Wealth Education: What’s In It for Me?
When seeking to encourage proactive engagement from the next generation, they must be told what’s at stake. When you have skin in the game you are more likely to commit to a sustained practice to achieve something. Most wealth creators worry their children lack initiative or motivation to do anything productive or constructive, having been raised with excessive wealth. Consequently, there is a fear that if children learn about their future inheritance or even an existing trust fund, it will only serve to reaffirm the belief that they’ll never have to work and still have access to the lavish lifestyle they’re accustomed to; and so the conclusion is that withholding information is better than sharing it. This is a mistake.
A lack of transparent communication and sharing of information creates an environment of distrust among family members and everyone is left to make their own assumptions which can be detrimental to family relationships and ultimately the family enterprise. When the wealth creator hides the details of his estate plan from his children, he is seeking to influence their behavior because he believes that if they don’t know what they’re getting they won’t rely on their inheritance. The reality is the opposite; children of affluence are aware of their privilege and station in their community and society. They know they are rich and believe they will inherit their parent’s assets one day. They don’t need to know much more to assume they will be taken care of no matter what because that is how it’s always been their whole life, thus bringing to bear the wealth creator’s worst fears.
No matter what your personal philosophy is on inheritance, engaging the next generation as responsible owners and stewards requires that you educate them on every facet of the family’s wealth. This means sharing all of the details of the family enterprise, the estate plan, and its impact on your loved ones – in simple terms, tell them what’s in it for them. While this may feel counterintuitive, it enables you to control the narrative and change the plan if needed while still present.
Furthermore, if you want your children to pursue a calling of their own and commit to stewardship, the education process should embody more than the technical details of family wealth. Yes, understanding the numbers and legal structures are important. Younger generations must learn basic financial literacy skills and fundamental investment concepts; they also must learn the legalities and operations of a family business, family office or foundation, and other family-held entities such as partnerships and trusts. This is obvious but merely focuses on the family’s financial capital. Often lacking is giving equal attention to the family’s human capital.
Human Capital Sustains Financial Capital
Without human capital, there is no financial capital. For affluent families, human capital focuses on the “family” in family wealth. Educating family members to have effective communication, informed and collaborative decision-making, constructive conflict resolution, and how to run effective family meetings nourishes family relationships because it creates a foundation of trust and a sense of fairness among family members, which in turn supports the sustainability of intergenerational wealth.
Skill sets that cultivate human capital develop personal emotional intelligence. Human brains are supercomputers that enable us to reason as well as regulate our emotions. Activities that require us to work in a group means we must be aware of our individual communication styles, habits, and personal biases and how these characteristics may affect the group dynamic. For family members, this is particularly significant because ingrained family scripts and history can be emotional triggers causing hypersensitivity during communications that may not affect us the same if it were in a non-family or professional context.
Therefore, it is useful to engage family members in workshops that induce them to exercise their emotional intellect. Workshop examples include: identifying core values and a shared purpose leading to a long-term vision and mission or family values statements; understanding communication styles and personality temperaments; producing and sharing a formal written or oral family history; designing a decision-making matrix that defines what and how decisions are made and by who; sharing personal stories and experiences to explore your relationship to money.
These activities do not require knowing the technical or legal details of the family enterprise. Instead, the focus is developing interpersonal skills to strengthen family bonds and a renewed commitment to one another through an understanding that while you are tied together by blood and shared wealth, everyone has a unique voice and valuable contribution. Harnessing the diversity of thought and appreciation of individuality among family members will in turn support the growth, preservation, and sustainment of the family’s financial capital. Thus, by moving the spotlight from any one family member (and what each may inherit – i.e., “What’s in it for me?”) and redirecting it to the larger family enterprise as an ecosystem unto itself, the concept of stewardship begins to unfold.
A Foundation for Stewardship
Stewardship is defined as the responsible management of something entrusted to one’s care; it is an ethic that embodies careful planning and management of resources. So while you may consume family resources for your security and pleasure, you are further obligated to steward it for future generations rising after you.
Research shows there are pressures associated with being raised in an environment of generational money that can negatively impact the full development of personal identity separate from the wealth itself; these stresses include lack of intimacy and contact with parents; parents using money as a tool for control; isolation and distrust of others; feelings of entitlement combined with fear of loss of wealth; dependency and lack of knowledge; lack of motivation for career or life purpose; anxieties about continuing or fulfilling the family legacy . Because of these experiences common to children of the rich, rising generations must be taught to take on the great responsibility of preserving and sustaining existing wealth. Therefore, if we recognize these stresses, a foundation for stewardship can be built through open family communication, continuing wealth education for the next generation, and process planning .
There are many ways next-generation family members can contribute to the family enterprise by promoting stewardship. The best practice is to approach an education and personal development plan structured around the next generation’s interests (not the wealth creator’s) to encourage intrinsic versus extrinsic motivation. Inherent in stewardship is the commitment to a lifelong practice of responsible management of resources. Lifelong learning cannot be forced through promises of external rewards because the behavior is driven by an expectation of receiving something rather than by an internal desire for personal betterment. When you give the next generation the choice of where to start, they dictate their learning journey thereby stimulating intrinsically driven behaviors that promote stewardship.
For example, is access to the family estate plan or the family business financials the desire? Or is it more decision-making authority in the family’s philanthropy and charitable giving policies? Perhaps it’s learning about the family’s investments and investment policy, or maybe entrepreneurship and starting a new business venture of their own? The point is, whatever it may be, just go with it and create a process plan consisting of educational and personal development workshops and activities with content that will naturally spark their internal passions.
Concepts key to stewardship addressing financial capital (e.g., budgeting, investments, cash flow, taxes, credit, etc.) as well as human capital (e.g., policy-making, critical analysis, and group decision making, collaboration and conflict resolution, goal-setting, values, mission, and vision, etc.) can then be weaved in through experiential learning so that the information sticks. Regular family meetings typically serve as the forum for conducting these activities and executing the plan.
Conclusion (But Not Foregone!)
In sum, all parents want the same things for their children: health, happiness, and security; to have thriving family relationships; and to provide opportunity without robbing them of life purpose. While wealth may provide some of these elements, it also may easily destroy others unless care is taken to create an environment that informs, educates, and uplifts them to actively engage in understanding what’s at stake in order to assume the great responsibility that comes with ownership and shared family wealth.
While it may feel risky to do the “big reveal” and tell the next generation what’s in it for them, the true risk of not doing so is the self-fulfilling prophecy of raising unmotivated children who remain wealth consumers throughout their lifetimes. While every family is unique, we know children of affluence experience common pressures that can stunt their emotional capacity to develop a healthy self-identity separate from wealth; but it doesn’t have to be a foregone conclusion. Recognizing this enables choices and actions families can take to support the rising generation in finding life purpose and lead them towards a path of wealth stewardship.
 Dennis T. Jaffee and James A. Grubman, Acquirers’ and Inheritors’ Dilemma: Discovering Life Purpose and Building Personal Identity in the Presence of Wealth; The Journal of Wealth Management (Fall 2007).
 Process planning is a concept in product manufacturing and consists of defining the sequence of steps that should be taken from design to production. Here, it is used to describe the sequence of steps a family takes to reset the next-generation mindset from wealth consumption to wealth stewardship.