A new study of ultra-wealthy families gives lie to the notion that formal decision making about wealth puts a strain on family relationships.
Morgan Stanley and Campden Wealth Research reported last week that 44% of ultra-high-net-worth poll participants in North America said decision making had a positive effect on their relationships with other family members, 30% said it had no effect and just 19% said it had a negative one.
“The study shows that involvement in decision making helps build better family relationships,” Campden’s chief executive Dominic Samuelson said in a statement.
“But importantly our analysis identifies a vital element underlying this harmony in decision making: having proper governance and decision-making structures in place to minimize conflict.”
Consider perceived outcomes among respondents of investment decisions made where there were more governance structures and non-investment decisions with fewer structures:
- Clear: 78% vs. 71%
- Effective: 83% vs. 74%
- Efficient: 78% vs. 54%
- Allows quick response: 80% vs. 59%
The research was based on a quantitative survey conducted in November and December of 59 members of North American families with more than $35 million in assets, plus in-depth interviews with 15 family members.
The study found that investment committees figured prominently in families’ financial decisions, but they also used family and professional advisors and family office personnel.
Fifty-six percent of respondents said investment policy statements were important, using them to define the family’s investment and financial goals. In addition, 58% of families either had or were developing a family mission statement.
In contrast, only about a third of families reported that they had a defined philanthropic policy. Moreover, 28% said they had a gifting policy separate from a philanthropic one.
A majority of families said they wanted their philanthropy to have a positive social or environmental impact, with education topping their list of causes.
Fifty percent of families said advisors had a strong influence on their financial decision making, and 39% said they had some influence.
Forty-one percent of families said they tasked the professional advisor with overall asset allocation, while 38% said they used the family advisor or family office executive.
A third of families said they gave advisors executive decision-making power over tactical matters.