Conflict within wealthy families - why does it happen?18 Oct 2018
After chairing a panel at the recent Prestel and Partners' Family Office Forum in London, Ocorian's Richard Joynt explores the salient themes that emerged from the discussion surrounding intergenerational conflict when wealth is transferred within wealthy families.
Chair: Richard Joynt, Ocorian Panellists: Dr Ronit Lami & Dominik von Eynern
In virtually all families, assets will be transferred from one generation to the next. Yet when those assets carry significant monetary value, as is customary within wealthy families, intergenerational conflict can often arise and develop into a serious issue. Careful thought and expert insight can mitigate the risk of conflict, enabling wealth transfers to lead to a harmonious and wealthy next generation who continue the family's mission and vision.
The impact of family conflict
Conflict over wealth transfers can have detrimental effects. Disputes over wealth can not only erode finances due to legal fees and asset freezing procedures - causing some family members to live in reduced circumstances whilst litigation is ongoing - but it can also ruin family relationships and the family unit itself.
During the panel discussion, there were three main themes of conflict explored:
- Authoritarian Patriarchy - All panellists had seen a patriarchal authoritarian style lead to conflict between generations at some stage in the future, often when the second generation were older and had become parents themselves. Commonly, this conflict is borne out of resentment and dissatisfaction about how their lives had not 'been their own' and they harbour desires to break this cycle for their own children.
This type of conflict can take many forms, but one type that seems to recur is 'rebellion' by the younger members of the family - this rebellion can be passive as well as aggressive - for instance, family members refuse to engage with those involved in the transfer or act in a passive aggressive, uncooperative manner.
- Mixed Messages - Another theme coming through was the damaging power of 'mixed messages'. In situations where a dynastic trust has been put in place, this may send a mixed signal to a family who is trying to engage their children in key family decisions. A family may encourage their younger generation to engage in voting, giving and asset disposition issues, yet at the same time teach them that they are 'beneficiaries' of a trust and may therefore have reduced powers in deciding on the future of the family wealth. This can be destabilising.
Panel members commented that the position of a beneficiary of a substantial trust may be envied by their peers but in fact, they actually feel powerless about their financial future and are subject to relying on 'hand-outs' from the trustees.
- Equal division without condition - The last perspective examined was the situation where a wealthy family decides to divide all assets on death and leave them equally to all heirs, without conditions. Whilst this is technically 'fair' and promotes ownership of their future, some offspring may be more able to deal with this sudden wealth than others.
Another point raised was that this does not encourage the next generation to work together, therefore reducing the economies of scale and doors to opportunity that a larger, closely allied family would have.
A professional solution to a perennial problem
Ocorian's Family Office professionals have first-hand experience of witnessing what successful and unsuccessful techniques have been employed by wealthy clients. Working with specialists such as wealth advisers, psychologists and wealth consultants, our Private Client team provide seamless and holistic solutions to the perennial problem of intergenerational conflict.
To learn more about Ocorian's Family Office service, click here.