bank’s founder, to help evaluate all family members’ eligibility for Bank Board service

16 of 16

NEXT STEPS

Review your charter to make sure you’re solid on your roles as a Bank Board member
Read the “Education on Loans/Grants/Gifts” presentation