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Women take the lead in family wealth management

Novelist Edith Wharton once wrote that the only way not to think about money is to have a great deal of it, writes Marc Smith. While this may have been the case during the US author's lifetime, which ended just after the Great Depression, wealthy women in the post-credit crunch world are not only thinking hard about the money they have, they are taking control of it too.

Reflecting larger societal shifts that have taken place over the last several decades, women of exceptional affluence are increasingly taking control of wealth management in their families and are choosing more active methods of guiding the next generation in wealth planning, according to a new study.

"The New Wealth Paradigm: How Affluent Women are Taking Control of their Futures" by Wilmington Trust and Campden Research in association with Relative Solutions, shows that women are seeking a holistic approach to wealth management, which includes establishing family governance structures and fostering dialogue, particularly with their children, about wealth management.

The research, which was conducted in autumn 2008, surveyed 40 women aged 40– 65 with a minimum net worth of $25 million and at least one child. Just under half of the participants inherited their wealth, while the remaining half are almost evenly split between those who created their wealth and those whose husbands are the source of their wealth.    

The vast majority (88%) are moderately or highly involved in the oversight of their wealth and management of the family's assets. In practice this means that they meet with advisors, read investment performance reports and try to compile and coordinate an entire picture of their wealth.

Two thirds of women describe their level of understanding of their assets (ie, stocks, bonds, real estate and operating companies) as high, reflecting the fact that this is a highly educated sample. However, there was a general admission that certain trust structures and insurance wrappers, among other examples, left them feeling less confident.

The family is of key importance to women when it comes to decision-making about wealth. Four fifths of respondents said they made decisions with the wider family, not just their spouse. However, less than half (45%) had formalised processes and procedures in place to make such decisions. Indeed, 20% made decisions on a case by case basis, while 25% said decisions were through informal dialogue.

The lack of financial governance was reflected by a lack of wider family governance. A majority of respondents (52%) admitted that they did not have formal family meetings or a family council. To find possible reasons for this, it is necessary to delve into the time when women were growing up.

The majority (78%) grew up in families that did not openly discuss their wealth. What's more, the women in the study did not benefit from a formalised financial education, relying instead on learning about budgeting by receiving an allowance in many cases.

In addition, the women had to face different expectations to their brothers. This was particularly true for those women who had created their own wealth, with 70% saying there was a clear difference; it was also true for those who inherited their wealth, with 53% saying there were different expectations of boys.

Despite this, women do not feel second class today. Almost the entire sample (97.5%) felt that the family wealth is theirs to do as they see fit and just 10% felt uncomfortable with the money they owned. In fact, their wealth is viewed as a source of empowerment to achieve philanthropic, professional, and personal goals.

In particular, women are focused on passing on values in regard to money rather than the extent of their wealth or practical money skills. In order of rank, giving back to the community, respect for people of all wealth backgrounds, and a strong work ethic and skills were mentioned.

Today's wealthy women no longer live in an age of innocence. Having come from a time when women were less free to choose work and career, and having had little to no formal financial training, they are determined to use their wealth for the greater good and ensure their own children are well versed in what it means to be born into substantial wealth.

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