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Financial decision-making a positive for ultra-wealthy families, says new research


Morgan Stanley Private Wealth Management and Campden Wealth Research has released the results of a new survey showing that financial decision-making within ultra-high net worth families in North America tends to have a marginally positive impact on relationships within families.

The findings are contained in the ‘Family Decision-Making’ report, and draw on a survey of 59 individuals from North American families of net worth in excess of USD25 million who are actively involved in financial decision-making, as well as 15 in-depth qualitative interviews.

“To the uninitiated, it might be tempting to believe that formal decision-making regarding wealth puts a strain on family relationships. Instead, our study finds that it is proving to be beneficial for family relationships within ultra-high net worth families,” says David Bokman (pictured), Head of Ultra-High Net Worth Resources for Morgan Stanley.

When family decision-makers were asked, ‘to what degree does decision-making about family wealth impact their relationship with other family members’, 44 per cent said it had a positive impact and 30 per cent said it had little or no impact. Only 3 per cent said it had a strong negative impact and 16 per cent said it had some negative impact.

“The study shows that involvement in decision-making helps build better family relationships,” says Dominic Samuelson, Chief Executive Officer, Campden Wealth. “But importantly our analysis identifies a vital element underlying this harmony in decision-making: having proper governance and decision-making structures in place to minimise conflict.”

This is clearly evidenced when looking at the perceived outcomes of investment decision-making, where there are more governance structures, and non-investment decision-making, where there are less. The survey shows that investment decisions are clearer, more efficient, more effective, more responsive and better understood among all relevant family members.

“Families should therefore be paying real attention to improving their governance and decision-making structure as this is the key success factor in the equation,” says Bokman.

Some of the individuals interviewed recognised this point. “Due to the small size of the family (principal, principal’s wife and his small children) we don’t have any family governance issues, but I am already thinking ahead to develop a next gen education program and governance framework for the future,” says the CEO of a large West Coast single family office.

The report maps what structures are currently in place, what is planned, and where the gaps might be. In the case of mission statements, for example, the majority of families polled either have a plan in place (51 per cent) or they are developing one now (7 per cent) or planning to in the future (7 per cent). However, 34 per cent have no mission statement and have no plans to address this. A family mission statement is a document put together to help families articulate their goals and values, and assist members in achieving alignment.

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