The wealth spiral
Success comes with an unexpected level of complexity, leading high net worth families to fall into a wealth spiral. Here’s why it happens, how it affects life at home, and what you can do to calm the chaos.
Imagine you’re a tech founder. You started your company with a few thousand dollars in a tiny apartment, and after years of pouring your time and energy into your work, you exit with more money than you’d ever imagined.
Your first move is to buy a house — or, more likely, two or three. Each of these houses is probably a luxury home with a large footprint, an expansive property and the highest quality assets and features — from boats and tennis courts to commercial-grade HVAC and plumbing systems. And, each one comes with its own complexities and liabilities (these systems seem to break and need more attention than anything you had in that old apartment).
This is a lot to manage, and you didn’t buy your dream house — or houses — to worry about housekeeping and maintenance. You simply don’t have the time, the desire, or even the know-how to do it all yourself. So, you set out to find people who can help you.
It turns out, hiring household staff is also a time-consuming, difficult process. How do you find someone you trust, who also has the expertise you need? On top of that, searching for high quality, trustworthy vendors for everything from landscaping to security is a massive project. (In fact, once you find that household manager you’re looking for, this will probably be one of their first orders of business.)
Ironically, once you’ve found people to help you manage all your properties, you’re in for another surprise: adding more people has, in fact, added more complexity.
Before you know it, you feel like you’re running a business in your own home. Rather than enjoying a sense of calm and spending your time at home on what matters most to you, you feel like your home is in a constant state of chaos.
A few questions start to weigh on you:
- We just want to live a normal life. How do we manage all this, without everything becoming so complicated?
- We have all these people here, but what are they doing?
- We thought our lives would get easier — so why is everything actually getting harder?
This is what we call the wealth spiral: a state of ever-increasing complexity after a wealth event, when in fact the opposite is expected.
Who falls into the wealth spiral?
The wealth spiral can happen quickly after a wealth event, or it can happen slowly over many years.
For example, for startup founders or athletes, a huge change in wealth can happen overnight — setting off a chain reaction where these newly high net worth individuals have to learn about wealth management and financial planning, while every aspect of their lifestyle starts to change.
Meanwhile, for families who have built their wealth over decades and generations, the wealth spiral can happen gradually, creating a low, constantly building hum of frustration over time.
Either way, families face a painful realization around expectation versus reality: we thought life would be easier at this point.
With the rise in new wealth, the number of families experiencing the wealth spiral is growing. In 2022, the number of U.S. homeowners with a net worth of $5 million+ jumped to 1,675,756 — up 33% over 2021. Of those, 943,657 owned 3+ homes.
If more properties, more people, and more projects lead to complexity, how can a family escape the spiral and live a normal, yet elevated, life?
Who can stop the wealth spiral?
The private wealth management industry is designed to help families navigate their financial challenges and preserve and grow their wealth. But, families rarely have access to the same level of professional guidance when it comes to their homes and their everyday lifestyles.
For the families, part of this is a lack of resources (where do you turn with questions about this?), and part of it is mindset. Some families may feel afraid to complain about these problems, some may not know there’s a better way, and most don’t know where to start.
Families, family offices (or financial advisors and wealth managers), and household staff — specifically leaders like estate managers — can all play a role in stopping the spiral.
In the next section, we’ll cover steps you can take to end the wealth spiral. Keep in mind, the people who are implementing these steps might the people who support the family, either in the family office or on the household staff. But, to truly streamline operations and create a sense of calm, everyone involved in running the household — especially the family — needs to be fully committed to creating seamless solutions that set everyone up for success.
How to escape the wealth spiral
With the right people and systems in place, families can stop the wealth spiral and live the life they imagined.
Step 1: Approach household management with professionalism and purpose.
One of the most common mistakes families make is managing their homes and their household staff too casually.
“I think the general thought amongst the families is, ‘this is just our life, these are just our homes,’ and it’s not structured in a way that you would structure a property management firm,” explains Rebecca Maguire, whose team at EFO Advisory Services helps families set up their family offices. “But some of the values of these homes are competitive with something like a real estate investment trust that’s on the stock exchange.”
Bringing a professional, purposeful mindset to household management might sound counterintuitive, since we’re talking about the management of your own most casual, comfortable environment, but failing to set up the right structure and systems leads to more risk, chaos, awkwardness and disappointment.
Step 2: Give staff the guidance, tools and support they deserve.
The goal of any private service professional is to make their principals’ lives easier.
But here’s the catch: household staff can’t read their principals’ minds.
Often, when families hire household staff for the first time, they expect them to know exactly how to do their jobs. But every household is different, and everyone has their own preferences on everything from housekeeping standards to staff etiquette. Without a clear understanding of the households priorities and expectations, household staff are set up for failure — and their principals are set up for disappointment.
Instead, give staff members a road map and all the tools they need to provide the best possible service to your household. This can include:
- Outlining your preferences, priorities and expectations
- Being clear about each person’s job description and reporting lines
- Providing feedback
- Giving staff a go-to place or person to turn to with any questions
- Supporting staff with professional development opportunities
Empowering staff will reduce miscommunication and mistakes, improve operations, and create a better culture for everyone involved in keeping the household running smoothly.
Step 3: Invest in systems that reduce chaos.
Even with the right people in place, it can be a huge challenge to keep everyone on the same page. Families want to understand what staff members are working on, but they don’t want to micromanage or check in constantly. Estate managers have to juggle constant questions from other staff members, vendors, the family office and their principals. With so much to manage, the household struggles to get ahead of challenges and everyone feels like they’re under water.
Investing the time and effort to implement the right systems will alleviate frustration, reduce the risk of property damage, help you retain your best team members, and lead to hours of time saved in the future. These systems include:
- Regular (daily/weekly/monthly) task lists for each household staff member, to create accountability and clarity around what’s being done and who’s responsible
- Annual maintenance calendars for properties and assets so you can get ahead of planned projects (and reduce surprises and emergencies)
- Professional communication tools to keep everyone organized (and to protect your household’s private information)
- A centralized household manual where staff members can find guidance and answers to questions (ideally, one where you can control which pieces of information each person is allowed to see)
A place to turn
At Nines, we’re on a mission to simplify and elevate household life — and we want to make it easier to stop the wealth spiral.
We’re attacking this problem from three different angles: systems, education, and support.
An estate management system built specifically for modern households
Our household management platform is the easiest way to manage properties and everything that comes with them. It gives households and estates one place for managing tasks, property information and staff communications. And, it’s designed specifically for households, with industry standard house manual templates, so you don’t have to waste time creating your own estate management systems with a bunch of different tools like email, text messages, excel spreadsheets and generic project management tools.
Household management training and education
Meanwhile, our Modern Household Management Workshops provide training around everything from the basics of household management to the details of maintaining a high-end property.
These workshops provide expertise and templates for tackling household operations, and empower private service professionals to implement best practices in the homes they support.
Support for families, family offices, and private service professionals
Our expert estate managers meet families, family offices, and private service professionals where they are — giving you a place to turn whether you need help setting up your household manual or someone to call when you have a question.
Plus, we’re committed to shining a light on the expertise in the private service industry and creating opportunities for private service professionals to learn from each other, through household management insights and stories, our Easemakers community and our Easemakers Podcast.
The keys to living well
Families who experience the wealth spiral learn the hard way that having wealth is not the same as living well. We believe that with a modern approach to household management, the right people, and the right systems, families can minimize chaos and spend their time at home on whatever matters most to them.
For guidance on your unique household, start a conversation with our team today. And for inspiration around living well, tips for modern household management, and stories from service hearts, join our monthly newsletter.
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