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The impact of wealth on family relationships: managing expectationPublished on 12 February 2019
The challenges every family faces in bringing up their children can be further complicated by the presence of substantial wealth.Wealth brings great advantages in terms of access to life’s opportunities but can sometimes have a disruptive impact on the development of individuals, on family relationships and on the family as a whole.
The potentially negative consequences, for some individuals include a sense of entitlement and loss of incentive, which can restrict ambition. On the other hand, some children lack self-confidence because they have grown up in the shadow of their successful and wealthy parents; they may find it difficult to prove themselves and to identify their own route to personal fulfilment. In too many cases they don’t become fully independent until their parents have died.
At a family level, there is a real danger of sibling rivalry leading to divided leadership and competing claims on their family’s assets. Such differences can have a damaging effect on the management of family wealth and, at worst, can lead to prolonged and destructive disputes.
Many of these problems arise from unfulfilled expectations. We all grow up with expectations that have been placed upon us by our parents and then ourselves; these expectations are gradually adjusted and shaped by our experiences, by access to new information and by feedback from others.
Unfortunately we may develop false expectations based on misleading information or inaccurate feedback, especially from those who seek our friendship for the wrong reasons. Most of us are occasionally guilty of hearing what we want to hear, rather than what has actually been said, perhaps gradually bending the facts to suit our own desires.
When false expectations go unchecked, perhaps for many years, they become more and more unrealistic. This is why, in some families, there can be a gulf of understanding between family members, which becomes more deeply embedded and increasingly difficult to bridge, the longer it has to fester.
The main expectations surround inheritance and the future role and status of the individual in the family. It can be argued that someone who stands to inherit has four main options:
The pressure of expectation to take the first option can weigh heavily on the mind of the individual, so that it deeply affects their ability to shape their future, often finding themselves torn between following their own instincts and seeking to please their parents, whilst fulfilling their perceived obligations to the family.
For those affected, this pressure may complicate an already difficult choice of career path. It is easy for a parent to say they are completely open to whatever course the child chooses, but quite another for the child to believe they really mean it. Equally, if several generations of the family have successfully led the family business or run the family estate, it can be difficult to be the first generation unwilling or unable to continue this tradition.
On the other hand, there are individuals who expect to succeed into a role of family leadership, but are not perceived by others to have the necessary abilities or indeed the ‘right’ to do so. This may lead to uncomfortable family relationships and ultimately poor management of the family assets.
The fourth option is what most parents would wish to avoid. However, the decision to do nothing is rarely made as a conscious choice and confused expectations often contribute to an apparent lack of drive or absence of work ethic. At the extreme, the child can be so fearful of parental disapproval that he or she finds it difficult to make any decision at all – a family dynamic which was illustrated so effectively in ‘Trust’, the BBC drama series about the Getty family.
The Getty case may be extreme, but it is not unusual for successful entrepreneurs to be still making all the family decisions well into their eighties. As a result, the ‘children’ may themselves be nearing retirement age before they take over the reins. It is also not unusual to hand over some element of decision making in theory, but to continue to question, challenge and criticise to the point which undermines the ‘child’s’ confidence. Everyone needs the appropriate space to develop as an independent adult, if they are going to shoulder leadership responsibilities when their turn comes.
If those same individuals have access to family money, but have not forged their own career, nor been given responsibility and respect within the family, it should not be a surprise if they use their money to ‘buy’ the respect of outsiders and come under the influence of unsuitable friends.
There is one further serious complication in wealthy families which, as mentioned earlier, is the potential for rivalry between siblings or even cousins. This arises partly from decisions on the distribution of wealth between family members, but also the need for a family to appoint leaders where there are businesses to be run or other assets to be managed.
It has long been the case that many wealthy families try to bring up their children as ‘ordinary people’, often hiding from them the true extent of their wealth and ensuring they have limited access to funds. In many cases they are subject to the same limitations and disciplines as their less wealthy peers.
In today’s world however, it is increasingly difficult to hide wealth from view, so it must be presumed that the children and their friends will be aware of its existence, at least to some extent. Rather than shielding the children from the reality, it may be best to help them come to terms with it from a relatively early age, to ensure they understand both the positive and negative power of wealth, and how their own family has decided to deal with it. This should help them understand that they need a sense of purpose to do something useful with their lives and their money, rather than being passive beneficiaries of the work of their ancestors.
