Family Culture Factors Affecting Long Term Wealth
Family culture encompasses your family’s history, traditions, values, views, habits, goals, communication methods, and experiences. Your culture can affect whether or not future generations will have access to the wealth you are now building or shepherding.
What are these cultural factors that can make or break your wealth transfer success?
Founder failure to give up control.
If your wealth creator insists on hanging onto control of the wealth or business that creates it too long, the next generation may lose interest in being part of that business and may not understand what it took to create the wealth, increasing the chances that it will dissipate within the next two generations.
To avoid this issue:
Educate yourself or the wealth creator in reasons and ways to start gradually transitioning control. Make sure the wealth creator continues to be part of the business or wealth management process, but let a second or third generation family member become a mentee. Begin defining family governance structures together – such as holding family meetings, setting out a family mission and drafting guiding principles for future generations.
Expectation of family to live for today and spend what they earn.
Many in America believe that individuals are responsible for making their own way, earning their own living and that it is somehow wrong to keep money in the family for more than one generation. This belief leads to the need for each generation to begin anew and does not allow a family to even think about carrying forward non-monetary wealth, such as their common history, knowledge or skill sets – let alone providing family wide funds to loan to future family members at reasonable rates for specific purposes.
To avoid this issue:
Research what family wide wealth can do for your family, now and in the future. Begin to examine the families that have it and start talking about what it would mean to your family. Start a tradition of lending a hand to the next generation. Become stewards instead of spenders.
Hesitation to deal with consequences of wealth.
Some think that having family wealth will cause havoc and destruction and neediness in family members. The kids will not learn to support them selves, the cousins will fight over the money and initiative will be out the window.
To avoid this issue:
Educate yourself and your family members on what the supposed consequences of wealth are and how to avoid those. List pros and cons of having a family wide pool of money available for your family. Point out families who successfully avoided wealth issues and investigate what they did.
Lack of identity as a whole family vs family unit identity.
It is common for each family unit to split off and isolate themselves from the greater family. Most extended families do not have a strong common vision for the future and do not necessarily relay a common family narrative to all extended family members. Some families fail to pass along their unique family history and heritage and culture to new family unit members.
If your family units do not consider themselves part of the whole extended family, they will not be interested in being involved in defining a common vision, or participating in extended family activities such as investment of family funds (vs their own personal funds) or joining other members in philanthropic activities and etc.
To avoid this issue:
Sponsor activities, stories, meetings and events to bring family units together for common purposes. These could be things such as celebrating traditional family life events – graduations, weddings, christenings and etc. It could be something new such as starting an extended family meeting to learn about something, discuss a particular thing or share information. Teach the family history via verbal and written stories, pictures and videos. Start identifying values, traits, abilities, events and interests that you have in common with extended family members.
Lack of a common whole family vision.
If each family unit is headed in a different direction, the entire family will never arrive at a common destination. Holding onto family wealth for generations requires a common vision across many family members in different generations.
To avoid this issue:
Work together with the family members to determine how to generate a common family vision or mission – along with goals to get there.
Lack of communication between family units.
Even though you have a wealth creator working to pass control to the next generation; your family members are able and willing to defer satisfying needs and wants now to build something bigger and better for later; you have together defined and dealt with fears that wealth will destroy future generations; and have defined a common family identity and vision – you can still fail at wealth transfer if family units fail to communicate with each other.
Lack of communication leads to misunderstandings, conflict between members, units and generations as well as potential wealth destroying law suits.
To avoid this issue:
If there are elders in the family, let them assume the role of communication coordinator and mediator. If there are not, build guidelines for communication and mediation into your family constitution and set up a family council to act as mediator.
Which of these factors are present in your family? Would you change them to allow your family to have access to additional common resources in the future – resources such as family reputation, contacts and networks to use, skill sets to pass along and money?
