This is how it starts.
Bob and Mary Campbell are sitting in their lawyer’s office doing estate planning. Bob, through hard work, real skill, and some luck has accumulated a substantial fortune. He has lived a rich and full life and built a company that he sold for an astronomic sum. He now invests in other emerging companies and real estate. A de-facto family office helps manage his diverse interests. Bob and Mary are now trying to make decisions about how to leave this fortune to their children. Bob wants to be responsible about his decisions. He wants to avoid taxes. He doesn’t want to create “trust fund babies”. Mary has her own concerns – she wants the children to be happy and to get along. She doesn’t want the wealth to “ruin” her children or grandchildren. They both want to do good in the world, and they want their family to learn to give money away responsibly.
The Plan
The lawyer proposes a plan that will avoid taxes at the survivor’s death and even create generation skipping trusts for the grandchildren. He suggests that Bob and Mary create a foundation to express their philanthropic intent and to help their children not only learn about money but develop compassion. He recommends strategies that will leverage gifting opportunities for the children by creating a qualified personal residence trust for a valuable second home and placing low value but likely appreciating assets into an LLC that will then be gifted to the children in cascading grantor retained annuity trusts. He has other ideas, strategems and tactics that will be put in place over time. By using these strategies, the estate tax burden is radically reduced. Vast sums will flow to the children, grandchildren, and even great-grandchildren.
Bob and Mary have had real concerns about entitlement, and so the trusts that they are creating have progressive distributions, but a good bit of the money will be locked away in trusts that will distribute funds based on a rational plan. These trusts will be administered by professionals with family oversight. There is a family bank that will fund the growth and development of the children and foster their maturity. Their lawyer is even progressive enough to suggest that their children learn about the wealth over time and that their financial advisor works with the family over time to educate the children and grandchildren to manage the wealth wisely. By almost every measure under current standards, this is purposeful and enlightened legal advice.
Bob and Mary are smart, and they understand the explanations in the lawyer’s office. When they leave, they realize that they could not explain what they just authorized to save their souls, but they trust their highly recommended and personable lawyer who seems to understand this complex world of wealth succession. Over the next few months and years, they meet with the lawyer several times and ask a lot of questions as they begin to implement the planning. They come to better understand the broad outline of the plan. The final pieces are put in place, all the documents are completed and signed. The lawyer writes a cogent letter explaining the entire plan in plain English – it even has diagrams. Whenever Bob and Mary become confused, they turn to the letter to refresh their understanding of the strategy.
The Plan Implemented
Fast forward forty years. The Campbell’s are now a “clan”. Bob and Marry had five children, four of whom are married and one divorced, there are 15 grandchildren and a growing number of great-grandchildren. The plans designed so long ago in the lawyer’s office have worked as designed. There is a complex network of trusts and entities that hold assets. The assets within these entities are professionally managed by lawyers, investment advisors, trustees, and accountants. There is a family office that coordinates, manages, and oversees this complexity. The family has family meetings to discuss and learn about the wealth. There have been some royal battles within the family over control of the wealth, but the family has survived with only one branch estranged from the others. There has been some entitlement and dependence, but the wealth has been prudently managed and preserved. This, by most measures, is a success story.
Or is it?
The Family Experience
It helps to peel back the layers of success. What I just told you is a part of the “mythos” of the Campbell family. The high points of the story are that Bob and Marry, who came from little, by hard work, acumen and a bit of luck built a company from scratch and created a fortune. Mary was a kind but disciplined matriarch. Bob was a firm but caring patriarch. Both were generous, and community minded, and they created a legacy for the well-being of their family and the good of their community.
This story leaves out details (and the details are always important), but in broad strokes it is the overarching story that the family tells itself, and it is the story that its advisors know well. It is also the rags to riches story for public consumption. What is interesting about this mythic narrative is that it is simultaneously believed and disbelieved by the family itself – they are acutely aware of the ironic nature of the story. Those advisors at the periphery don’t get to peek behind the curtain to see the stories behind the stories. I am not talking about secrets or dysfunction – but rather the realities of living within any wealthy family. Those trusted advisors who are closest to the family know and understand more of the private complexities involved.
