RECOGNISING THE INDIVIDUAL
WITHIN A WEALTHY FAMILY
by Patricia Angus
How does it feel to be an "individual" in a family of great wealth today? While it certainly has its advantages, it can also be confusing, complicated, and occasionally disheartening. Beneath the "glamor" of being in the family, there are several recent trends that have placed the individual in a difficult position. Well-intentioned actions by family members and professionals in response to these trends risk further exacerbating the problem. Fortunately, there are ways to mitigate these risks and seize opportunities that support individual family members. This piece touches briefly on these issues to raise awareness and encourage further study of this phenomenon.
There are several trends that have led to the precarious position of the individual in wealthy families today. First, demographic shifts including longer lifespans, ageing baby boomers, and geographic dispersion of family members have altered traditional individual developmental paths. Second, the rapid growth of wealth in the top 1% globally, combined with the financial crisis, has spurred the financial services industry to roll out a new array of services and educational programs to promote family, as opposed to individual, success. "Family systems" theory and a systems approach to family wealth have also shifted focus from individuals to the family. Finally, more families are using inter-generational trusts and other structures that bind family members together for longer periods of time.
None of these trends is harmful per se; however, the convergence of these developments - and steps taken in response by families - can result in potentially adverse consequences to individuals. It can be all too easy to lose one's way in a wealthy family today. So many life decisions are decided without the input of the individuals who are affected, and often in a way that increases dependence rather than promoting healthy independence. Human capital is now recognised as the key to preservation of family wealth, but many of the practices used to develop it create systems of control over behaviour that can only diminish incentive. Even if "dynasty" trusts are intended to be positive forces in individual lives, too often they serve to impose the grantor's values and dreams in ways that can feel crushing to the generations who live with them.
Inter-generational wealth, and the practical skills needed to manage it, are still not discussed openly in many families, creating a sense of mystery and danger. In others, they are discussed in family meetings and educational sessions that are created for rather than by the individuals who need to integrate the information in a meaningful way. It is hard enough to live with societal expectations, the weight of family history and legacy can be overwhelming in even deeper ways. The simple use of terms such as "G1" and "G2" to define one's place in a family can create unintended harm by tying identity to a significant financial event (ignoring the importance of non-financial capital), and diminishing the value of each and every subsequent generation.
There are several ways that families can mitigate this potential harm. The older members of the family must always keep in mind their actual goals during the planning process and implementation of their plans. Family members and professionals should be alert to the ambivalence and fear of older family members who do not want wealth to destroy the incentive of future generations. If they truly want to support independence, it will take more work than merely signing a document to do so. Often the older generation declares that it wants the younger generation to be stewards of wealth that the older generation itself is not comfortable handling itself. At the other extreme, the decision to disinherit or limit an inheritance does not necessarily lead to the positive development sought. In the end, it must be understood that all generations need help with these enormous tasks, not just the "next generation."
Trusts and other structures need not necessarily create dependence so long as they are operationalised in a way that supports independence and accountability. Indeed, the actual behaviour of all parties involved in family wealth is far more important than structures, investment results, and legal/ tax planning. Families must be careful in choosing trustees who respect, listen to, and encourage adult behaviour by beneficiaries. They can also include beneficiaries in the planning and implementation of structures (e.g., as co-trustees) to a far greater extent. Families must look at themselves and ask: are we transparent, open, and communicative? They must seek to provide support that derives from compassion and humility rather than judgment and control.
There is ongoing work to be done by all generations, at all times. Recognising the nature and complexity of that ongoing work can help each individual within the family have a sense of reward and contribution despite the trends. That is an incredible opportunity for individuals and family alike.