In fact, the older generation most often holds to the traditional model, in which the family is relatively detached from decisions and oversight, with the exception of a single family leader. As they learn about the complex nature of family trusts, partnerships, corporations and boards, the younger generation may feel that this learning entitles them to have a voice in decisions. A family conflict over power and authority can be ignited, which can escalate into a family feud and lead to litigation and demands by next-generation family members for control of their assets, leading to the breakup of shared family institutions. An innocent family meeting or education session can open up this Pandora's box.
It must be recognized that there is a great difference between the realm of family wealth management, which is regulated tightly by complex legal and financial structures that only an expert can fully understand, and the realm of personal and private family relationships. The presence of family wealth is both a special opportunity for family members and a constraint, as it forces them into partnerships and activities that can make them feel like confused and captive partners in an entity that they only dimly understand. The family lives simultaneously in the world of the wealth entity, and the world of the private extended family, which is personal and beset with rivalries, emotions and different statuses and roles.
While these two realms are private, one personal and one organizational/legal, the family also lives in a community, where their wealth is visible and their affairs and actions are scrutinized by the media and the public. A family disagreement can spill into public view when a conflict leads to litigation or a disaffected family member goes public with a grievance.
Recently, family members have gone public in books and other media with internal family conflicts about values and the disposition of the family wealth.
The RM has a curious role. He or she represents the financial legal entity, with traditional fiduciary responsibilities. But the service may also pull the RM into the family on a private and emotional level. As an outsider, the RM is not always welcomed or privy to the personal family world, except through being drawn in by individuals who have concerns. How does an RM who hears a concern or complaint from one family member act as a mediator and bring the issue to the family's consideration? In trying to do this, the RM can venture into a family conflict where they are neither competent nor have the ability to exercise the leverage they need to act as a real mediator. If they bring an issue from a young family member to an elder, and the elder says it is none of their business or acts punitively toward the family member who raises the issue, the family will hear about this and their trust in the RM will be compromised. As a general rule, the older generation has the power and authority and is less open to the new ethic and principles, and the younger generation wants information, voice and a role that the elders resist. How do RMs act when faced with this classic generational difference? How do they avoid taking sides with one generation or the other, thereby limiting their ability to act as a mediator or advisor to all parts of the family?
While there are skills that an RM can use to navigate these waters, the "warning label" that should be attached to family relationship services is that the RM may open a door to potential family conflict that he may not expect or be prepared for.
Even by setting up a family meeting or financial seminar for the next generation, an RM can trigger unexpected repercussions if, by learning about the family's wealth, family members begin to ask questions, demand a voice or ask for control of their share of the family wealth. We fully support the entry of wealth advisors into this territory, but RMs need to be ready for the unexpected and unanticipated consequences.
Dennis
T. Jaffe, Ph.D., is professor of organizational systems and psychology
at Saybrook University in San Francisco. He can be reached at
[email protected].