Pictet Group
Prevention is better than cure
Conflict in successful and wealthy families has long made for riveting drama. We see it in the works of Shakespeare, Dickens, and the Brontës. A generation ago it was Dynasty and Dallas. More recently it’s been Succession. The emotions are universal and the stakes are high.
This is all well and good when you’re holding the popcorn. But according to a recent Cornell University project studying family reconciliation1, more than a quarter of the sample group reported having cut off contact with a family member. Reasons given for estrangement ranged from upsets as far back as childhood, and included issues surrounding new parental partners, expectations, and, inevitably, money and inheritance. Disagreements surrounding wills and control of finances were cited as a major source of conflict. Where the transfer of family wealth is thrown into the mix, sibling and intergenerational rivalry can last beyond the grave.
Of course, we’d all like to be able to settle arguments quietly. But reaching resolution without external help can be deeply challenging. Difficult dynamics, long-nursed wounds, and entrenched positions can obscure a fair answer. Added to that, ideas don’t always align about the nature of a good solution – whether it’s keeping family members running the business together, or offering freedom to leave. The reality is that external support is often needed to reach a lasting conclusion. Three main routes to resolution are litigation, arbitration, and mediation.
“The reality is that external support is often needed to reach a lasting conclusion.”
The most brutal route is litigation – resolution by court order. This is famously destructive and can be painfully public. Mediation is the least disruptive, helping parties communicate and find a mutually acceptable solution. This can suit intra-family disputes and helps maintain a sense of perspective. Mediation is comparatively quick, inexpensive, and private. It’s also flexible – agreement is the only pre-defined aim, and expertise can be accessed directly. Nevertheless, it’s no miracle cure. Family members need to actually want resolution, and to listen to the advice given.
Arbitration is often the preferred option. This route allows families to settle privately, keeping matters out of court and the public eye. The solution is imposed by an agreed authority, and is legally enforceable. The arbitration process will usually follow a pre-agreed format. This could be laid out by a stand-alone agreement, a will, or a family constitution – a written statement that can define a family’s driving purpose, core values, and modus operandi in the context of wealth management and business decisions. But having that pre-agreed structure is key; it can be almost impossible to introduce once disputes have already arisen.
Tensions within teams, families, and businesses can be healthy, but need to be managed. With a family constitution, a lot of stress, expense, and exposure can be avoided. A starting point for writing such a document might be to consider the founding of any organisation designed for a common purpose, with common goals, that also has to reconcile different needs and desires.
This means establishing rules for co-existing peacefully, achieving objectives and, importantly, resolving conflict within a community with divergent self-interest but a common sense of identity. The same applies here. Families can discuss what each person expects, wants, or needs – and what they are willing to put in to achieve it. These factors can then form the foundation of the constitution.
Governance mechanisms defined by the document should include a robust approach to settling disputes. Some of the most successful families take just such an approach, using internal rules to regulate relations and behaviour. The best approaches use an agreed arbitration process – with an established arbitration committee – to settle disputes that spring up from sometimes distantly related family members who might have very different objectives. But the most effective of these family constitutions also include mechanisms designed to keep differences from reaching the point of conflict. That includes listening and encouraging people to talk, maybe through a neutral and discreet party who can advise and direct – be it a lawyer, doctor or counsellor engaged by the family within the framework of the constitution. Sometimes it’s just a matter of encouraging people to step into each other’s shoes and to say sorry and thank you.
“Values, beliefs and emotions are hard to negotiate, and are often at the root of family conflicts.”
Families can also benefit from cohesive forces that transcend individual gain. Philanthropy can be a great focus for a non-material shared purpose, and constitutions can be strengthened by a commitment to doing good through altruism. The causes that matter to individuals will differ. Pitching to one another about these issues opens a forum and an opportunity for self-expression and responsibility, as well as demonstration of skills, shared values, and empathy.
Issues of money, power, and actions can be resolved through compromise. But it’s harder to give ground on matters of identity. Values, beliefs and emotions are hard to negotiate, are often at the root of family conflicts, and have historically been a point of friction between the generations. Older members might be blinkered by seeing the present through the lens of the past; younger ones by the latest social trends.
With that in mind, many potential conflicts can be avoided with a plan that makes space for the shape of the family. The process of crafting a constitution can be an opportunity for families with both traditional and complex modern structures to discuss what matters to every member. Done well, a family constitution can align, clarify and integrate generations, and create a road map for navigating potential problems in the years ahead. For some, it can avoid conflicts altogether.