Surveying Success: New Research on How Wealthy Families Chart Their Futures

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Stacie Jacobsen: Thanks for joining us today on The Pulse by Bernstein, where we bring you insights on the economy, global markets, and all the complexities of wealth management. I’m your host, Stacie Jacobsen. As you may hear, I have a bit of a raspy voice today. I’m getting over, you know, the first of the fall season illnesses.

Feeling much better, but just wanted to make everyone aware of that, that it is just the raspiness here. What we’re talking about today is a piece that Bernstein just released called Wealth Beyond Measure. You know, so often we get questions from families like what are other families like ours doing with their wealth?

And we wanted to be able to answer this question more than just anecdotal stories. So, Bernstein went out and interviewed families from around the world, exploring top of mind issues that they wrestled with the most. And what we heard may challenge your assumptions, right? These families shared their extraordinary ways that they’re using their wealth to make a lasting impact and really how they’ve navigated challenges and conflicts along the way.

So, joining us today to discuss the research is Anne Bucciarelli, Senior National Director of Family Engagement Strategies here at Bernstein. Anne, thanks so much for joining us today and welcome to The Pulse.

Anne Bucciarelli: Thanks, Stacie. Good to be here.

Stacie Jacobsen: So, Anne, you recently completed an in depth study to really uncover what matters most and even least to families of significant financial means. What was it that inspired this project?

Anne Bucciarelli: We get a lot of questions from our clients and they’re eager to learn from each other. And when we were looking at what was out in the marketplace, we were seeing that there’s not a whole lot of insights and research out there where people can learn from each other and across a variety of different areas like family governance and trust and estate planning and even investments.

So, it was really, I think, an opportunity for us to engage some clients that were facing various issues in these areas and really be able to create something where our clients can learn from one another.

Stacie Jacobsen: All right. So, before we jump into the findings, tell me a little bit about the families. What are the demographics that you were looking for?

Anne Bucciarelli: Yeah, so we interviewed 40 families spanning in net worth from 100 million to over 4 billion. So really, uh, an array of wealth that they were managing. But also, we had global families that were dealing with multi-jurisdictional tax issues. We had business owners, we had families that had a family office in place.

We were talking to rising gen members of families. We were talking to, you know, the senior generation. So, it really covered the gamut.

Stacie Jacobsen: Yeah, it sounds like a pretty wide range there. If you think through all of the interviews and how the families responded, is there a common thread that you could almost place among all of the different families?

Anne Bucciarelli: Yeah, you know, I think there were a few themes that emerged and we heard several times. One of them being around this notion of You know, complexity shows up in different ways for different families. Conflict can often pop up sometimes when you least expect it. And how do you deal with that? We also dealt with a lot of concerns around the rising generation and how to best prepare them and communicate wealth with them.

I think one of the things that sort of almost universally we found in the research was just this feeling of isolation that wealth can create and just a real desire and hunger to learn from other families that may be navigating similar issues.

Stacie Jacobsen: That piece on isolation is something that I find when I’m working with a handful of these families as well, so let’s take a deeper dive in there. Why do you think that wealth can be so isolating?

Anne Bucciarelli: I think that there’s a few different reasons. Our research found that almost 75 percent of the families that we talked to felt isolated. They didn’t feel like they had anyone, even friends and advisors to talk to about some of their wealth concerns.

So, I think for some families, whether you’re a multi-generational family or someone that just sold a business and have, you know, created wealth that you hope will become multigenerational. I think there can be a feeling of a lack of comfort, a feeling of anxiety around who can I even talk to about these issues.

It can be how you were raised. You might have been raised in a house of we don’t talk about wealth. That’s not what we do, but then I also think we talked to a lot of wealth creators that say, you know what? My peer group has changed now that I’ve sold my business. And so, I don’t think it’s appropriate for me to ask some of these things that are on my mind to my friends and my current network, but also they’re not facing the same issues either, and so I’m not sure even if I felt comfortable that I was.

Stacie Jacobsen: Yeah, I often hear that there’s really no empathy for the wealthy in the sense that, you know, when issues do arise, or there’s some sort of conflict complaints or complexities, and almost feels like, well, should just solve that instead of being able to openly discuss some issues that they’re facing you listed off a handful of things in your findings.

I think that complexity was certainly one of the top findings. How do you think about complexity and what are the families doing to help navigate the wealth transfer down multiple generations or ultimately just reach their goals?

Anne Bucciarelli: I mean, I think the first thing to recognize is that complexity can come in a lot of different shades.

