Wealth, Capacity, and Mental Health: Bridging the Generational Divides

We help families define their legacies and pass them down to the next generation, but mental health and capacity issues are ever more important parts of facing this challenge. A mental-health crisis among younger people and earlier diagnostics in later life mean we can do much more to understand and support our clients, say AlTi’s Andrew Rodger and Jill Shipley.

The kids are not all right. Currently, one in seven adolescents globally struggle with mental-health challenges¹. A recent large-scale study found that 50% of people around the world will develop a mental-health disorder in their lifetime². The situation appears to have worsened markedly in the past 15 years.

Few parents doubt that economic worries, smartphones, social media, lockdowns, and climate anxiety have left the generation now stepping up feeling anxious and purposeless – just when we are looking to them for optimism, fresh ideas, and boundless energy.

Those fretting parents are children themselves and looking at their aging parents with an increased awareness of health conditions that affect mental capacity. Medical advances are pushing diagnoses up, and we are getting (a bit) better at emotionally supporting those living with them.

Nevertheless, in terms of financial matters, we still operate under fairly binary legal and ethical rules that suggest that people either have capacity or they don’t. This does not do justice to the families we serve.

The truth is that, as advisers, we need to equip ourselves to navigate a much more complex client profile in respect of both mental health and capacity. This is especially true when dealing with succession for families facing these issues in the older and the younger generations simultaneously.

To meet this crisis, we must first understand it. This is, of course, much more involved than a short article can cover, but we can, perhaps, touch on a few key themes.

Thinking About Mental Health

Obviously, mental health and capacity are completely different things, but they both profoundly affect the kind of advice needed and the way in which it lands with the client.

First, mental health does not just mean being “OK.” According to the World Health Organization: “Mental health is a state of mental well-being that enables people to cope with the stresses of life, realize their abilities, learn well and work well, and contribute to their community.”³

The sense of security and freedom implied in this definition is surely an appropriate goal for the clients of wealth managers and puts into context the reason why focusing excessively on investment benchmarks can leave many clients cold.

We work with some of the world’s wealthiest people, so it may be surprising to discover that one of the biggest concerns we hear from clients is about mental health. And we make it our duty to address this directly as we believe nothing is more important. The returns on one’s investment portfolio matter, but they are significantly less likely to contribute to overall wellness – and, paradoxically, a family’s prosperity – than one’s mental well-being.

So, what role does wealth management play in relation to mental health? In simple terms, it must sit at the heart of our work. As a multi-family office, we must concentrate on growing all forms of our client’s capital – human, intellectual, social, and spiritual, as well as financial. Our clients are people, and paying attention to their well-being is fundamental.

We spend a lot of time trying to figure out how to make the capital travel down the generations, but this is a two-generation job. Wealth cannot just be sent from one generation to the next, or the next-but-one, as is often the case. It must be carefully received. If the younger recipients of capital are themselves struggling, this will go wrong.

This doesn’t mean that we are in the business of nannying our clients. Ultimately, our help will best be expressed by thoughtful, empathetic service and support in implementing good governance. That’s nothing new, of course; what has changed in recent years is how society defines and treats mental health, how the stigma surrounding poor mental health is disappearing, and how we perceive the impact of wealth in this area.

Empathizing with Older and Younger Generations

At the same time, intergenerational relationships that may have an effect on mental health are shifting. So, the two generational perspectives merit deep consideration.

First, you don’t need to watch four seasons of HBO’s Succession to know that succession planning by the older generation needs to be a nuanced and carefully managed process. Wealth creators have often spent a lifetime controlling every detail of their business and may be distressed at the thought of stepping back in the face of any health issues, such as a reduction in mental capacity. They will be rightly proud of their longstanding and cultivated legacy, and facing up to one’s own fragility is, for anyone, difficult.

It is reasonable to worry that mental health might even decline when facing the loss of control of a business you worked your entire life to build, plus the fear of losing your capacity to learn and contribute, and the loss of identity and purpose. Even retirees who have often dreamed of freedom after a life of hard work struggle with anxiety and depression, losing routine, relationships, and meaning. 

Proactive communication, planning, and governance help to acknowledge and sensitively address these pressures. It is a sad fact that there are, for example, conditions that mean that, in some cases, the ability to carry on controlling the business is severely compromised. Earlier diagnoses mean good governance must happen earlier and more gently, before crude legal definitions of capacity are tested.

It is our duty to help manage this – professionally, legally, and ethically – from a place of empathy and independence, from which we can liaise with the right experts and advise accordingly.

Secondly, the rising generations have real concerns, too. It’s arguable that one contributor to the mental-health epidemic plaguing the young is the pressure put upon them by previous generations. Often, inheritors can feel molded to fit a family structure, to meet their family’s expectations, rather than free to forge their own path.

At the same time, technology seems to have delivered searing social anxiety across a whole generation. Pressure to perform or live up to unattainable standards are expressed deliberately through notifications on phones that are always on and always on hand. If that wasn’t enough, the 24-hour news cycle fights for clicks by bombarding us with images of a world fraught with climate change, economic crises, increasing social divides, escalating conflict, and the threat of the “black swan” unforeseen catastrophe.

Adding wealth to the equation, especially money they did not earn or are not prepared for, can be a crushing burden filled with shame and guilt that challenges mental health.

