Coming into wealth suddenly – such as through inheritance or a windfall liquidity event of a family business – can carry serious risks.
The rapid change in financial circumstance can lead to poor decision-making, a loss of perspective, and social isolation. It can lead to a dysfunctional relationship with money/wealth. In the case of inheritance, there can be mixed or conflicting emotions of loss and gain.
It can be like winning the lottery, and research shows that most people who do so end up losing their money in a relatively short time.
But unlike winning the lottery, families are able to prepare themselves for future changes to their financial circumstance. I would argue that it is incumbent on parents to prepare their children to be healthy custodians of family wealth, rather than hide it from them for fear of spoiling them.
Consider This: Are your children ready for the wealth they will inherit? What have you done to prepare them? If most of your family wealth is tied up in an operating asset, do you have a sense of what it is actually worth?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
This is a difficult topic to broach, and needs to be done only in appropriate settings – indeed, that might be the most important message of this topic. After the story of BMW heiress Susanne Klatten went public, she was slammed on social media. Her personal challenges – the responsibility, self-doubt, and being targeted by scammers – are real. But it’s very hard for anyone brought up without wealth to have any sympathy (and often it’s the reverse), so seeking it from ‘outsiders’ is almost a waste of time.
For people without it, wealth is seen purely as an opportunity with only positives. People growing up with wealth realise that it also comes with a burden – expectations that can never be achieved, the challenge of finding purpose. For some, the burden can seem like more trouble than its worth. Wealthy families have the same family issues as others – indeed, when money is used to sweep issues under the carpet, the underlying issues only fester and become worse. My friend likes to say: “the poor want to be rich, and the rich want to be happy”.
Consider This: Do you have an appropriate forum (e.g. peer network or mentor) where you can discuss both the positives and negatives of wealth? Do you have family discussions that broach these issues?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
The challenges of bringing up children with wealth are predicated on the idea that said wealth will transition to said children. But what if it won’t?
Some families are thinking more about giving away the bulk or almost all of the family wealth to charity. In the US, families are talking about giving a maximum of $15M to each child (and the rest to charity).
There are different reasons driving this (don’t want to leave children with “too much” or overly entitled, want to make philanthropy the family legacy), and different approaches (e.g. setting up a foundation and having family members involved, so they remain part of the legacy). Of course depending on the numbers involved, giving away “the bulk of” can still leave more than enough for generations to come.
It’s important for families to understand their “why”, and take their children on the journey.
Consider This: If you plan to give significant family wealth to charity, have you considered the reasons? Which family members were involved in the decision? Are you doing it for positive or negative reasons? Will the distribution of the wealth result in a lifestyle downgrade for future generations?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
The lockdowns of varying degrees currently being experienced in Melbourne and Sydney highlight the deep fissures and inequalities prevalent in large cities. Rather than a tale of two cities, it’s a tale of two halves within each city.
While these generalisations are very broad, they are indicative of a number of factors that start with the socioeconomic status (SES) variation across different suburbs within the city. This is not a simple case of rich vs poor; of course there is plenty of variation between and within suburbs. However, for the purpose of this exercise, it is helpful to consider two “halves” of the city – lower and higher SES, and then look at the other related factors in people’s lives.
Factor
One half
The other half
Socioeconomic status (SES)
lower
higher
More common type of work
blue collar
white collar
Ability to work from home, or work at all
harder
easier
Density of people living in a single residence
higher
lower
Likelihood of being vaccinated
lower
higher
Again, to qualify this table: I’m not suggesting that everyone in higher SES suburbs are white collar workers who can work from home, live in larger houses and are vaccinated. Rather, there is nuance in the differences. So someone in a higher SES suburb is more likely to have white collar work; a white collar worker is more likely to be able to work from home etc.
Now, consider the multiplier effect of these factors. People who are lower SES are more likely to be blue collar workers who need to travel for work. The more people move around, the greater their COVID transmission risk, so the higher transmission risk will be among blue collar workers. They are on average not as well-educated and may not have English as their first language, which means they may be more susceptible to misinformation about vaccination, which means they may be less likely to vaccinate. Because of their work, they may not be able to take time off to vaccinate either.
Because people in lower SES suburbs are more likely to live in higher density housing (think large government housing apartment buildings and multicultural communities with larger families and multiple generations all living together – and again, this is something that is more common in some suburbs), risk of infection spread is higher. And these are people who already need to travel for work.
