The opening passage of Tolstoy’s Anna Karenina famously asserts, “All happy families are alike; each unhappy family is unhappy in its own way.”
Given the choice, we’d all prefer to be in the former category, of course. Good family relationships can be a bedrock of satisfaction, support, and joy, whatever our path in life.
For families of exceptional means, it’s important to recognize that family harmony—or its absence—is not an accidental occurrence. In the same way that wealth creators typically build their fortunes through sustained effort and deliberate focus, so too, they increase the likelihood of positive outcomes for their children and grandchildren through care and foresight.
Personal relationships are by their nature unique. I don’t profess that creating a satisfying family dynamic is easy. Nor do I mean to suggest that it’s a one-and-done task that can be summarily crossed off a list. Family relationships, as Tolstoy intimated, can be fraught and sometimes even messy. However, there are some positive steps that high-net-worth families can take to promote open communication, anticipate issues, avoid common pitfalls, and embrace best practices.
Many of us grew up in households in which our parents had some favorite sayings. After a while, we likely became deaf to those mantras, their frequent intonation dulling our perception of their worth. Still, maxims take hold precisely because people have found valuable wisdom in them over the years.
I thought it might be intriguing to revisit some of these maxims in light of best practices that we’ve observed at Venturi Wealth Management, particularly for families of exceptional means. I’ve pinpointed three “old saws” that still have tremendous value for high-net-worth families as they seek to sustain and deepen the relationships that lend meaning, value, and continuity to their lives.
1. Honesty Is the Best Policy.
You’ve heard this precept dozens of times, but don’t let its familiarity dampen its worth. For high-net-worth families, honesty really is the foundational element of good relationships. Conversations about wealth should not just encompass balance sheet totals, trust specifications, or the enumeration of advisors and attorneys. Indeed, the vivid “back-story” involved in building, preserving, and stewarding a family’s wealth can be one of the most treasured legacies of all. Allow yourself the pleasure of telling the story–your story—of how you founded and built your wealth. By enabling your children and grandchildren to glimpse your struggle, hard work, uncertainties and setbacks, they will have a better sense for the reality of the good fortune that now graces their lives. They may also be bolstered by your own narrative of grit and perseverance—a beautiful legacy for any person to cherish.
Communicating openly and clearly is one of the best gifts parents can give to their children. By laying out the projected scope, timing, and inherent responsibilities of wealth, parents can cement their essential roles as loving guides and teachers. Delegating this responsibility to your written fiduciary plans robs you of a critical role: shaping positive outcomes for your loved ones. By engaging candidly and transparently with your children, you help them identify as stewards—not simply as beneficiaries.
2. There’s No Better Time Than the Present.
Most of us tend to put off things that make us a little uncomfortable, like going to the dentist, or calling a friend we haven’t spoken to in ages.
When it comes to preparing the next generation for wealth, time is of the essence. You might consider that you are already communicating about the intentions of your wealth, so don’t wait for a magical moment to transcendently appear. Rather, remind yourself that the transfer of wealth is a process, not an event. It’s likely that you will feel some relief once you have begun to discuss your plans with the next generation. You can determine the scale of these conversations: whether you start small and reveal more detail over time or prefer a more substantive dialogue from the beginning. You will know what feels right for your family.
For your children, these discussions can be a little disconcerting, particularly in the beginning. Wealth transfer intersects with a host of issues that are emotionally charged—questions of fairness, equality, and expectation. But engaging in these discussions early can dramatically increase the likelihood that successive generations will not only enjoy positive relationships with you, but with each other. Many families postpone these discussions until a crisis—typically illness or death—forces their hand. However, crises tend to beget more crises. It is far better to begin these discussions in a spirit of poise and composure rather than stress and exhaustion.
It’s also wise to be clear on expectations before a situation arises. For example, it’s generally conceded that a pre-nuptial agreement is a good idea for people of significant wealth in that it protects an estate from unpredictable outcomes. When this policy is conveyed proactively, its wisdom is nicely disembodied; the dynamic is far less charged than when your children are in established relationships. Similarly, if you expect your children to hold gainful employment as adults, it’s a good idea to help them envision possibilities as teens. By conveying the satisfactions of meaningful work, you can inculcate a spirit of self-determination that can spur your children to uncover possible vocations. These conversations are much easier when your child is 16 rather than 26.
Given the flurry of modern life, some families have embraced more casual opportunities to discuss their expectations and intended legacies. Some have initiated discussions over Sunday dinner; others have spoken poolside during family vacations. Still others prefer the formality and structure of official family meetings mediated by professionals. Whatever the context, these conversations can help prepare the next generation as capable and confident stewards. The sooner they begin that process, the better, so be resolute in your own determination to “carpe diem.”
3. Be Your Own Person.
As teenagers, you may have heard your parents exhorting you to “be your own person.” Though you may have rolled your eyes at the time, there is great wisdom in that precept, particularly when it comes to the transfer of wealth. The value of this saying manifests in two spheres: the path your children take for themselves and the path you take collectively as a family.
For your children, it is good to recognize that significant wealth can entail pressures and expectations that can weigh heavily on them. Your children may hold themselves to the same standard of success that you have attained, for example. Or they may feel pressure to continue in the path you have forged, personally or professionally, tethering them to a certain industry, geography, or lifestyle. But all of us are unique, with our own talents, interests, and destinies.
As parents, you may believe intuitively that your children should enjoy the freedom to chart their own course. Your wealth can help nurture their gifts, of course, facilitating education and experiences that can allow their innate strengths to come to the fore. By giving your children explicit permission to “be their own person,” you free them from the heavy mantle of a life in parallel with your own. One father embraced this precept by aiming to “prepare his daughters, not protect them.” By granting his children autonomy—even the fragile autonomy to make their own mistakes—he instilled a legacy of self-confidence that can gird them through future challenges.
It’s similarly wise to chart your own course as a family. Effective wealth transfer is forged in the cauldron of your own dynamic, circumstances, and personalities. When seeking to optimize outcomes for your family, you have considerable latitude in how you transfer your wealth. If you are concerned that the scope of your wealth may disincentivize your children and grandchildren from working hard, for example, you might consider establishing a family bank. Customized to your parameters, the family bank might allocate funds for clearly delineated positive goods (such as higher education), while incentivizing other virtues (matching earned income, for example). While the details vary in each case, the spirit is the same. You have the flexibility and vision to delineate the structures and processes that can engender long-term good for the people you cherish.
Tolstoy’s Anna Karenina ends tragically, as you likely know. But in writing your own story, you have the agency and insight to pursue a different ending for your children and grandchildren. As you mull the values of honesty, immediacy and individuality in your own legacy design, take heart that you are advancing positive action that can potentially endow a lifetime of good.
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Venturi Wealth Management
Venturi’s core mission is to help organize, plan, and manage all aspects of wealth for families and entrepreneurs with substantial assets so they can focus on their personal and professional priorities. We manage more than $1 billion in assets, a significant portion in-house, often eliminating additional layers of management fees. Founded in Austin, Texas, we incorporate the city’s entrepreneurial energy into everything we do.
For more information, reach us directly:
Russ Norwood, CEO and founding partner
(512) 220-2040
russ@venturiwealth.com
Mike Sanders, President
(512)220-2044