Ultra high net worth families are faced with an ongoing series of highly complex, multi-generational wealth management challenges.
For many families and more especially the original living creator of the wealth, this will often be their first experience of focusing their mind on their personal wealth preservation rather than on the creation of it. Suddenly it looks like a minefield - no idea where to tread, lack of experience dealing with these issues and advice coming from all quarters on what to do next.
They get to a point where they are not sure whom to listen to or what is the sensible next move. Ultimately it comes down to decision-making and ensuring that there are high-quality outcomes from those decisions.
How can advisers such as ourselves help them?
- Objective rather than subjective solutions or suggestions - although there is some subjectivity in an adviser's thinking, in that it is their opinion, it is an objective view from the point of view of the family and broad experience that the adviser has.
- Experiences - the adviser has the experience of working with other families. They also have much personal experience. In my case, I have been there and done it with my own family's situation.
- Lack of biases - advisers operate with a lack of biases and do what is best for the family.
- Inclusive not Exclusive - advisers can be inclusive of all members and branches of the family rather than exclusive of or to certain people. They would do their best not get caught up in any family politics.
- Listening - Listening is such undervalued tool and a skill many people do very badly. How often do you hear somebody say they like the sound of his or her own voice. Listening requires practice especially as our brains works four times faster than the person speaking. You have to stay in the present and not drift off. If there is trust, families quite often are more prepared to listen to outside advisers than their family. It is rather like children who never seem to want to listen to advice from their parents! They know best....or do they.
- Decision-making processes - interpersonal and rational behaviour. Families in many instances are not like executive teams. They do not sit around the table every week or month making key executive decisions about their personal wealth. This is totally alien. The skill of making good decisions as a team takes time, practice and in some cases coaching. Behavioural characteristics of individuals will alter the behaviour of others. However, have you seen a passive-aggressive individual cause somebody who is slightly more passive to stop contributing, fold their arms sit back in their chair and not open their mouth again? I see it often. What's more, it is the passive person who is quite often the one who has the answer to the problem and even more often they are often female, to bring gender into the discussion. So that is the interpersonal. The rational is about discussing the topic, having a clear objective, checking whether there are sub-objective, analysing the alternative options, discussing the consequences and finally implementing the solution. This is not often done very well.
- Consensus - advisers can help families work towards that solution that all members of the family accept as logical and feasible and something that they can live with. Voting does not work.
- Evaluating the Outcome - it is important that the family and/or the adviser re-evaluate the effectiveness of the solution after a sensible period of time. Were the objectives met? Is everybody satisfied with the outcome as it plays out? Continual monitoring is required and this is something that an adviser can do.
Ultimately, it is important to ask questions if you do not understand. The financial world is awash with technical jargon which at times looks as if it is designed to baffle and confuse. That can be difficult for somebody coming to this world for the first time with a serious amount of newly created wealth that they do not want to lose. Choose an adviser who is aligned to your needs who can steer you through the maze of money management. It will pay dividends.
Ultra high net worth (UHNW) families are faced with an ongoing series of highly complex, multi-generational wealth management challenges. A new study, Family Decision-Making, the Campden Wealth/Morgan Stanley Private Wealth Management North American Family Wealth Report 2016, explores how UHNW families make important decisions and what roles their advisers play in those processes.