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  1. Wealth
September 14, 2016

Unhappy families: what brews domestic disputes

By Spear's

Ceris Gardner delves deeper into what causes conflicts in wealthy families and finds that it isn’t often ‘about the money’.

‘All happy families resemble one another; each unhappy family is unhappy in its own way.’ So said Leo Tolstoy in Anna Karenina, but I think he was only right up to a point. We all see unhappy family circumstances from time to time, and while each story is unique to the family involved, the themes are often familiar.

History and literature are full of examples of family disputes. The Fourth of July celebrations are an annual reminder of a famous family divide — when Benjamin Franklin signed the Declaration of Independence, his son William was governor of the colony of New Jersey and supported the king, and this disagreement divided them for the rest of their lives. The Old Testament and the Koran both recount how Joseph’s ten brothers, jealous of their father’s evident preference for him, sold him into slavery (a reaction not normally seen even in extreme family disharmony nowadays).

In Bleak House, Charles Dickens supplied us with the byword for family disputes, Jarndyce v Jarndyce, in which the whole estate is consumed in the costs of an action so long-running that no one can remember its original cause.

In many disagreements, the flashpoint often does not reflect the true root of the problem. On delving deeper into a dispute, it is often not ‘about the money’ at all, but about supposed favouritism (in family matters or in business), long-held resentment relating to a particular object (valuable or not), or the absence of parental love (or the perceived loss of it on remarriage of one parent).

‘Cherchez la femme’ (often a stepmother) may provide answers, but just as frequently one looks for what one of my partners calls the ‘shiny red bicycle’ — whether real or metaphorical, some prized possession that one child had and another wanted, or took, or broke. The family need to work this out before they can hope to solve their disharmony; just settling the obvious trigger is akin to papering over a crack.

None of this is new — many countries have proverbs about wealth being dissipated in three generations. Anecdotally, 65 per cent of family wealth is lost by the second generation and 90 per cent by the third. The originators of the wealth, anxious to keep control of the family business, come into conflict with their offspring who are keen to take over, and think they can do better. One child resents another’s success, or the fact that their own business acumen has been overlooked.

Then, perhaps having been brought up with more creature comforts, and often lacking the drive of their forebears, the grandchildren dissipate the money. Whatever the nature of the dispute, it is vital to help the family find some means of resolution. It is common to hear parties to any dispute proclaim their wish for their ‘day in court’, but the judge’s findings cannot make a family feel better, and (as every mediator will tell us) litigation encourages a focus on being ‘right’ or ‘wrong’.

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Sometimes this can’t be avoided, but other forms of dispute resolution can help the family work out a solution that all can live with. Even when a family cannot cure the core problem, if they are able to reach a new modus vivendi, they can move on, whether together or individually, and if not in harmony, at least without continuing conflict.

One form of prevention, often also a solution, is a family charter (the ‘club rules’ by which the family operates), to document the assumptions, understandings and expectations regarding the family’s wealth, business, philanthropy and succession planning and how the benefits and responsibilities are going to be managed, shared, and preserved in future. Often, the process of debating the issues creates awareness and accord among the family by itself.

In other disputes, a family may conclude that the only practical outcome is a complete split of all their financial and business affairs, so that they are not obliged to continue ‘feeding from the same trough’ and thereby risking a further outbreak of hostility.

It’s hard to distinguish some of these issues from the current furore over the UK’s relationship with the EU, of course. One member wishes to leave a long-running family partnership which has had successes and flaws.

Whatever one’s personal political views, private wealth advisers would counsel treating this discordant ‘family’ the same way as any other: encourage communication, compromise, transparency, and trust whenever possible; avoid taking positions from which it may be hard to row back without loss of face; and encourage each family member to play a future role which suits their strengths and embraces (or recognises) their differences. Here’s hoping.

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