The mental health toll of lockdown will also be higher with so many people living together in close quarters and unable to spend as much time outdoors. This is especially the case if they need to home isolate after being in an exposure site. The lockdown experience in a leafy suburb where more people live in larger houses with gardens and fewer people per house is completely different.
It’s clear that these factors all carry a multiplier effect: lower SES, travelling around the city for work, not vaccinated, living with others in close quarters. A quadruple (or more) whammy. Another factor is compliance with regulations, and there is certainly variability in this across suburbs.
The net result is that in some suburbs, COVID will spread more rapidly than in others. And from those suburbs, it can spread outwardly more easily because their populations are more mobile.
Rather than use this as a launching pad into “systemic inequality”, what I’d rather address are the policy implications in dealing with COVID outbreaks and getting us closer to the vaccination targets and opening up.
The biggest lesson here is that vaccination rates across the country or even the state are too broad a measure. Rather, we need to consider the finer granularities of suburbs and LGAs. When taking population density, movement and demographics into account, it’s possible that a lower or higher vaccination rate is needed in different suburbs to achieve the same target COVID spread risk.
Because lower SES suburbs carry higher risk of infection spreading, messaging to those suburbs needs to be targeted and in appropriate languages other than English as necessary. In close-knit communities, partnering with community leaders to get the message out can be more effective to increase acceptance.
While eligibility for vaccination is now being broadened, supplies are still short. Rather than prioritising on age bands (some of which may be related to mobility and contact with others) and whoever is fastest to book an appointment, we should consider prioritising on risk factors that directly relate to occupations, travel, and SES. To put it bluntly, vaccinating a retired couple from a leafy suburb who walk regularly in the park and have a small social circle will protect the two of them. Vaccinating an Uber driver who drives all around town, working two shifts to support their family of six which includes their grandparents will protect their family, as well as everyone they come in contact with.
With national vaccination targets as a key path to opening up and learning to “live with COVID”, vaccination is no longer just about the person being vaccinated. It’s also about everyone they come in contact with. Every single person vaccinated is a step close to the target that affect all of us.
Sledgehammer policies like mass lockdowns have now reached the point where they are causing more damage then benefit. It’s time for some fine-honed social marketing and sensible thinking to bring everyone on the journey while taking into account the full diversity of our country.
One of the biggest challenges in wealthy families is when/how to talk about the family wealth to children. There are a number of factors to consider:
1. Being aware of other ways children will learn about it themselves, e.g. from the media, direct research, and from friends (it’s a bit like sex education). Would you rather your children find out about the family wealth from reports and rumours that are laden with assumptions? It’s better to tell them more than have them fill in the gaps in what you do tell with misinformation.
2. Children will also make assumptions about family wealth based on the lifestyle you live. This is the “indirect” way you tell them about the family’s wealth, status and influence. Be aware of what messages you are sending about the family wealth by your actions (aside from your words).
3. Age-appropriateness is essential at all time, as well as taking the children on a controlled journey as they grow older. It takes some balance and nuance to ensure children know as much as they should as teenagers, young adults, and as they mature. Taking a step-by-step approach works well to avoid any “shock” that can have negative consequences.
See a number of good articles linked below for additional insights.
Consider This: When did you tell your children about the family wealth? How much do you think they already knew by then? Have you considered the risks of not telling them (i.e., not giving them authoritative information straight from the horse’s mouth)?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
The e-word – “entitlement” – comes up in almost every presentation or lecture I give, and in many family discussions. It has become almost a dirty word when it comes to family wealth – something to be avoided at all cost. “How can I prevent my children from becoming entitled?” is what most every parent wants to know.
When it comes to family business, limiting the negative impact of entitlement can be achieved by instilling leadership qualities in children, establishing good governance and a culture of accountability, and a sense of custodianship when making decisions about the family business.
Personally, I think there is too much negativity around entitlement. The vast majority of parents will transmit their wealth to their children, so the key challenge is to be realistic and manage children’s expectations (rather than avoid them). Being a little entitled isn’t nearly as bad as having no purpose or meaning, which is another ‘symptom’ of children in wealthy families. More about that another time.
