We recently gave a presentation to a group of 30 ultra-high-net-worth families. One of the mothers told me she feared that her kids were entitled. She often found herself frustrated that her suggestions fell on deaf ears, that her children had no interest in earning a living, and that they lacked motivation.
One of the recommendations that arose during the discussions was that she should change the dynamic with the kids, one in which she solved most of their problems. We suggested instead that she discuss these dynamics with the children, invite them to solve problems themselves and ask them questions: “What three things do you see you could do to contribute to the family?” “Name three people you might want to shadow for a day.” “What aspects of our world today do you find yourself reading about on social media?” “How could you learn more about this?”
In one family we worked with, the youngest son was labeled the black sheep. At 27 years old, he spent his time hanging out with his friends and playing video games. His relationships to his siblings and parents had become increasingly distant, and his desire to engage with the outside world was diminishing. Finally, when he was asked at a family meeting why he was not coming to family events, he announced that he was sick and tired of everyone telling him what to do.
He said every time he suggested an idea it was shot down or someone had a better one, so he just stopped trying. He was overwhelmed at the idea of finding his “passion,” and nothing seemed like a worthy enough pursuit. One of the coaches asked him: “If you had free rein to try something, without any promise of it being successful, what would it be?” He said he’d always been interested in commercial real estate, but he felt no one would take him seriously.
So his brother-in-law, who ran a construction company, invited him to come along to work for a week and see if there was something there. One year later, the son is continuing to build his competence in real estate and preparing a proposal to make an investment with his father.
Preparing the heirs means teaching them to have a healthy relationship to wealth. While they may not need to earn an income to support their lifestyle, they do need to have a sense of purpose, a direction in which they can see they are making a contribution and that they matter.
How Advisors Help Prepare The Next Generation
Advisors can invite younger family members into the conversations by asking provocative questions early on, such as “What would you like to see change in the world?” “What conversations are you having with your friends?” “What teachers or books do you find interesting?” “What is the most radical idea you have heard in a while?” “If you could solve a problem in the world, what would it be?” “Do you ever find yourself so involved with something you lose track of time?”
Refocusing your questions on the kids’ values and goals rather than on their assets invites them to be part of the vision for the wealth on their terms. Advisors can ask, “How do you define wealth?” “If you could see yourself contributing to the wealth, what might that look like?” “What would you like to see happen if you were to use this gift?” “What would you like to see happen when you inherit wealth?” “What actions do you see you need to take to be prepared?”
Cordial Hypocrisy Vs. Aligned Values
The other dynamic we often see in families is “cordial hypocrisy.” The children’s forced smiles may indicate agreement, but just behind them is simmering discontent. It means they aren’t buying in to the family leadership’s vision. When that happens, the younger members end up taking individual actions to protect their own interests, and that causes divisiveness, potentially leads to litigation and finally means a lost opportunity to unify the family and help them maintain control of their assets.
It’s this disconnect in values underlying many common arguments—about paying for homes, medical care, lifestyles, technology, cars, family vacations. Our values drive our actions, so it is important to bring them from the background to the foreground by having explicit conversations. You can clarify the family’s values by talking about what it means to be financially responsible or understanding everybody’s personal perspectives on what success means. Once you do that, you can create a framework for the family’s success.
Everybody’s values do not have to be the same, of course, but they can align in one purpose. Everybody’s personal path to that purpose can be different.
For example, we worked with a family in which one sibling was very hardworking, uncomfortable taking family distributions, and deeply religious. The other was involved in a nonprofit for disadvantaged youth. She relied heavily on family support, freely spent money and was an atheist.
We used a family meeting to help them really understand each other’s core values and their actions. They eventually both concluded that the family wealth was to support them becoming their best selves and leave the world a better place. With that overarching statement, they were able to make individual decisions that helped the family accomplish its shared goals, which were to produce socially responsible and productive citizens.
Clients Need A Family Mission Statement
When family members’ goals aren’t aligned, it leads to perpetual planning that can stall family decisions and prevent financial advisors from doing their jobs. That means the family wealth mission statement is a North Star for families trying to decide what to do and what not to do. It provides an essential framework for the next generation to locate their actions inside of what the family stands for.
Advisors can help reveal the family’s values by asking each member to talk about the purpose of the family wealth. You can have meetings with everybody, including the spouses, to find out what they are currently doing in pursuit of their vision for the wealth. Ask them what they care about, what their organizing principles for living a good life are and how they put those into action. When they articulate these things, they reveal the hidden forces that drive their action, expectation and unity.
Markers Of Successful Families
Successful families make these investments of time to increase trust and communication, prepare heirs and forge a family wealth mission. Their relationships should be based on trust and affable. They should also be able to have open and honest conversations without taboo topics. They should be able to make decisions efficiently as a family team, placing care for one another above assets. When they hit a bump in the road, they should be able to work together to co-design a path forward that everyone can live with.
There are often hidden forces that divide a family, and if they are left undiscovered, they pose a big risk to family legacy. As the advisor, you are entrusted with the family nest egg. Let them know you care equally about the family itself and will work with them to make sure they do not fall victim to the shirtsleeves-to-shirtsleeves phenomenon. Ask the tough questions and shine light on the hidden forces that, once revealed, can light the way to stronger, healthier relationships and wealth transition.
Amy Castoro is the president and CEO of the Williams Group, which coaches families in succession planning and wealth transfer. The firm is based in San Clemente, Calif.