Insights


Wealth & well-being: How can you help your family find happiness?

by Elizabeth Goldfinch Senior Manager Elizabeth (Lizzy) is driven to help families and their emerging generations address both the opportunities as well as the challenges of wealth. She works closely with wealth creators and inheritors to understand their intentions and develop strategies to realise their goals across all aspects of their wealth. Lizzy is passionate about helping families find meaning in their money and succeed in sustaining wealth across the generations. Contact Elizabeth

There is an age-old saying that money can’t buy happiness which is often heard, but just as often scoffed at. But in the book “What Happy People Know” by Dan Baker, Dan affirms that “The fact is that wealthy people are unhappy just as commonly as people without money. That’s one important thing that happy people know: Money doesn’t bring happiness”.

So, what does bring happiness?

Based on the nation’s most comprehensive study of satisfaction compiled over 15 years of research, the Australian Unity Wellbeing Index, Deakin University Emeritus Professor Robert Cummins believes he knows the answer. He believes that there are three core elements that are the very essence of wellbeing which he dubs as the ‘golden triangle of happiness’:

  • A sense of purpose;
  • Financial control; and
  • Strong personal relationships.

How, then, are financially successful families managing their wealth, finding a sense of purpose and building strong personal relationships that in short, enable them to find happiness?

A sense of purpose

Wouldn’t it be great if you could increase family engagement and satisfaction along with your financial returns? Research shows that companies defined with a purpose consistently outperform those that are not, and the same is true for financial families.

Ernst & Young’s Purpose Publication (2016) found that purpose led companies have employees that are 1.7 times more satisfied in their jobs, customers who are 73% more likely to switch to their brand and shareholder returns that are at least 10 times greater than the S&P500.

Within the family context, failing to define a clear purpose for a family’s wealth contributes significantly to failed wealth transfers according to Williams & Presser in their seminal book “Preparing Heirs”; it is one of the top three reasons why over 70% of wealth transfers fail.

Many families also recognise that their long-term success and happiness hinges not only on the purpose of the family but on individual family members finding their own ‘why’. Peter Buffett, the son of billionaire investor, Warren Buffett, says that the only real inheritance that has been handed down from his parents was the philosophy to ‘forge your own path in life’. This enabled him to establish his own identify, find his interests and passions and reap his own successes.

Family Wellbeing Index – Purpose
  • Our family has worked together to establish our purpose
  • We have talked about and agreed what our wealth is for and our vision for the future
  • We encourage and support individual family members to forge their own path
  • We have a plan in place to help family members grow and develop (financially and non-financially)
  • We are aware and appreciate our individual strengths and talents and use these each day

Financial Control

What the study has shown is that financial control, not ‘financial capacity’ makes you happy. In fact, Professor Cummins and his research team have shown that not being in control can make you very unhappy; they found that financial insecurity produces similar feelings to that of physical torture!

There is undeniably a link between income and well-being, but the study has found people earning over $100,000 a year, are no happier than those with a lower income. The power of money to affect well-being lies in its capacity to alleviate stress and create an environment for happiness.

With wealth comes added complexity. It is easy to see how attaining more wealth does not make life easier or problem free. For some families, the notion that wealth is a burden unfortunately rings true. They may have no plan or strategy, may succumb to ‘friends’ with the ‘next Uber’, drown in administration and paperwork, have unnecessary complex structuring and no clarity on how sustainable their spending is. They feel they do not have control of their wealth.

Family Wellbeing Index – Financial Control
  • We have a plan! It includes clearly stated investment goals that are in line with our family objectives
  • We have developed and documented an investment strategy to reach our goals
  • We have pressure tested our goals to ensure they are achievable
  • We have considered our long term spending and developed a sustainable distribution policy
  • We have oversight of our wealth through regular and accurate reporting on all that we own and the ins and outs.

Strong Personal Relationships

Professor Cummins has found that strong relationships are perhaps the most vital part of well-being.

The study asserts, that “a good close relationship (or many good relationships) with someone you can share your thoughts, secrets, hopes, dreams and fears with, who will remind you that you are loved and valued, provides a critical resource to defend against life’s challenges.”

Relationships within the family are one of the most vital elements of successful wealth transitions and family well-being. A breakdown in communication and trust within a family unit accounts for over two-thirds of failed wealth transitions. Disputes can be toxic (and expensive), cause families to lose sight of their purpose for being together and take a toll on individual family members.

Family Wellbeing Index – Relationships
  • We have forums to communicate about all areas of the family’s wealth (not just financial)
  • To help us, we have an agenda and we note any actions that need to be taken
  • We have an independent facilitator who we trust who can help us navigate issues
  • We acknowledge and understand our personality differences and how we can work together effectively
  • We have fun! We schedule time away from the business or office to celebrate our family and enjoy life

How is your family tracking in the Family Wellbeing Index? Do family members have strong personal relationships? Do they have a sense of purpose and financial control? Are you helping your family to find happiness?

Our hope is that all families can improve their well-being and manage their wealth, unlocking the golden triangle of happiness.

References:
Baker, Dan. 2003. What Happy People Know. Rodale Inc. USA.
Williams, R and Preisser, V. 2012. Preparing Heirs Robert D. Reed Publishers, USA


Mutual Trust Pty Ltd ACN 004 285 330 (AFSL 234590). Liability limited by a scheme approved under Professional Standards Legislation. For participating members (other than for the acts or omissions of Australian Financial Services Licensees). This information is general in nature and subject to change. It does not constitute tax, legal or financialadvice. We recommend you seek advice specific to your circumstances before taking any action. Copyright © 2014 Mutual Trust Pty Ltd.
Back to top
Related Insight
Three key challenges facing wealthy Australian families by Jeff Steiner, Partner

Families

Market research tells us that nearly 70% of intergenerational wealth transfers fail by the third generation and almost 90% by the fourth. These are compelling statistics which have become top of mind concerns for many families as they plan their …

Keep reading
Contact Jeff