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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 6/30/2014

Understanding wealth and the impact of wealth 

Understanding wealth
Extract from the book “Governance in Family Enterprises – Maximizing Economic and Emotional Success”, 2014 , reproduced with autorisation, Palgrave Macmillan ©

“I am grateful for the blessings of wealth, but it hasn’t changed who I am. My feet are still on the ground. I’m just wearing better shoes,” said talk-show host Oprah Winfrey. True, wealth comes with many blessings: access to a better health systems, comfortable housing, entrance to select schools and expensive higher education, not having to worry about financial security, an active social life, the resources to care for family members, and the opportunity to help the community and the world at large.

Many people overlook the fact that wealth is a mixed blessing. It can also bring negative attitudes and emotions, such as:


  • Fear of losing everything, which can turn into anxiety and sometimes into miserliness, due to the fear of overspending and the fear that someday nothing will be left.
  • Isolation stems from the belief of societal attitude that wealthy people belong to a different class. When that notion is instilled at an early age, young people feel disconnected and isolated – a painful experience.
  • Guilt and shame at having so much when others have so little.
  • “Affluenza” and entitlement, also called “silver-spoon syndrome,” when a young heir is perceived to display attitudes of impatience and arrogance.

Like the yin and yang philosophy, the positive and negative emotional impacts of wealth come together and influence one another: most wealthy people have a mix of both. A feeling of guilt, for instance, can lead to an initiative to support the community and charitable causes, and help establish a social role and a deeper meaning to life.

The most important issue for the wealthy is learning to live with wealth, to feel content, to be oneself, and to use that wealth as a springboard for further achievement. To do that, families need to start by opening up and breaking the taboo about discussing wealth and its responsibilities. This can help create a forum and become a basis for identifying solutions.

Financial wealth is often created when the business is sold, listed on the stock exchange, when a division is sold, or through having strong cash-flow. In such cases, families have to question whether they want to split the money and go their separate ways, or stay together and manage their wealth together. In the latter case, there is a larger pool of financial wealth that provides wider investment opportunities, while a smaller amount from split wealth may not.

Once the family has made the decision, depending on the amount of financial wealth available, the degree of control they want to have and the trust they have in the service providers, they will either organize their own financial asset management (usually through their own family office) or subcontract that management to third parties.

 

What family should consider and how they should structure their family office, shows: Governance in Family Enterprises – Maximizing Economic and Emotional Success, by Alexander Koeberle-Schmid, Denise Kenyon-Rouvinez and Ernesto J. Poza, Palgrave Macmillan, ISBN 978-1-137-29389-3, http://www.palgrave.com/products/title.aspx?pid=649676,entitled to a 20 % discount with the promotional code WORLDPALGRAVE20 if ordered through http://www.palgrave.com.

Denise Kenyon-Rouvinez

Denise Kenyon-Rouvinez
Denise Kenyon-Rouvinez, Ph.D, is the Wild Group Professor of Family Business and co-director of the Global Family Business Center at IMD, Switzerland.
 

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