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Biggest disruption to family wealth is family itself: adviser Griffiths-Hamilton shares research

Biggest disruption to family wealth is family itself: adviser Griffiths-Hamilton shares research

Family enterprise adviser and author Emily Griffiths-Hamilton explores the dynamics and challenges to managing family wealth and the importance of decision-making, having written the 2018 book 'Your business, your family, their future.' 

What are some of the main issues facing family offices in 2019?

'The main issue facing family offices is not addressing the impact of the family factor. Successful family offices proactively manage both the quantitative aspects, like investment and asset management, financial, insurance and tax planning, risk analysis, etc., and the qualitative aspects in relation to the family factor. The latter includes education for the family members and the creation of a family framework, or governance structure, which ensures the family enterprise continues to be one of its greatest legacies, making good decisions.'

What are the main trends you have seen develop over time and how do you expect to see these evolve?

'A significant trend is the development of more consultants in the area of family enterprise advising. This is very good because it is my belief that families who have created, often out of nothing, a thriving family business are easily capable of transitioning their life’s work into a thriving multigenerational family office/enterprise. I often find these individuals know what their destination is, they are only looking for some kind of roadmap to get there and family enterprise advisors can assist with that.'

What has been the biggest disruptor to managing family wealth?

'The biggest disruptor to managing family wealth has been the family itself. In fact, of the 70% in each generation of family wealth transitions that fail (with a failure being defined as the family involuntarily losing control of the financial wealth), 60% are due to a breakdown of communication and trust within the family, 25% because the next generation is unprepared for their future roles and responsibilities and 12% because the family doesn’t have a shared vision. The remaining 3% is due to the traditional work of our professional advisers, telling us that family’s wealth management plans don’t fail because of the work of the professional advisers but ‘in spite’ of the work of professional advisers.'

Why is it such a struggle for family wealth to be maintained as you move down the generations?

'There are two primary areas in which families struggle to maintain family wealth through the generations and both are related to decision-making. The first has to do with decision-making in the family becoming a team sport. It can be difficult for second-generation family members to learn how to make decision as a team. After all, quite often the best decision-maker they’ve had as a role model has often been a sole decision-maker, often a parent who was the family business builder. The good news, though, is that like any new skill, learning how to make decisions as a team can be learned through education and practice.

However, the family team members at the decision-making table must have quality ‘Earned Voices’, because quality voices make quality decisions. It’s not uncommon for the first generation to invite every member of the second generation to the decision-making table, solely based on blood relationship. This doesn’t work well when family members don’t have qualified earned voices in relation to the decisions being made. For instance, if the decision is about whether or not to partner with another family office on a private investment in an active business and one of the voices at the decision-making table has no experience or education whatsoever in such issues, they will not be bringing a qualified voice to the decision-making table. While this example of the need for a qualified earned voice is easy to understand, the more subjective factors of earning a voice, which are just as important as the technical aspects, are often overlooked. These factors include characteristics such as having earned the respect of the other family members, being able to work harmoniously with other family members, being able to put the needs of the family before their own, shows respect to family members and is able to work consistently and kindly towards the resolution of differences of opinion. In the final analysis, any decision-making team is only as strong as not only the aptitudes but also the attitudes of the individual decision-makers at the table.'

To what extent is a general lack of financial education affecting millennials?

'In the 21st century, no matter the individual, we are all on financial journeys of some kind. And yet, in many cultures, money remains as the last taboo topic. The result is that, especially for millennials (born 1981-1996) who grew up during the most significant changes in our banking system, many find themselves enslaved to banks through their personal indebtedness for non-essential items. This has been a new phenomenon because in previous generations, access to credit was not easy.

For example, in previous generations, university students at the end of a semester would often be heard lamenting ‘how broke they were’. This meant their bank balance was zero, zilch, nada. They were done. There was nowhere else they could go but home for dinner. And yet for millennials, university students now lament how ‘in debt they are’…and they just keep going further into debt. This change happened surreptitiously and the sad news is that these millennials are now enslaved to the bank, finding themselves making life and work choices based on paying down their debts as opposed to being free to pursue the life of their dreams.'

To share some insight into the world of family offices, contact Eleanor on emahmoud@citywire.co.uk for an off the record chat - we're all ears. 

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