Psychology of inherited wealth: coping with a sudden financial windfall
Sudden wealth syndrome isn’t a new phenomenon. Indeed, Charles Dickens’s 1861 novel, Great Expectations, has become a metaphor for what happens to many people who unexpectedly come into a large sum of money today. When protagonist and narrator Pip inherited his wealth, he experienced an egotistical change in his personality as he became consumed by the social expectations of his inheritance.
‘We spent as much money as we could and got as little for it as people could make up their minds to give us. We were always more or less miserable, and most of our acquaintances were in the same condition,’ said Pip.
‘There’s a psychological fear about passing on inherited family wealth’
The novel’s reference is raised by our expert panel during our event exploring the psychology of inherited wealth – be that by intergenerational transfer, selling a business or winning the lottery – and what can be done to ease the burden of sudden wealth. They confront the emotive and complex issues that can arise and discuss potential solutions from inheritance tax planning, to cash flow forecasts to philanthropy.
They note how there is often a reluctance by many families to pass on wealth down through the generations because they believe that younger people are more vulnerable, or even ‘reckless’ when protecting wealth that a family has accumulated over decades.
‘There’s a psychological fear about passing inherited family wealth on. I’ve seen things go very well, and I’ve seen things go not so well. And where it hasn’t gone so well is where there hasn’t been a lead-up – and a family has kept schtum on discussing wealth with their children,’ says Peter Shand, panellist and Partner with Murray Beith Murray, the Scottish-based private client law firm.
‘The business sale event is quite a brutal place when you exit with a pile of cash’
While selling a business can open up insecurities an entrepreneur never knew they had, ‘You fast realise that the business sale event is quite a brutal place when you exit with a pile of cash. It sounds wonderful, but instantly, there’s a pending tax bill, and you are no longer in control as you once were,’ says panellist and Weatherbys Associate Director Nathan Valbonesi.
The panel also debates what makes successful people tick and what makes many wealthy people happy. ‘One of the most fascinating cohorts I’ve come across is the early Microsoft employees, who were all given a huge transition stock and discovered they were all worth about $100 million. One went off to become a professional poker player, another wrote self-help books. Yet, you know, a huge number of them just kept on working at Microsoft, because that’s what they enjoyed doing,’ says Rhymer Rigby, panellist and leading national journalist.
To learn more about the complexities of landing a life-changing sum of money, and on the tips, advice and plans on how to overcome sudden wealth syndrome, click the button below.