For some families this just means bringing up the children ‘properly’ and passing on a set of values and family culture, but others have recognised that in a fast changing world, it is a major challenge to manage expectations without resort to more structured communication and training. The objective must be to ensure all the right messages have been consistently received and understood, with proper opportunity for discussion and debate. Family meetings, seminars, videos and social media platforms are thus increasingly popular, with more formal and better understood processes for making family decisions, which will include selecting leaders for the next generation.
Some people are lucky enough to identify their ‘calling’ at an early age, but for others the process of choosing a career, or how to get started, is not always easy.
There is a fine line between encouraging a child to do something useful with their life, versus giving them too strong an impression of what that career should be. Most people would nowadays accept that everyone should feel free to develop their own interests and pursue their own calling in life.
At the same time, however, it is difficult to avoid communicating anxiety and concern if no-one in the next generation is stepping up into family leadership roles. Such sense of disappointment is bound to impact on individuals. Equally, successful parents may find it hard to hide their disappointment with children who lack their skills or sense of purpose.
The ability of the child to handle these pressures will vary, but it is worth considering how best they might be reduced and what support might be helpful; this again comes down to effective communication. Each child needs the platform or forum to express their own views and concerns without fear or embarrassment. The parents need the feedback to ensure they communicate thoughtfully and sensitively and have the opportunity to detect and correct mistaken interpretations.
In some cases, a child approaching adulthood may well benefit from a mentor outside the family, who relates to the child, but also carries credibility with the parents and can be a useful bridge between the two. Ideally this might be a godparent, a family friend or even professional adviser.
Families handle the passing on of wealth in a variety of different ways, ranging from primogeniture to splitting the wealth equally between all the children. Some prefer the bulk of their wealth to be allocated to charitable causes.
The variety of options is too numerous to explore here, but there are arguably two common mistakes to be avoided:
Many families still rely on the tradition of primogeniture, but this is now changing quite rapidly. The one, and perhaps only, advantage of primogeniture is that it brings a degree of certainty based on centuries of tradition. Otherwise the next generation of leaders is selected either on merit or by favouritism, either by the parents or by the wider family, either clandestinely or with an open debate.
The sensitive issue here, as far as family dynamics are concerned, is that judgments on potential leaders are inevitably subjective and are difficult to separate from love and favouritism. Families will be wise to anticipate such problems and prepare to deal with them sooner rather than later, as any rivalry can be very destructive.
As things currently stand, most families do not have a formal and open process for selecting leaders, but the trend is in that direction and the process is sometimes enhanced by involving respected and impartial outsiders.
The existence of a family constitution can assist the smooth transition, including the selection of new leadership. Experience has shown that where decisions are taken in accordance with an agreed framework, the family dynamic and the wealth are a lot more likely to survive for future generations.
A family constitution enables the family to set out guidelines and parameters for the broad purpose and use of the family wealth, which helps the family unite behind some common objectives and with a common understanding.
It should also ensure that decision making is subject to a properly informed debate and robust challenge, both from family members and from trustees, advisers and others whom the family selects to be involved.
There is no doubt that wealth has both an enabling and potentially destructive power, depending significantly on how relationships are managed. Having a considered approach to the impact of wealth on the family is probably the best way forward; the purpose of the family’s wealth is agreed upon and all parties are aware of their roles, rights and responsibilities.
The inevitable conclusion is that whilst wealth brings many benefits, it adds complexity to the already demanding role of being a parent. The management of expectations plays a critical role in avoiding the most obvious pitfalls, but this is no easy task.
Communication takes many forms and is open to interpretation in the hands of the receiver, so it is vital to minimise the room for misunderstandings to arise, which can be so damaging both to individuals and to the family as a whole. It is not what is said that matters, but what is heard!
No one wants to run a family like a business, but many families now recognise the advantages of better structured, more formal communication, to put across clear and consistent messages, to build a common understanding and to give everyone the opportunity to air their differences without fear or embarrassment.