I think it’s easy to immediately jump and say, well, if your balance sheet is larger, then you must have more complexity. You know, one example that comes to mind is a family that we were working with that had a net worth in excess of a billion dollars. They had been a pretty small family unit, and as they were seeing their family tree start to grow, they realize that the healthy relationships and the sort of conflict-free way that they were making decisions was probably unlikely to continue in the future with the expanding family tree.

And similarly, we see a lot of families that are on the other end of the spectrum, the 100 million families that have a lot of complexity already in the picture. So, whether it’s, again, you’re a global family dealing with multiple tax jurisdictions, you have a very complicated estate plan with a lot of entities, perhaps the family dynamics that are present in your family, create some wrinkles.

There might be a lot of single stock or complexity in the asset location and type. So, I think it can come in a lot of different shades.

Stacie Jacobsen: So that first family that you mentioned that, you know, we’re still just starting to expand. There would be new spouses, new family members, grandchildren, and they recognize the need for structure. What were some of the first steps that they were going to take?

Anne Bucciarelli: I think the first step was just acknowledging that the likelihood is sort of closeness, not just in terms of how they were all raised together, et cetera, would continue, that, that was sort of the first Ahas that is the ask for help where we really started with them was doing a deeper dive into their values and core principles and also the goals.

So, what is it that you hope to get out of this governance structure? What is it that you hope to get out of revisiting your estate plan and linking it to your governance structure. And what came out of that was a clear articulation that we want to keep our family together. We don’t want geographic distance or the fact that we have kids that aren’t working together, you know, in the same business and having that type of relationship somehow get in the way or worse, you know, sort of create conflict.

And so I think like with many families, Stacie’s, I know, you know, we kind of took a step back and really asked them a lot of questions to just get a little bit more meat on the bone and what exactly they had in the way of concern and the way of hope to achieve out of this work that we were going to do.

And then also learning a lot about the family members and starting with values and just really understanding. Their views on wealth was incredibly helpful and it really set the foundation for the rest of the work that we did.

Stacie Jacobsen: It sounds like this family had a main goal of staying together, having family cohesiveness, but you had mentioned conflict and it sounds like the structures and the discussion around values is certainly the first right step in at least mitigating conflict, if that’s possible.

As the families begin to grow, I mean, that’s not always the case, right? Some families that might even be best for them to separate from the wealth so that they can, can maintain family cohesion. So, what are some of the ways that you recommend for families that are in conflict or feel that they might be on the road to conflict? What can they be doing?

Anne Bucciarelli: I think, again, similarly, the first thing is you can ask for help and get insights from other people that have navigated from, you know, third parties that aren’t in the mix every single day, that, that bring a fresh perspective and frankly, bring experience in the conflict resolution space.

But I think you mentioned, you know, sometimes breaking up is, is the way to do, and I don’t mean breaking up the family. I mean, you know, perhaps there is a trust that is commingled that has multiple beneficiaries. And the right solution is at a certain point, maybe that trust is subdivided so that the individual beneficiaries have their own trust.

Maybe it’s that there’s multiple lines. You know, we interviewed one family where there were multiple business ventures. In past generations. And they made a point at one point to really split two very distinct businesses apart with the cousins taking one of the businesses and they retained the real estate business.

And they said, you know, looking back, had we not made that split, I don’t think our businesses, each of them and collectively would be as successful as they are. And we know that our relationship between family, you know, would not be where it is today. And so, I think that that’s a great example of sometimes taking a step back and saying, you know, do we need to be all in this together?

Do we need to all agree on where we’re giving out of the family foundation, or is there a way that we can come together on some charitable giving and then do our own thing in our own family branch? And so that’s one example.

And then the other thing that we see and that these families remarked on is it’s hard to address conflict, and I think it’s a lot easier for families to just sort of cross their fingers and hope for the best or say, you know, I’m just going to let that one slide. I think we’ve probably all seen where at some point that that starts to boil over and so really trying to get out in front of conflict when cooler minds prevail and really think through what are some of the things unique to our family that thinking through how we’re going to address that today probably sets us up for success and a lower likelihood of conflict in the future.

Stacie Jacobsen: I think I saw in your findings something like two thirds of the families didn’t address conflict resolution in any of their governance structures, which I did find relatively high. I would say that if any of the numbers were surprising, that was certainly one of them.

Anne Bucciarelli: Yeah, absolutely. I would say the lion’s share and even the ones that did have a strategy said it’s difficult. It’s not necessarily a fun process to go through, but it can be a really rewarding process. What we found too, and we were just speaking to some of the families is that there can be a perception of a source of conflict that actually doesn’t exist because we’re all colored by our own perception of what my sister thinks about this particular situation.