Consider This: Do you consider your children ‘entitled’? If so, to what extent is this a product of how you brought them up? How much entitlement is too much?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
Family business has positives and negatives – our aim should be leverage the positives and seek to mitigate the negatives. One important distinguishing feature of family businesses is that they can embody a sense of purpose.
The original purpose of the business founder may have been wealth creation. However, as the business evolves and additional family members join, it’s an opportunity for the family as a group to discuss and articulate their collective values and purpose, and then make them an essential part of the family business.
Purpose and profit are not mutually exclusive; purpose must drive profitability. It need not be political either. While early thinking was that purpose of the corporation is to “maximise shareholder value”, more recently this has broadened into thinking about “stakeholders” which includes employees and society at large.
This can be challenging for many corporations. But a business that is owned by a small group who are connected by familial ties are in a better position to both articulate their purpose, and take a long-term view in terms of how they manage and operate the business. That way, the business is just one piece of the family’s “social capital” that helps it achieve the broader family mission.
Consider This: To what extent is your family business “values driven”? Has your family discussed and considered your shared purpose? and how that translates into how you use the family capital (both operating and non-operating assets)?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
It’s a most quoted statistic – “just 13% of family businesses survive the third generation” – and it has finally been challenged. It comes from a single study of US manufacturing companies in the 1980s, and for some reason it has stuck and become almost axiomatic.
But it is deeply flawed. Most importantly, it never compared family businesses to non-family businesses (family businesses on average do last longer), and it also never considered the reasons why those businesses did not continue. Besides, not all businesses are meant to last that long – among other things it’s a function of their industry and their ability to do regular strategic renewal (and for some family business, the latter is a huge challenge).
The other issue is the conflation of this trope with the well-known “shirtsleeves to shirtsleeves” proverb. Enduring family business is not the same as enduring family wealth. Plenty of families have been able to parlay an operating business (which is usually how the wealth was created) into a healthy mix of diversified assets that can support the family for decades.
So forget blanket generalisations about family businesses and focus on their unique attributes that are a mix of strengths and weaknesses.
And view the proverb as a statement about the culture of wealth and how it affects those who created it, those born into it, and those well removed from its creation.
Consider This: How do attitudes to wealth in your family differ between generations? How long do you think your business (or any business) ought to last?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
A ‘family business’ is more than just a business owned and operated by a family. In addition to being a vehicle of wealth creation and entrepreneurship for the family, these businesses can bring other non-financial benefits – known as “socioemotional wealth” or “social capital” – to family members.
Being part of the family enterprises brings feelings of pride, personal reward and satisfaction, and can constitute a part of family members’ identity.
These additional intangibles are very important when it comes to succession planning, from bringing in new family members to handing over the reins at the appropriate time.
It’s worth noting that this additional emotional bond between family members and the business can be a double-edged sword: it can also drive poor decision-making and conflict. The key is to be aware of these additional non-financial dimensions in a family business, and to manage them proactively.
Consider This: Do you talk about your family business? I don’t mean “business talk” – I’m talking about how family members feel about the business, what it does, its history, and importantly its future.
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
Can you have the best of both worlds? Family businesses have to tread a fine line: they must compete like any business, while also maintaining harmony amongst the family – both those who are involved in the family business and those who are not. There are a few common themes that help families maintain this balance:
1. Trust is essential, and what builds trust are good communication and transparency. Anywhere information is not provided, people make up answers to their questions instead, which can lead to the spread of incorrect information, and the erosion of trust. A good governance structure can help avoid this and preempt the potential loss of trust.
2. Disagreements and disputes within businesses always arise, and in family businesses, they can spill over into personal and family life. Families need to learn how to “disagree well” – to raise issues about the business and about the family in a structured way rather than ad hoc over the dinner table, and to agree on how disputes will be resolved – that usually translates to internal processes.
3. Because family members have multiple roles, setting boundaries is especially important. This means boundaries between work life and home life, and treating family space as ‘sacred’. Short breaks from work to indulge fully in family time can be very healthy. The issue of roles becomes especially important as family members transition from doing many different things within the business to bringing in professionals/externals – this is a time to narrow and define their roles within the family enterprise.
Consider This: If it was “family vs business” in your family, which one wins? How often do you mix family & business? Do you have agreed processes for tabling issues and resolving them?
For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.
David Werdiger 