Agreed family values may help preserve family wealth

Published 8:25 pm Friday, October 15, 2010

It’s a staggering statistic that appears to validate a bit of folk wisdom—as many as 70 percent of wealthy families have lost control of their wealth by the end of the second generation; as many as 90 percent lose it by the end of the third.

Those are figures from a 2009 study by the family wealth consulting firm Williams Group.

The question is, “Why?”

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The reasons are endlessly debated. Some point to faulty legacy planning, although it is acknowledged that however noble a plan’s intent, implementation depends on the actions of less-than-perfect human beings.

Communicating values

A key to the success of the smaller percentage of families that do indeed preserve and grow their wealth across the generations seems to be an intelligent transference of family values. Passing along wealth without the family values that accompanied its creation is a formula for failure.

It is said that sustaining a family’s legacy across multiple generations depends on four distinct types of capital: Human, intellectual, social and financial—all vital elements for success.

Wealth and values

Preserving a family’s wealth is most likely if an agreed set of values has the support of multiple generations.

Clearly, the figures show that accomplishing this goal is relatively rare, which is why experts in legacy planning encourage families to share information and to make sure that all interested parties are engaged meaningfully in the family enterprise.

The family vision may have originally been set by the founding generation, but as younger members become empowered, they may insist on modifications.

As long as these support the values that go hand-in-hand with the family’s vision and wealth, the legacy may be counted among the small number that are preserved.

If I can be of help to you in your legacy planning, please don’t hesitate to give me a call.