A new report has highlighted the lack of communication between generations in UHNW families and the potential damage this can do.
The report, from Smith & Williamson, shows a worrying minority neglect the need to converse as a family: ‘The families we surveyed think nearly a fifth are poorly equipped or very poorly equipped to take over the family wealth…and a significant cohort don’t have regular meetings,’ Charles Gowlland, investment management partner at Smith & Williamson told Spear’s.
Surveying 39 families with a combined wealth of over £1 billion, the report suggests managing family members is just as important to UHNW individuals as managing family wealth.
Gowlland mentions that appointing a third-party adviser to co-ordinate or corral family discussions is an option but ‘what we really mean by “education” is families discussing the values associated with the wealth, what it means – what privileges, rights and responsibilities come with that wealth.’
Such communication does seem to be working for the majority, however, with Gowlland emphasising that ‘there is greater willingness to involve the next generation at an earlier age than previously. Participants typically commented that thirties is the watershed age.’
‘Sometimes it’s the older generation that mismanage and one way they do that is by hanging on too long. Usually, it is better to hand the money over gradually… rather than give it to them all at once. If they’re fifty by the time they get it they might feel: "right, I’m going to have a lot of fun.'”
Frank Akers-Douglas, tax partner at Smith & Williamson, sees improvements in what has often been a reticent forum: ‘We are seeing more openness within families than was the norm just twenty years ago. The use of the internet and social media can also be helpful but ultimately, there is no substitute for getting round a table.’
Financial mismanagement was considered the greatest risk to family assets. Unsurprising, then, that most families polled felt a need to train younger members in financial management as well as a ‘feeling that young adults need to establish their own careers and independence before benefiting from significant family wealth’, said Akers-Douglas.
In a week that saw two lottery-winning couples break up under the pressures of extreme wealth, such a survey proves the value of communication when it comes to managing big money among family. Gowlland makes clear that ‘divorce is certainly quite significant, but isn’t necessarily the main factor’ [in costing the family its wealth].