For the world’s wealthy, and those wrestling with big inter-generational changes in regions such as Asia, it’s never been more important to have a clear sense of purpose for oneself and family members, rather than treat privilege as a given, a new report says.

For the world’s wealthy, and those wrestling with big inter-generational changes in regions such as Asia, it’s never been more important to have a clear sense of purpose for oneself and family members, rather than treat privilege as a given, a new report says.

Withers, the law firm, in conjunction with Scorpio Partnership, the consultancy, have produced a report, The Meaning of Wealth In The 21st Century. It examines the varied dynamics of wealth creation and transmission in Asia, North America and Europe. The report was based on 16 in-depth interviews conducted in 2013 and this year, as well as a Scorpio body of research based on 4,500 individuals’ inputs, Withers said. (That group of 4,500 persons each had at least $10 million of personal wealth or more.)

“Rather than counting their money, the most successful are making their money count by taking practical and incremental steps to be economically and socially active,” the firm said in its report.

The report adds to other surveys by the likes of Boston Consulting Group, KPMG and RBC Capgemini, highlighting rising wealth around the world in general and a continued upswing in the size of the high net worth and ultra-HNW population in Asia. But such figures can mask the specific challenges in handling inter-wealth transfer and preservation, which is where the Withers report comes in.

But while it is often a common feature of such surveys to point to regional differences, sometimes driven by culture and history, there is a great deal that wealthy families have in common, the report said.

“Perhaps what is most striking across all the research is the extent to which wealth creators and wealth holders think deeply about the implications of their wealth ownership. They recognise that opportunities of great wealth are matched equally by challenges. As a consequence, they are not only listening and learning from peers so that they can avoid the pitfalls, they are applying best practice and enabling each generation to take their own steps forward, not out of a sense of privilege, but with a sense of real purpose,” it said.

Katie Graves, a partner at Withers, said: “For wealthy families across the world, we found that simply having large amounts of money to invest is not enough to provide purpose and cohesion to the broader family group. Having come to realise this, wealthy families are responding by re-immersing themselves in active business operations or putting their wealth into effect to yield positive changes in their communities.”

Different cycles

However, wealthy families from different continents are at different points in the wealth cycle. North American and European families have long experienced transitioning wealth from operational business to financial family structures while many Asian families are just beginning to shift from owning operational businesses to becoming financial families on a greater scale.

“In 21st century Asia, globalisation and longer life expectancy mean that traditions are being challenged. As people from second generations have been waiting in the wings through the decades, the third generation is learning the best of business practice at the world’s top universities. When the moment comes to decide the future of the family business, there are three generations with three distinctly different points of view. The younger generation typically champions a more western and modern style approach to business practice. Through this, Asia is likely to see a shift in the life cycle of wealth; with more families shifting from owning businesses to becoming financial families,” she added.

The report said that the “most striking thing” about talking to family members in Asia on the subject of their wealth is the vast range of insights and perspectives.

“For every wealth creator who is passionate that the brightest future for his children is in the family business, there is another who is equally persuasive about the benefits of letting children follow their own course. And for every family business that has passed successfully from father to son to grandson, there is another that has been battered by the storms of political, economic and family instability,” it said.

Americas

The recession and need for business to grow has perhaps forced families to return to the roots of what wealth is for and how actions affect the wider economy and society, the report said.

“Whatever the motivating factors, a growing number of the world’s wealthy families are moving beyond coupon-clipping and are re-assessing the potential of their private capital to have a positive impact on the social and economic challenges they see around them,” it said.

“This transition to a third stage of family wealth is most evident in the US, but also in pockets around Europe and Asia. It is characterised by the desire of individuals and families to have a clear purpose for their wealth: a sense that wealth only really matters because of what you can do with it,” the report said.

The report set out lessons such as that transitions between selling a business and passing on wealth are complex; that families should not rush into decisions; that they should have clear principles and set examples; that families should realise their limitations, and that they should give the next generation “just enough” to avoid the age-old worry of spoiling young people with too much money, too soon.

(Editor's note: The insights here are interesting, if not all that surprising. In Asia, the transition of the region from a place where all the wealth was first-generation to a more varied picture, and where so much business is family-controlled, is throwing up a list of challenges. It may be a bit of cliche to say that Europe is more mature, as is the North America market. There is, let's not forget, a huge amount of entrepreneurial energy that remains in the US and there has been a gush of "first-generation" money made in parts of the US, for example, due to the shale gas revolution (aka "fracking"). Getting succession right and binding family members into a sense of mission, without trying to over-manage what people do, are pretty widely accepted now among advisors as key markers for protecting a dynasty over the long run.)