Wealthy families around the globe are exploring how to use their private capital to positively influence the social and economic challenges they see around them, according to new research by the global law firm Withers Bergman.
The findings show that families are moving beyond an objective of wealth preservation alone, and finding new purposes for their wealth that can give meaning to wealth ownership for each new generation.
Withers, working with wealth research agency Scorpio Partnership, based its research on 16 in-depth interviews with multimillionaires and billionaires from the U.S., Asia and Europe, and cross-referenced their opinions and experiences against the attitudes of 4,500 individuals with more than $10 million in personal wealth, who had answered digital surveys on a wide range of subjects over the past two years.
“Families are finding that active participation is much more beneficial for the family and for society than a passive approach to investing or giving,” Withers Bergman partner Justin Zamparelli said in a statement.
Although the interviews showed that the desire to give wealth a purpose existed across cultures and generations, this was currently most evident and active in the U.S.
“There is a clear trend showing that several generations of relative economic and political stability have given North American wealth owners the longest experience of transitioning wealth from operational businesses to financial family structures, and then back into the wider economy and society,” Withers Bergman partner David Guin said in the statement.
Researchers asked wealth holders what lessons they had learned that they would wish to share with other global families.
Five key lessons emerged that respondents said they had learned through coping with succession and working to preserve their assets and family unity.
Transitions are complicated, whether selling a business, setting up a foundation or passing control of wealth to the next generation.
Families should ask themselves “why are we doing this?” at each transitional stage to find the common objectives that keep them, and the family’s wealth, intact.
Take your time. Family businesses are a collection of individuals, not an organization. They require a unique leadership style that should involve listening, learning, observing, sharing and understanding.
Lead with principle. Wealth ownership means that attention is focused on family business heads. They should lead by example. When wealth is used as a force for positive social change, the wider community will view its ownership with greater respect.
Recognize your limits. A family business comprises many roles; no single person can play them all well. Once the skills, strengths and motivations of every family member (including the head’s) have been accurately assessed, other family members and professional advisors can be appointed to fill the gaps.
Give the next generation just enough. Each generation should be able to think of itself as the first generation. For the next generation, this means they should be given everything they need to be successful, but no more. For the older generations, it means recognizing when to step aside.
“Maintaining commonly held reasons for working together as a family is a continual process,” Catherine Tillotson, managing partner at Scorpio Partnership, said in the statement.
“When a new generation is called upon to take ownership of the family wealth, there is a potential for it to unravel, as the younger family members bring their own values and interests to bear. Clearly, anything that creates coherence and harmony is valuable, and these days it appears to be the social application of wealth.”
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