As for the mythic origin story, official biographies of founders and videography or written histories of the stories of family members are created. These artifacts are often not quite hagiographies, but they are almost always sanitized and simplified. They make a point – and often a deeply moral point – about the nature and identity of the family. This origin myth, while self-consciously acknowledged as such – holds great power within the family as an organizing force. The families may knowingly wink to each other about these stories, but they hold profound sway in the hearts and minds of family members. These mythic stories become a reference point – an idealized point of view for both insiders and outsiders that plants a stake in the ground for understanding the family.
Parallel Narratives
Within the family, however, are a host of other narratives beyond the reductive “Myth of the Origin of Wealth”. These are stories of internal contradictions, struggles, triumphs, and development. One of the stories is about how the trusts and the advisory systems around that wealth have evolved and operate in the present. Family members have, as part of the family, a cohort of advisors who are neither quite in the family nor separate from it. As the family disperses psychologically and physically, these advisors increasingly shape the definition of the family itself. Even in close families, the family is continuously engaged in the ongoing saga of “advisory relationships”. These advisors are intimately involved in the life of the family. Indeed, it is this orientation – towards the structure of wealth and the advisors who support that structure – that holds the greatest sway in the sense the family has of itself.
The family defines itself and is defined by the structures that are created (and to a lesser extent the advisors who serve these structures on behalf of the family and mediate their impact). This is an extraordinarily private set of stories – never willingly shared with outsiders by the family or the inner circle of professionals who serve them. Even within the family, the mysterious workings of the structures of wealth may only be known by family leaders who have taken the time and interest to focus on understanding this complicated matrix. The scaffolding of this narrative was created by Bob and Mary in the lawyer’s conference room – it started in mystery, wrapped in impenetrable legal language and the doctrines of law and legislation. It was built out and realized during their lifetimes and in the lifetime of the second generation. The third generation is only now being inducted, selectively and carefully, into the mystery of this “legal narrative” through rites and rituals of “preparation”. The mystique and mystery of wealth are often a core concern for family leaders charged with the stewardship of this wealth and with good reason. There is a recognition that knowledge of these mysteries is easily converted into the currency of power and that power has the potential to be remarkably destructive.
There is also a family dynamics or “therapeutic” narrative – a story of the relationships within the family and the dynamics that drive that narrative. The behavior of members of the clan is exhaustively dissected and interpreted. People’s motives are imputed. Sometimes fights break out. Sometimes people withdraw. Sometimes leaders intervene to fix the situation. Many times maturity prevails. The spectral presence of forebearers is reflected in the naming of children (the number of common names within dynastic families keeps alive the connection within each generation and between the generations – it is almost certain that there will be a Robert and a Mary within the descendant lines and often the names of the second generation show up in the third in one form or another). That ghostly ancestral presence will shape the personal and collective experience of family members – often more than they are consciously aware of until they reach middle age. To the extent that darkness exists, this is often where those secrets reside: stories of addiction, mental illness, and abuse. Some are “open secrets” within the family circle, and some are held very close to the vest. These ties of blood, marriage, descent and familial relations create a complex skein of psychological and collective experience. The meaning attributed to this experience becomes a powerful set of narratives told within the family. Sometimes these issues become the subject of counseling and true therapy. They are often the domain of facilitation and even dispute resolution. These narratives may be known to close advisors or trusted confidants of family members. Here the family attempts to make sense of itself and create the shaping narratives that will serve as inspirational and cautionary tales for the next generation. Occasionally, through public exposure, some scandalous stories may leak out to the mass culture. Most often the dramas large and small continue behind closed curtains driven by anxieties and the full range of virtue and vice that we as human beings in relationships live within. Even here, however, the wealth – and the relationship of the family to that wealth – is a brute fact. It leaves little untouched.
