Most wealthy families have a crew of advisers helping them manage their money, business, and family affairs, but are there any lessons about wealth preservation and succession that they could learn from each other?
Certainly, according to research by law firm Withers. Withers, a specialist in private client work, interviewed sixteen millionaires and billionaires across Asia, Europe and the US and complemented the results with a survey of 4,500 individuals with more than $10 million by Scorpio Partnership.
According to the report, wealth owners think that for a family to be successful, each generation needs to see itself as the first generation.
Respondents also said that their children and grandchildren should be given everything they need to be successful, but not more. They aren’t alone. Many high-profile HNWs, including Warren Buffett and more recently Sting, have said they want their children to make money on their own.
In order to do so, the report adds, matriarchs and patriarchs need to take on a leadership role and make sure that their children and grandchildren are fully aware of their responsibilities. As one of the interviewees said: ‘Values cannot be taught. You have to inculcate them through your own actions.’
This concern seems to be prevalent among the ultra-wealthy. ‘My experience is that the wealthier you get, the more concerned you get about your children,’ Sarah Cormack, a partner at Withers, tells Spear’s. ‘There seems to be an assumption by the ultra-wealthy that their children won’t be up to the task.’
HNWs are also aware of the impact that big changes – whether it’s selling the family business, setting up a philanthropic foundation or going through a generational transition – can have on the family. Respondents suggested that every time the family is going through one of these changes, they should ask themselves ‘Why are we doing this?’ and identify what their final goal is.
According to the report, families also need to realise that a leadership style or a set of rules that work for other families may not work for them. This is particularly true when it comes to business-owning families. While normally company shareholders are interested in profits and dividends, family business owners may have different motives, and advisers need to be aware of this.
‘Families are obviously interested in financial security and financial success, but the really successful families that we work with have a sense of the non-financial return of investment that they are looking to achieve,’ Ken McCracken, a consultant at Withers Consulting Group, tells Spear’s. ‘The challenge for the advisory community is to understand that and to ensure that all planning is aligned with the family’s overall version of success.’
Finally, families also need to accept that wealth comes with duties and responsibilities, some of which you cannot take care of. One of those interviewed told Withers: ‘As a leader you have to be open-minded and accept that other people are sometimes smarter and better than you… A business family has to be multi-disciplined and that means accepting outside help sometimes.’