What matters most to high net worth families is giving their wealth a purpose
Anyone with the right amount of luck, hardwork combined with faith and purpose can be rich. However, it takes a generation of advanced knowledge, creativity and cooperation within a stable family to achieve real wealth. New research by Withers, drawing directly from interviews with high net worth international families, has revealed that generational succession in wealthy families around the world has led to a fundamental re-evaluation of the purposes of wealth and family businesses. In the words of one interviewee, as they assessed their wealth: “The most important things are how you make it and how you distribute it. If you can do that in a way that is socially acceptable and keeps your family happy, then you are winning.”
Withers partner Sarah Cormack comments: “For many wealthy families, we found that simply having large amounts of money to invest is not enough to provide purpose and cohesion to the broader family group. Having come to realise this, wealthy families are responding by re-immersing themselves in active business operations or (and, in many cases, also) putting their wealth into effect to effect positive changes in their communities.”
“Maintaining commonly-held reasons for working together as a family is a continual process. It is brought under intense pressure when a family sells out of active business ownership and moves to a financial/investment-based footing (or back again). When a new generation is called upon to take ownership of the family wealth, there is a similar potential for it to unravel, as the younger family members bring their own values and interests to bear. Clearly, anything that creates coherence and harmony is valuable, and these days it appears to be the social application of wealth,” says Cath Tillotson of Withers’ research partner, Scorpio Partnership.
The research established five key lessons that wealthy families have learned through coping with succession and working to preserve their assets and family unity, as illustrated through the points and quotes below:
1. Transitions are complicated: Whether selling a business, setting up a foundation or passing control of wealth to the next generation, families should ask themselves ‘why are we doing this?’ at each transitional stage to find the common objectives that keep them and the family wealth intact.
“In Asia we have three generations living side by side… the hard business stuff has become the easy stuff, and the soft family stuff has become the hard stuff.”
2. Take your time: as a collection of individuals, and not an organisation, family businesses require a unique leadership style which should involve listening, learning, observing, sharing and understanding.
“Family members often think they are unique, with the right skills, so you have to be willing to let go. Sometimes you have to be willing to lead from behind and recognise just because you can do the job, doesn’t mean to have to.”
3. Leading with principle: Wealth ownership means that attention is trained on you. Family business heads should lead by example and the wider community will view wealth ownership with greater respect when it is used as a force for positive social change.
“Values cannot be taught. You have to inculcate them through your own actions.”
4. Recognise your limits: Within a family business there are many roles to play; no single person can play them all well. Once skills, strengths and motivations are accurately assessed (including one’s own), other family members and professional advisors can be effectively appointed to fill the gaps.
“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.”
5. Giving the next generation just enough: Each generation should be able to think of themselves as the first generation. This means that those in the next generation are given everything they need to be successful and no more. For those in older generations, this also means recognising when to step aside.
“It is better to let children find their own way… If they want to come into my family business, they can, but they will have to earn their place, just like everyone else.”
Withers worked with leading wealth research agency Scorpio Partnership, basing the research on 16 in-depth interviews with multi-millionaires and billionaires from Asia, Europe and the US. The opinions and experiences described by these individuals were cross-referenced against the attitudes of 4,500 individuals with more than US$10 million in personal wealth, who answered digital surveys on a wide range of subjects over the past two years.