And sometimes you might be right. And sometimes your sister might actually have no problem with that whatsoever. I actually applaud it. And so, you’re sort of creating tension and conflict out of something that may not even be there. So, and what were some of the other top concerns of the families that you interviewed?

For families that had a family business, really thinking through what that succession strategy looked like. One of the things that came up quite a bit, and it’s interesting because it was actually cited as the top concern, umm, but also the thing that families were most excited about in a positive way was the rising generation and what they were going to do.

If the first question we get asked is what are other people like me doing? The second most popular question we get asked is, and how can I ensure that I set my child on the right path, that they don’t get, you know, demotivated or that finding out about the wealth or a trust doesn’t color or shade, but the way that they view the world in a negative way.

And so that that was something that was voiced by many of the families we spoke with.

Stacie Jacobsen: What our family is doing to prepare the rising generation and Keep them motivated.

Anne Bucciarelli: A big way is through education in multiple forms. So it’s financial literacy, philanthropic, if that’s a part, many families were philanthropic, both in what we see in our practice and also in the research, really providing that underpinning so that the rising generation had the skills and the knowledge to be able to navigate some of the things that they were going to come up against in their lives and in the family office or the family business.

The other component though of education that’s often overlooked is what are some really important parts of our family history, our values, our family business that the rising generation may not know or may not appreciate or may not have the perspective that the senior generations do. And so really being able to weave in some of that knowledge and learning, I think it can be overlooked, but I would argue it’s some of the most valuable lessons that they will hear.

And again, it gives you another potential insight into some of the things that are coming your way that as a family, you can then collectively plan for, and I think that’s what really then starts to build up to this notion of family governance. And I think sometimes that can sound like a scary word, but it really just means, how are we going to make decisions together in the future?

What is the process that we’re going to take and by starting with some of these questions and by including the rising generation in those conversations, you’re going to get those insights, but also you’re going to be able to frame that family governance system to best meet the needs, both positive and negative of the family going forward.

Stacie Jacobsen: I have a question about the makeup of the wealth dynamics and the families that you interviewed. Where, you know, most of them include a family business. Were they liquid? How did they hold their wealth?

Anne Bucciarelli: There was a mix of liquid and a liquid, about sixty percent of the families that we interviewed had a family business.

Uh, some were, you know, the bulk of the wealth was really tied up in the business, so more liquid. There were some business owners that had amassed, you know, quite a substantial liquid portfolio. In fact, one global family that we were talking to remarked and said, we started out with a retail business and most of our wealth was in the retail business, fifteen, twenty years ago.

We had a real estate portion, but it was quite small. The liquid investment portfolio was, was almost negligible. And now I don’t think that our family members, we realize it because we’re involved in the business and we’re looking at the balance sheet every day. But the bulk of our family, I don’t think realizes how big the investment portfolio has grown.

That’s actually the largest part of our family’s wealth now. And that’s just not known by most of the family members, they decided that they really needed to go through and refresh their family governance documents and decisions and really overhaul it because the family had evolved and even the asset base had evolved.

Stacie Jacobsen: And when you think about families, whether their wealth is comprised of a family business or a liquid wealth. And, and I think your story of recognizing that that can shift over time is really insightful. What role do family offices play for these particular families?

Anne Bucciarelli: I think at its core, a family office is there to help organize the family and address some needs that the family has.

But I think what is a misconception is what does a family office actually look like and what is considered a family office? So, when we conducted our research, about seventy percent of the families that we spoke to had a family office in place. I think you hear the word family office and you think brick and mortar, fully staffed, and actually about forty percent use what we would think of as kind of a traditional staffed family office, but about a quarter of the families.

We’re using their operating business. And even within that lens of a quote unquote, traditional family office, I think the models of what that looks like has evolved over time too. And so, for some of the families we spoke to, it was brick and mortar, it was staffed for others. They were really exploring more of an outsourced model where they said, you know, we can achieve most of what we need through outsourcing where appropriate.

So, I think really kind of taking a step back and assessing why do we need a family office and what is going to be the best way to organize as a family that really, I think sets the right tone to then structure the family office and the family organization in a way that’s going to make the most sense and be the most productive.

Stacie Jacobsen: So, and when you talk about the family office, I wonder how often they’re involved in the philanthropic efforts of the family and if not, what are some of these families doing from the philanthropy side of it?

Anne Bucciarelli: I think many of the family offices that we spoke with were deeply involved in the philanthropic efforts from organizing the giving, helping assess impact and getting the data and the reports and the due diligence and even forming junior boards so that the rising generation can start to get acclimated and involved in the family philanthropy.