While many outsiders consider this a narrative of family dynamics, that is a gross oversimplification. What people do not realize is that these are not dynamics defined by middle-class concerns about family – the sustaining of marriages and the raising of children (which are obviously shared by wealthy families), but dynamics of the relationship to the structures of wealth. It is wealth that gives rise to the family dramas and defines these relationships. This is family dynamics in the shadow of wealth. Without the wealth, these dynamics wouldn’t arise in the first place. Families themselves get this – they often tell me that they are not “dysfunctional” and they are right. They are wrestling with issues of natural and healthy human complexity, not dysfunction. This is also not, typically, about control or power over wealth, it is about its administration and the complexities of decision making and risk management when that is embedded in interpersonal and familial dynamics. This is why “therapy” is rarely effective in these situations. The problems are not usually pathological or diseased in the clinical sense. While the narrative may be “therapeutic” and couched in therapeutic terms of popular culture, the narrative is really about the inner workings of collectivity in complex social environments.
As a subpart of the family dynamics or therapeutic narrative is a special narrative of familial power and control. Families develop narratives about what might anachronistically be called “character” – it all started with Bob and Mary’s concern about entitlement and not spoiling the children or grandchildren. These notions of character – in this case, what it means to be a Campbell – have a deep impact on family dynamics. These narratives are particularly complex when it comes to women, in-laws, “black sheep” and youthful rebels. These family members often take on the status of second class citizens within wealthy families. The stories they generate and are imposed on them radically test the dominant narratives of the family. The family must create narratives that take these into account and ultimately reconcile the inherent uncomfortable contradictions raised by these upstarts and renegades. Within that testing however lies a more dominant narrative of power and how power is used, historically by the male lineage but increasingly by bloodline lineage as feminism has taken root in the broader culture. This control over the corpus of wealth plays a preeminent role in the unfolding of family culture in the context of the internal challengers to that legacy.
In addition to these narratives that are largely private to the family, there is also a public narrative. When families become prominent, they gain gravitas within their community. The family sits on boards, donates to charities and runs businesses within the community. These activities garner attention, and the larger community creates a narrative about the family. That narrative is always a caricature of the family – grossly simplistic and laced with only the most memorable of glosses and features. It is often patched together from bits and pieces of information and misinformation, and injected with voyeuristic curiosity about the “rich and famous”. However, this narrative is wholly known to the family, and it must incorporate this public narrative into its ongoing existence. It must reconcile this public narrative with the more private, legal and therapeutic narratives in play as well as the overarching origin “mythos” of the family.
The complex interplay of these various narratives – and others unmentioned – means that the family is dominated by the fact of its wealth.
Unlike most middle-class families, the wealthy family is organized and defined by the structures that Bob and Mary put in place so long ago in the lawyers office. This is the naked truth of wealth in families. The administration of wealth becomes the dominant reality of the family – indeed, the sense of “family” is largely appended to the structures and the administration of wealth. This has arisen out of the two foundational realities in play: first, the creation of trusts and legal structures that have mystified the wealth, leaving descendants suspicious, dependent and subservient to mechanisms they neither fully understand nor control and, second, the attempt to make sense of these realities to retain both psychological and cultural coherence of their existence in the shadow of this dominant reality. In short, families of wealth live out their lives in the shadow of the complicated machinery of wealth and the human reactions to that machinery.
The Primal Contradiction
There is a great deal more to be said about all of this, and we will get to that eventually, but the key dynamic is embedded in the primal contradiction that exists at the heart of almost all dynastic families:
A strong individual leaves an organizational legacy that has radically and utterly failed to come to terms with the hard phenomena of collectivity.
What arises out of this inherent contradiction is the authoritative appropriation of family identity by the structures of wealth and the advisors who serve as caretakers of that wealth, the public that interacts with the family in various ways, and the internal dynamics that form the private experience of families – all occurring within the larger umbrella of the “mythos” of the family. The family rides these narrative waves as largely passive participants in their individual and collective lives.
