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Talking about money
I was recently working with a family client when the conversation became rather animated while discussing money. Most of the members of this particular family viewed money in a positive light; as a means to an end, the ability to make choices, the ability to make a difference, a medium of exchange etc. However, for some, money might be viewed as the cause of conflict, the ruin of family life, the lure of the forbidden and the priority of their parents.
Money can be a taboo subject, and deciding what to do with it is often a challenge when it comes to the next generation. We’ve seen a wide range of views, and it is common for different individuals and families to have different opinions. For example, for some, money is a means to enjoy life now over and above financial security for the long term, while other individuals choose to leave the bulk of their wealth to charity rather than to their children – because they may feel their children don’t need the money and don’t want to ‘spoil’ them.
Different types of money
In my conversation with the particular family referenced above, ‘active’ money – money earned from working – was distinguished from ‘passive’ money – money that is gifted or inherited – during our conversation. When discussing this topic, the following questions were raised: Should ‘active’ and ‘passive’ money be valued differently? Should someone who earns £1m be treated differently from someone who inherited £1m? Should the money be spent differently depending on how it was received? These questions provoked much debate and got the group thinking more deeply about entrepreneurship, wealth creation and wealth preservation.
Money and happiness
In addition, we talked about personal aspirations, lifestyle goals and monetary needs. Interestingly, there has been some research into the optimum income for happiness. For example, Angus Deaton (2015 Winner of the Nobel Prize in Economics) conducted a piece of research which concluded that happiness and income are correlated, but only to a threshold of $75,000. Whilst this research was conducted in 2010, the concept remains the same. Is there a tipping point after which happiness is no longer linked to income? I.e. is there a quantum above which increases in income no longer produce a corresponding increase in happiness and contentment?
Of course, another factor to contend with when discussing the value of money is ‘lifestyle creep’ – as you have more money, your needs and tastes often develop too. It’s a lot harder going back to basics once you’ve got a taste for a more luxurious lifestyle!
When I sat down to write this post, my hope was to provoke some conversation and interesting dialogue within families. Why not ask your family members how they think about money and see what they say? There is no right or wrong, and the answers might surprise you.
Likewise, might it be worthwhile to make a list of what you want? What do you really want in life, what do you value most? How much would it take to fund that? Or perhaps you should ask what you need – how much would that change the total amount?
And for those of you who have sufficient funds to meet your needs and wants, a final question to consider: what is the purpose of your wealth? What it is for? Do you know? And does your family know?
In the numerous conversations I have had with both the current and next generation of family business leaders and their families, we have discussed topics as diverse as the smooth transition of leadership from one generation to the next, family charters, setting up family offices, tax and estate planning, growth, strategy, and the overall speed of change in the market.
This week, Walid Chiniara, a partner who leads the Family Enterprise Consulting practice in Deloitte in the Middle East, discusses the delicate act of communication in family businesses.
As a family business advisor, I have observed numerous interactions between family members as owners and employees of their family business.
Succession, transition, change, transformation, adjustment – retirement! There’s a lot to think about as I step down from my role as Vice Chairman at Deloitte UK.
Having spent many years working with families and helping them through the challenges that succession brings, I am now finally doing it for myself. As I approach the end of a long career at the firm, I’d like to share my personal experiences as well as those that I have previously seen in a professional capacity.
At some point in time, many next generation family members will have a decision to make about whether or not to join their family business. This can be an extremely difficult choice, not least because of the tension between the opportunities afforded by family businesses and their inherent complexity.
This week, Niall Glynn, a partner with Deloitte in Ireland, discusses the compensation of family employees.
For family employees in family businesses, compensation can often be one of the primary causes of conflict. It is extremely important to have clear parameters for reward and avoid basing compensation decisions on emotive criteria.
This week, Tam Chee Chong and Cathy Chow from Deloitte in Singapore discuss the effects of Asian culture on succession in Asian business families.
Asia’s business families are in the midst of experiencing unprecedented generational change; the majority are transitioning their businesses from first to second generation, and some are making the transition from second to third generation. For many, family values, underpinned by culture, are one of the most influential factors impacting succession planning and the decisions made on that journey.
This week, Eefje Chalmers, a family business advisor with Deloitte Netherlands, considers the potential impacts of using technology on families and their organisations.
The internet is one of the greatest inventions. Few other things have so radically shaped culture, media, commerce, entertainment and communication. But as with many things, these benefits can have a downside, especially where family, wealth and business collide.
This week, Joanne Whelan, a partner with Deloitte in Ireland, looks at conflict in family businesses.
It is no secret that family businesses are complex. This complexity arises from a mixture of family chemistry, diverse family priorities, and the organisational challenges and opportunities which most businesses face. It can often lead to a degree of conflict in family businesses - lines may be more easily crossed and disagreements can become more heated, and personal relationships with family members can cloud judgement when it comes to making business decisions.
This week, Peter Pagonis, a senior partner who leads Deloitte’s Family & Individual Wealth practice in Australia, discusses the benefits of introducing a family council governance structure.
We often hear about how having a family council can be hugely important for family owned businesses. They seemingly bridge the gap between family and business, and in the best cases, manage to simultaneously meet the needs of both.