5 Challenges Inheritors Face (and how to overcome them)
When working class entrepreneurs become wealthy, they bring a perspective about wealth much different from those who inherit it. Wealthy inheritors face unique challenges that require distinct approaches to wealth management.
This post describes 5 challenges wealthy inheritors face and how to overcome them:
- Financial Awareness
- Lifestyle Management
- Stewardship
- Self Esteem
- Trust in Relationships
Financial Awareness
Working class families need to budget, save, and most of all keep earning a paycheque to support themselves. In contrast, most wealthy inheritors can avoid these tasks. This results in a common challenge for wealthy inheritors: a lack of financial skills & experience.
Not knowing about wealth management is a way to deny it or avoid taking responsibility for it. The solution is to participate in your wealth management process and teach your heirs to do the same. Being financially aware is about knowing exactly how much wealth you have, how its invested, and how it is spent and shared. Although it can be scary at first, becoming financially aware by taking responsibility for your wealth will reduce guilt and burden in the long-run.
Lifestyle Management
Putting your wealth into perspective and choosing a sustainable lifestyle is vitally important for inheritors. Using your wealth to support the attainment of goals, instead of just for fun makes a big difference.
When wealth is used to purchase for consumption it becomes exhausted and the good feelings eventually evaporate. When wealth is invested productively towards the pursuit of important goals, it becomes a renewable resource that continues growing over time.
The answer is to look beyond material pleasures and work towards higher level goals. Live a simple life and take pleasure in your accomplishments.
Stewardship
Inheritors often feel guilty and burdened by their wealth. Stewarding inherited wealth is a big responsibility, filled with emotional baggage.
Successful inheritors know it is not enough to consider their own personal satisfaction in isolation. Having wealth gives us the opportunity to influence and help others. Successfully stewarding wealth means taking responsibility for it. It also means being engaged in your wealth management process. Get to know your professional advisors and cultivate long-term relationships with them. Accept the fact that your material consumption is not as important as living a purposeful life including attainment of goals and helping others.
Self-Esteem
Am I successful? Or is my success simply the result of my inheritance? How much of my personal value, self respect, and personal identity is based on my wealth? Does the fear of losing my wealth lead me to feel perpetually uncomfortable?
Unless you learned how to love yourself and feel confident about yourself regardless of your wealth, like many inheritors, you may feel continually financially vulnerable. One way to overcome this is to develop caring relationships with others facing the same challenges. Share your feelings with those you can trust and listen to their perspectives too. Cultivate long-term relationships with professional advisors you can trust and who you believe truly care about you. You are not alone, others are in a similar situation, so build a team around you.
Like most inheritors, you’ll probably discover you’re good at some management tasks and lousy at others. Its prudent to delegate many tasks associated with managing your wealth to others. Just make sure you’re taking responsibility for key decisions and holding your service providers accountable.
Trust in Relationships
Does he/she really love me? Or, are they with me just because of my money? Can I trust this investment advisor or are they simply trying to sell me something?
The presence of wealth can make it hard to trust others, even as it attracts them. Wealthy inheritors must learn to how to select and trust other people in their interactions or else always feel that money undermines their relationships.
How can your Family Office help?
Your family office can help you overcome the challenges of inheriting wealth by allowing you to express your feelings. Your family office can also proactively educate you on the financial skills that will help you take more responsibility for your wealth and make better financial decisions. Your family office should provide you with advice, illustrate your choices, and provide you with emotional support. Your wealth management process is a lifelong journey. A good family office will provide you with the infrastructure to ensure your wealth is managed in a professional and consistent way. In a way that makes you feel confident. Your family office can relieve the pressure you may feel.
Hosting regularly scheduled family meetings is good practice to prepare the next generation for the responsibility of wealth. Inheritors can observe the way their family members deal with professional advisors and make decisions. They can also participate in decision making and share their opinions. Our family office has experience hosting family meetings. We can create a safe space where all family members can express themselves.