When it comes to families establishing a purpose for their wealth, things, it seems, are moving in the right direction. While our 2018 research showed that only 38% of wealthy families had a shared agreement on purpose1, according to our latest findings2, that number is now 51%.
That still leaves just under half of families with no formal philosophy or purpose – something we as a firm consider the most critical building block of any intergenerational planning strategy. However, with 24% of families “rethinking” it and 25% saying it has been “critical” to them during Covid, purpose is very much on the agenda. One respondent noted that discussions had “highlighted that having a purpose pre-agreed would make the decision-making process in the family simpler and less subjective.”
Interpreting the statistics lies in understanding who makes up that half of respondents with no formal purpose. It certainly confirms that vital conversations about purpose are neither easy to start nor to finish. However, it is also fair to assume that the half of respondents with no formal purpose are families with no attachment to a family business.
A family business – typically with deeply ingrained cultural values – often provides a family with a ready-made purpose. When a business is sold that strong sense of purpose is removed, leaving something of a vacuum. Although difficult, establishing a new purpose and framework for collective decision-making is not impossible.
As advisers, it is important never to impose a preconceived purpose on a family but to ask the right questions, guide discussions and facilitate an environment where they themselves come up with what is most important to them.
A purpose can often be quite general – more of a vision that provides individual family members with a degree of latitude in how they interpret it. Some families, for instance, may make it their aim to ‘improve sustainability outcomes for their local communities’ – a purpose which is quite deliberately interpretable in many ways.
Other – perhaps more streamlined – families might wish to outline a more specific purpose. In this case, it can be helpful to identify a passion all members get behind, be it humanitarian, academic, ideological, social or aesthetic.
Glyndebourne – an opera house in the heart of the English countryside is a good example. It was born of the shared passion for music of John Christie and his love, soprano Audrey Mildmay. Although today it is one of the finest and most celebrated opera houses in the world, it all started as a personal project for a family to celebrate their passion for opera.
However you establish your purpose for wealth, it is essential that every pillar of capital is properly serviced to ensure both its own continuity and the continuity of the wealth itself. The success of something specific like Glyndebourne could not have been achieved without the Christie family’s attention to all four pillars of capital. Their musical expertise (intellectual), their responsible operational and employment policies (social) and their strong values (cultural) have all played a part in sustaining the festival across the generations. And without the financial capital, the concept would not have existed at all, much less evolve and thrive over the years.
For the families we work with the Covid pandemic has undoubtedly played a role in helping them appreciate the role of purpose in their governance structure. For the 24% prompted to rethink their existing philosophy, one reason has been the marked differences between people’s lived experiences of the crisis. Wealthy families have become more conscious of the already growing scrutiny of their behaviour and are more aware that they are responsible for what their behaviour may ‘look’ like.
The inclination to focus on purpose and keep it top of mind is set to continue. The fact that the three non-financial pillars of capital have been gaining greater prominence in family governance over the last ten years is a trend we as a firm have been watching for some time. Indeed, our first Four Pillars paper3 noted that “families who concentrate solely on managing their financial capital, and do not develop a holistic long-term strategy that encompasses the other pillars of capital, will struggle to break free from the mould of ‘clogs-to-clogs in three generations’.” The Covid pandemic has redoubled our efforts to renew that message to all our client families.
1Four Pillars of Capital the Next Chapter: Practical Leadership for Changing Times, 2018
2Four Pillars of Wisdom: A time for reflection, 2020
3Four pillars of capital for the twenty first century, 2017
Photo by Michael Heuser on Unsplash
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