by Charles Lowenhaupt

When we talk about “family wealth”, “family business”, “family office”, “family values” and “family legacy” we talk as if “family” is monolithic.  Yet, the fundamental building block of any “family” is always the individual members of the family.  Each individual will have his or her own vision, identity, and aspirations.  Indeed, any family needs to be seen as an association of individuals, bound by values, genetics, ancestry, or any other thread the family member chooses.


Too many of us start any conversation or any design of process or systems at the “family” level.  Individuality can get lost or stifled so completely that “family” becomes the chains binding people without giving them liberty.  To see how completely those chains can destroy the family’s functionality, consider the strains on family dynamics as individuals try to assert themselves under “family governance structures”. Consider how much family harmony is destroyed over issues relating to managing “family assets” or “family culture”.  Siblings who fought as children over sharing toys turn to fighting as adults over “family business”.


Wherever there is private wealth, the starting question must always be “what is that wealth for”. That is a question each individual must answer for himself or herself.  Each individual has different circumstances and can answer the question differently.


In answering the question of what the wealth is for, the answer can never be solely about “creation” or “preservation,” since private wealth is created or preserved only to accomplish real purposes.  Some see a worthwhile purpose as creating freedom and functionality in future generations. Others see a purpose in protecting wealth for future generations to have the freedom to live their lives.  In either case, the most fundamental purpose is to allow each person to be all he or she can be and remain free of any burdens that might be imposed by wealth.  When wealth achieves this highest purpose, we call it “Freedom from Wealth”.


Dysfunctional relationships within families impede “freedom from wealth.” “Self-actualisation” requires recognition of self.  Putting family activities into a framework of family without individuality removes recognition of self.


Most family wealth management disciplines “bundle” the family.  For example, investment programs rest on a “platform” which treats everyone the same way.  Governance structures frequently leave little room for individuality.  Philanthropic programs expect shared values.  When families bundle in areas where members want individuality, members resent bundling even when they do not want individuality.  For example, where a family vacation is “bundled”, family members will build dysfunction around not only the vacation but also the selection of an accountant.  We have seen large family fights over the selection of a decorator for the family office. In short, families fall apart when family members feel they are not respected as individuals in one or more areas of “family wealth management”.


The fact is that efficiency or convenience often encourages “bundling” and disregard of individuality. Requiring all family members to act the same way with respect to investment, values or culture is easier than recognizing the differences which come with marriage, children, or personality.  The efficiency of family wealth administration is often at odds with focus on the needs or goals of the individual family member.  Expediency often trumps Freedom from Wealth.


If family is not monolithic, how should a family consider its family unit?  Some of the most successful business families separate the business at each generation. This can be done through amicable agreement or court intervention.  Others build a principle of primogeniture or business passing to those who are engaged in business.  In other words, these successful business-owning families recognise that individual strengths and interests determine ownership and governance of the business.


Families managing portfolio wealth succeed when they also recognise the importance of individuality.  Respecting and honouring individuality is all the more difficult in a world of multi-culturalism.  Spouses and children of intermarriage will bring their own values into a family.  Consider the issues facing a Chinese family in its investment portfolio in which a member marries a sharia-compliant Muslim.  Consider the legacy issues of a descendant of an African American slave marrying into a family descended from a white slave owner.  How does the Christian family have its regular Saturday family meetings when one of its members marries an Orthodox Jew and converts to his observance?


Families of wealth should start every conversation with the individual.  Every family should start with a careful analysis of “unbundling” the family wealth, whether portfolio wealth or intellectual wealth.  What benefits come with the bundling and what sacrifices must be made?   There can be the economic benefits of efficiency and bulk in purchasing services; there can be opportunities of size not otherwise available; there can be better management in bigger businesses; there can be more effective charitable gifts.  But there can also be the sacrifice of an individual’s self-expression.


The benefits must be considered under ground rules that give any family member the right to “opt out” of any bundle. Individual family members must recognise that there may be some bundles that cannot be created efficiently (if at all) if enough family members do not want to participate.  The best business investment may have to be foregone if not enough individuals want to make it. Culture must be respected, and any governance structure, statement of legacy and values, or family constitution must be broad enough to give freedom to different cultural differences.


There can be no successful legacy family unless the primacy of the individual is recognised and the entire wealth management program is designed to allow each individual to live life fully, independently, and with full freedom to self-actualise.  Family wealth management starts with Freedom From Wealth.

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