The central failure of coming to terms with collectivity at the outset has ultimate consequence. The reason the story set forth above may not be a success story from the point of view of the family and especially individual family members is that their collective and individual lives are effectively controlled by the wealth. The structures that were created and the advisors who serve those structures – even when acting as true fiduciaries – are more powerful than the collective family. This failure to account for collectivity started in the lawyer’s office. It evolved as the plan was put in place over time. It emerged full-blown as the advisors implemented those plans in the second generation. It is now a living breathing complex in the third generation and, by the design of the structures themselves, it is likely to come apart in the fourth as trusts expire and the “dynasty” falls apart.
Here is the key point: either the wealth will control the family or the family will control its wealth.
The Choice
The only possibility of realizing the second option is for the family to come to grips with collectivity – the ignored aspect of the primal contradiction. If the family will control its wealth, the family must mindfully construct its culture and then intentionally build that culture into an effective counterbalance to the structures of wealth that would otherwise define it. This is not to say that the second option is the right one – there is nothing inherently wrong or even dysfunctional about the way the Campbell family operates. What can be said about the Campbells with certainty is that by living in the shadow of their wealth, rather than building a culture that will control it, they have sold themselves short and are living a very cramped, if reasonably comfortable, existence. Choosing between being controlled (and serving) the structure of financial wealth rather than living a life of controlling wealth (and thus prioritizing personal and collective well-being) is a choice every family must make for itself.
If the family chooses the second option, it will be on a more difficult but ultimately much more liberating path. It will mean that the family will become the conscious author of its own narratives – it will assemble itself powerfully – as a social construction out of whole cloth – to create a culture with enough weight to counterbalance the formation of the structures that would otherwise define it. To do so, it must come to understand its deep moral purpose, it must consciously integrate disparate narratives, it must develop both formal and personal capacities. It must be built on foundations of trust, character and authenticity. It must evolve covenants, agreements, accountabilities and empowering communication within and across generations. If the family is to flourish and grow, it must not see itself in the context of wealth, but must see the wealth in the context of the family – with all of its complexity and dynamics. Failure to rise above the brute fact of wealth is rare – structured wealth is a powerful force. No family succeeds entirely – it is always saddled by the leaden structures it inherits. But it always has the choice to breathe life into those structures so that they serve the growth and development of human beings and the common well-being of the family as a whole. It has the power to shape and direct those structures at least in their administration and often in their form. Beyond that, it has the power to reconcile the deep contradictions of individualism and collectivism. It has the power to resolve the primal contradiction created at its founding – that a strong individual left an organizational legacy that radically failed to come to terms with the hard phenomena of collectivity.
Playing the Game
I noted in the first installment of this series, Understanding the Endgame, that it seems there are three basic patterns for the fates of great fortunes: Division, Preservation, and Growth. The Campbell structure described above plays the game of Preservation. This game was effectively, if unwittingly, chosen by Bob and Mary in their lawyer’s office in the beginning. The Campbell’s are, by all accounts, playing that game rather well. Yet the game of Preservation, of necessity, is a game where wealth controls the family.
There is a game that transcends this game of Preservation. The game of Growth is quite different from the game of Preservation – it requires different rules, different skills, different patterns of communication, different relationships of all of the players, and so on. This game of Growth could have been framed at the start – it was a missed opportunity by Bob and Mary who could not know that that option was available or what it would have required. That said, it is not too late. The Campbells could “change the game”.
To play the game of Growth well requires, of necessity, that culture trumps structure – or at the very least provides an effective counterweight to it. It sees structure not as a static brute fact of family life, but as a malleable set of evolving relationships that can serve to grow not only the economic base of the family but its individual and collective development. It works creatively with both structure and complexity to forge a different future for itself. Ironically, if Bob and Sally had known that playing the game of Growth rather than Preservation was possible, many of their deepest aspirations for their progeny- the progressive development of character, competence and compassion in their children and grandchildren- would have been required. By playing the game of Preservation, they locked into place the very things they wished to avoid – dependence, entitlement, and fracture. Playing the game of Growth will not allow families to avoid the vicissitudes of fate and folly entirely, but to consciously construct a family culture that promotes personal, familial and economic growth will go a long way to blunt their effects.
© 2016. Matthew Wesley. All rights reserved.
— February 22, 2016