Philanthropy was a significant portion and deeply embedded in about half of the families that we spoke to, say that that is a very significant part of the fabric of their family. It looked and felt different based off of the family and what they were really focused on. One of the things there that is really striking, and we certainly see this in the conversations that we have with families outside of the research is that philanthropy can be a really great way to start to involve the rising generation and what might feel like a safer way, um, for parents, for grandparents.

They may not feel comfortable talking about trusts that have been established for their benefit or feel that the kids are ready to hear about certain aspects of the family business. But there may be educational moments and ways to talk about what we care about as a family and some of our core principles and values by starting to get the rising generation, even at a young age, involved in the family philanthropy.

Stacie Jacobsen: I’ve also heard families having the rising generation put together almost many business plans for philanthropy where they have to discuss the reason why they chose a certain entity to receive wealth, how much they’re going to give, and if this is going to be a one-time gift or if it’s going to be regular.

So, I agree with you in that in my work, I’ve also seen that philanthropy can be a fantastic educational tool.

Anne Bucciarelli: We had one family that I think is a great example. They had two daughters that were in late high school, early college. They were really starting to think about how do we start talking about our family wealth with our girls?

It’s not necessarily a place that we feel super comfortable. And so, they were looking to Bernstein to get some advice and some help in that matter. And they were deeply philanthropic, and the girls knew about, uh, the family, you know, charitable endeavors, but historically had not been That involved, and so where we really started was we started with a values exercise with the parents and with the daughters, so they could really understand the values.

We also then took them through an exercise to start to link those values to the causes that they were really passionate about. And even the parts of the world, are you giving locally is the cause that you’re thinking of more global in nature? What does that look like?

And that then, Stacie, kind of bled into when we collect all of these insights, what is the giving picture look like for this family? How are the girls recommending grants? This particular family decided that they were going to create a grant request form and that they were going to meet on a quarterly basis. So, we actually scoped out, it’s going to be a quarterly meeting and you’re going to come with your grant recommendation form filled out.

It’s going to have the due diligence that you went through. It’s going to have the name of your contact at the organization. It’s going to have the dollar amount. It’s also going to include how you’re going to track and measure the impact that that gift has. And then we’re going to talk about it as a family.

And then in the next meeting, we’re going to come back and see if there’s any updates on the impact that that gift had. And that really set the stage for an annual review of their giving. And so, I think, you know, by putting in some of these steps, by really clearly articulating what the mission and vision is, what your strategic giving policy is, and putting some parameters, you know, parents, grandparents have something that they can really look at and measure the success.

A few families noted it can be really easy for philanthropy to become sort of a set it and forget it. And in fact, one of the questions we asked around philanthropy was how do you measure impact? And I think I wrote this in the research families either took a deep breath or kind of chuckled because they said it’s really hard.

Either we don’t do it at all or it’s imperfect. And so, I think the more that you can be intentional and have the awareness the better positioned you are to try to have a better measure of what the impact is that your philanthropy is having.

Stacie Jacobsen: All right. And well, I want to personally thank you for doing this in-depth research project, because I know it answers so many questions that we hear on a regular basis.

And today we’ve touched on a lot of the top ones, the complexity, the conflict, the isolation, rising generation values, and so many more. Do you have a parting thought that you’d like to leave our listeners with?

Anne Bucciarelli: I think if there’s an overarching theme, certainly in the research and in the work that we do day-to-day with families, is that wealth is all encompassing.

It’s holistic in nature. It’s not just financial, even though that’s the lens that many of us, not just those in the financial field, but I just think humans in general, it has become the word wealth has become associated with financial wellness and really the origins of wealth come down to wellbeing.

And that includes. It’s the strength of our relationships and our family, our philanthropy, and the things that are most important to us of which wealth is one thing and it’s an important tool, but it’s certainly not everything. And I think that that really comes through in the research and practically in the work that we do with families.

They’re really looking for guidance, um, across multiple dimensions of wealth. All right. And thank you so much for joining us today. I really appreciate your insights.

Anne Bucciarelli: Absolutely. Thanks so much for having me, Stacie.

Stacie Jacobsen: And for anyone who’d like to take a deeper dive into the issues we discussed, I do recommend reading the Wealth Beyond Measure white paper.

There’s actually three different versions of it. There’s an executive summary, a condensed version, and the full scope of all of the in-depth conversations and interviews that we took. We’ll link all of it in the show notes as always. Thanks for listening. And we’ll be back in two weeks with another episode.

I’m your host, Stacie Jacobsen, wishing you a great rest of the week.