The good news is that rising generations across society seem instinctively to be more in touch than their parents and grandparents with the idea of living in alignment with their values. They want to have a positive impact on their community and the planet and are far more in tune with global and geopolitical challenges. 

Wealth Is a Complicating Factor

The interplay between mental health and wealth is a complex and often-misunderstood relationship. It’s a common misconception to believe that an increase in financial resources alleviates all problems, stress or hardship. Parents naturally dream of providing their children with the opportunities they never had – that these privileges can ensure their children’s happiness and success. Research suggests otherwise.

Northwestern University’s The Family Institute reports that anxiety among affluent boys and girls is 25-30% higher than among other teens⁴. Affluence itself is increasingly considered a risk factor in adolescent development – not just having money, but how having money can distort values, parenting practices, and interpersonal relationships. Unfortunately, affluence as a risk factor outlasts adolescence, and anxiety is not simply outgrown. This can lead to further issues – for instance, substance abuse. What may have started as self-medicating can, over time, become habit-forming and even a full-blown addiction.

For many, it’s hard to make sense of why people can be wealthy and yet so deeply in pain. Research suggests there are two primary risk factors – achievement pressures and isolation⁵. The sense of obligation to be the best academically, socially, athletically, and physically, or to carry on the family’s “good name,” is a pressure that may very well come from outside the family, such as the community at large, or from the child themselves. Significant wealth is often associated with great success and that casts a large shadow that makes it difficult for the rising generation to find their own sense of identity.

The second risk factor is isolation. It is not the money, wealth, and privilege that cause mental-health issues, but rather the lack of ability in our modern-day world to have a safe place to openly talk about them. As a multi-family office, we can help by leveraging our position to bring together individuals with similar interests, passions, and issues, so they can safely discuss their challenges, concerns, hopes, and dreams in an atmosphere of trust and support. Creating a sense of community allows clients to share experiences and expertise and learn from others, and reduces their own feelings of isolation.

The Importance of Open Communication: Two Examples

The following examples illustrate the disconnect between parents’ aspirations and the struggles of their children, and the role we, as wealth managers, seek to play.

The parents of Family 1 rose from humble beginnings to amass considerable wealth through their entrepreneurship. Their son excelled in sport at school and their daughter is studying to be a doctor. The parents are justly proud.

Beneath the veneer, however, their children struggled to bear the weight of expectation. Both felt intensely pressured to surpass their parents’ achievements. The daughter dropped two courses due to depression, not telling her parents out of fear of their disappointment. Meanwhile, their son used up his allowance by spending it on his friends, in a bid to assuage the guilt of his financial privilege.

Recognizing the disconnect, the parents decided to have a candid discussion about their hopes and expectations. The children admitted to their struggles, and the parents apologized for unknowingly pushing them too hard. They explained that they want their children to reach their potential and resolved to support them in pursuing their passions, even if that meant deviating from traditional measures of success. In other words, they opted to pursue the idea of wealth as well-being.

This wasn’t an instant, positive change. But with open communication and a recognition that they could redefine success beyond simply financial metrics, without the weight of expectation, over time it was transformative. The son, for example, found his fulfillment playing football close to home; the daughter, meanwhile, sought professional help to address her mental-health challenges, boosted by the unconditional support of her family.

Then there is the contrasting case of Family 2. The parents met in boarding school, and both are from dynastic wealthy families. Early on, however, they made a conscious decision to break the cycle of negative impacts associated with wealth. They lived modestly, below their means, and prioritized values over material possessions. They embraced philanthropy, involving their children and demonstrating the value of these charitable activities to them from a young age. They were always sure to instill a sense of responsibility and empathy.

Their approach to parenting has been built on open discussions about values and money. They shared their own experiences of how money had negatively affected their family dynamics, fostering empathy and understanding in their children. With a strong commitment to individual well-being and family connectedness, they encouraged financial responsibility and education from a young age.

This passion for societal impact led the family to explore impact investing, and inspired broader change within the extended family as relatives began to reassess their own attitudes towards wealth and its implications. The family’s large foundation shifted towards impact investing aligned with their mission, engaging the next generation in philanthropic endeavors.

Through their efforts, relationships within the broader family were slowly repaired, and the role of money in shaping mental health and well-being for future generations was redefined. And thus, the power of intentional values-based parenting and philanthropy created a legacy of positive impact and familial harmony.

The common denominator between these two scenarios is, of course, open communication. It’s a cornerstone of good governance and something that we, as wealth managers, seek to foster and cultivate as early as we can in the relationship we have with our clients. 

What Actually Matters

Our two families demonstrate, to some degree, the more traditional approach versus a more modern, open and communicative approach that fosters the value of wealth as well-being from the ground up.

The latter is reflective of how we work with our clients, fostering and cultivating those values of empathy and value. What this means is that relationships are closer. The older generation and younger generation can empathize with each other, respectful of one another’s concerns and the impact they may have on mental health, while working together to create a more open and fruitful family unit.

Renowned family wealth expert and author of Family Wealth: Keeping It in the Family James “Jay” E. Hughes⁶ suggests that redefining wealth as well-being is imperative to navigate the complexities of mental health and capacity and the way they connect with wealth. We wholeheartedly agree.

As trusted advisers, it’s important to be flexible and empathetic, and to understand our clients’ wealth goes far beyond their money. Ultimately, it’s our job to help clients grow and pass on their human, social, intellectual, and spiritual capital, supported by the financial capital – not burdened by it.