Behavior and psychology play a big part in your wealth accumulation experience, as much as (some may argue even more than) the technical. While many times we discuss topics that are very technical, this month we’re going to touch upon some family dynamics that we keep hearing about, over and over, from those we serve.

• The right way to make a gift to a family member
• Managing the risk of being taken advantage of by friends/family
• What you can do to maintain peace in the family without sacrificing your own financial security

The common theme is vulnerability and generosity and the interplay between the two when it comes to complicated, emotional family relationships. This is a struggle very common to the ultrawealthy and especially those of you who are acting in the role of family benefactor.

Making gifts to family members

The airlines tell you to put on your oxygen mask first before assisting others – no different with financial planning and being a family benefactor. It is generally wise to stay away from loans at all costs and call everything you choose to provide a “gift” as opposed to a loan. You have to sincerely mean this. If you cannot afford to give this money away permanently, don’t do it – your financial survival must always come first.

Managing the risk of being taken advantage of by friends and family

Wealth can be a tough pill to swallow socially, if your immediate circle isn’t at the same level of financial success as you are. Often this isn’t even something that people consciously are trying to push on you. Sometimes it’s guilt, other times it’s generosity, or it may just be convenience; but it’s not uncommon for the wealthiest person in a group to find him or herself be the one picking up the tab for the entire group’s dinner.

It is a real risk, and if you’re not careful, this kind of generosity can take its toll emotionally, resulting in the “giver” feeling unappreciated and even taken for granted. It can be very painful when a friend or family member resents you for your success. This can put a considerable strain on relationships.

Moreover, there are financial risks. No matter how wealthy you are, you still have expenses and obligations. Being affluent doesn’t free you from taxes, late fees, and the risk of not being able to afford your lifestyle.

Clear communication is the solution. It’s useful to create advocacy and get other family members involved. Passivity is not the solution to the problem of being taken advantage of. Letting it go unchecked allows relationships to become compromised – and they’ll stay that way until there is an intervention.

Third party resources can help

One of the roles that we embrace as wealth manager to our client families is accepting the role of gatekeeper when anyone (family, friends, charities, etc.) tries to put the arm on our clients. To do this effectively, we must be empowered to listen, communicate any ask with the client in a way they understand, and politely say “no” if necessary.

Here’s the difference a third party can make.

Let’s take for example a hypothetical scenario in which a young woman, let’s call her Grace, inherits a large sum of money from a deceased relative, while her brother and sister inherit nothing. Upon becoming aware of the fact Grace has a trust fund, they begin to ask her for “help” all the time. In her guilt/vulnerability, Grace would have felt obliged to give them everything they asked for in the absence of our intervention.

We have counseled Grace on how best to communicate the guardrails around her generosity to her relatives. This involves committing to nothing more than an annual gift for her relatives, and only if Proquility, as her wealth manager, advises that she can afford it in a given year. As a result, Grace’s siblings are aware that there is a gatekeeper to get past. Consequently, they don’t expect or feel entitled to a recurring amount every year, and this considerably reduces the pressure on Grace when dealing with this issue.

If there’s one thing worth fighting for, it’s family relationships. Keeping a wealthy family intact is no small accomplishment. We hope that our newsletter has shed some light on the emotions that come along with immense wealth – guilt, vulnerability, entitlement, resentment, and fear. As wealth managers, we are ready to work through all of this with our clients because we know that for many it’s a reality.

If you’d like to discuss, we welcome you to contact us to set up a time.

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