Across the globe, there are thousands of families who rely on external support to manage their assets. It's estimated there at least 8,000 single family offices in existence – and that number is expected to grow to more than 10,000 in the next five years, according to Deloitte.
Running a family office can be a complex operation: ensuring the finances of future generations are considered, carrying out philanthropic work, and balancing the needs of all members of the family, as well as overseeing personal arrangements such as staff and travel. And just as every family in the world experiences disagreements, it's only natural that conflicts will arise among those with a high net worth.
While familial relationships are complex at the best of times, add in a considerable amount of money to manage and that only amplifies the potential for differing opinions. Even the smallest single-family offices will be managing at least $300 million in assets (HSBC), while combined it's thought there are assets worth $3.1 trillion under family office stewardship.
Why might conflicts arise?
As with any family, conflicts can arise for a number of reasons. Where a family spans numerous generations, including those who are related by marriage as well as by blood, each generation may have specific ideas about how their money should be spent.
Some individuals may seek to increase the philanthropic work undertaken by their family office, while others may prefer to keep their wealth intact for future generations. Older family members may feel they should have a larger say in decisions, as in a typical parent/child relationship, despite their children now being adults. And naturally people will have different spending priorities, and ideas about how and where investments should be made.
A clear structure is essential within a family office, to assign each person specific roles and responsibilities, set out overall aims for the assets, and identify whose preferences take priority where there is a difference of opinion.
But good governance won't necessarily solve all problems which might arise within the family, and that's where having an expert mediator on hand can make the difference between a happy resolution and an escalation of the conflict. In the worst scenarios, we see argument send up in court – such as the case of the Salems, one of London's wealthiest families. Their dispute over which family members were entitled to hundreds ofmillions of pounds worth of profit from their trading empire not only ended up being a years-long court battle, but also tore apart the family in a bitter row ongoing for decades (Evening Standard).
How can mediation help?
We will never know if mediation was attempted, or would have been successful, in the case of the Salems. But for many other families, the process has helped them to reach amicable decisions – and it's not exaggerating to say it can help rebuild fractured relationships by resolving the issues at the heart of estrangements or ongoing arguments.
A good mediator does not set out to decide who is right and who is wrong – they are not a judge overseeing a court case, quite the opposite: they hold space for each party to explain their point of view, and they act as an unbiased external presence who can support calm and rational conversations, which move towards a universally-beneficial and accepted resolution.
Using a mediator experienced in issues of family wealth and in the intricacies of the role of family offices means they can offer a objective, professional perspective while being mindful of the emotionally charged situation. Mediators understand that disputes over finances can be highly emotive anyway, but when that argument involves family members, this adds complications. Younger family members may resent the overbearing presence of the matriarch or patriarch, biological family may dismiss the views of in-laws, and parents may strive to see their offspring benefit from assets over their siblings' children, for example.
It may well be that an initial request by a family member seems unreasonable to their relations, but mediation can uncover an entirely rational reasoning behind it – identifying that their interests are not as selfish as their family thought they were, and potentially uncovering a way forward where neither party feels they've had to over-compromise in order to reach a decision.
Navigating a way through the financial issues, interwoven with the politics and history unique to every family, is a skill. But it's one that mediators have honed over the years, especially those who have worked with family offices regularly, and it's a process which has immense benefits. It can see family members feel united again, highlighting their similarities where previously they have been focused on differences; it can provide a resolution where no one feels they have had to compromise their values; and it can be a positive step forward, as long as everyone enters the process ready to listen to (and really hear) what others are saying and to repair the damage that has been done as a result of the conflict.
High-net-worth families mayhave differing views about how to use their assets, but where conflicts arise,mediation is worth its weight in gold.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
