As a phenomenon, the dissipation or loss of family wealth is almost as old as wealth itself and prevalent throughout the world. Indeed, almost every culture has a longstanding saying equivalent to the adage of “shirtsleeves to shirtsleeves in three generations.” In recent decades, research has shown the tendency of great wealth to fail to survive beyond the third generation. According to one study, 70% of wealth transfers fail by the third generation.1
But why should this be so? Explaining the phenomenon is more complex than identifying it. Contrary to widespread belief, the root causes of wealth dissipation are seldom financial, tax or legal issues. Instead, family matters may be to blame in as many as 97% of failed wealth transfers.1 Such matters include:
Lack of communication and trust in the family
Insufficient preparation of the next generation
Absence of shared family values or vision
How do the families who have managed to preserve wealth across multiple generations differ from those who have failed to do so?
Despite the tendency toward failure, we believe it to be far from inevitable. Anecdotal evidence highlights differences between families who have preserved wealth over many generations and those who have not. Families such as the Rothschilds (whose wealth dates to the 1760s), Rockefellers (1863), Du Ponts (1802), and many others have successfully managed to transfer wealth across many generations.
In our white paper, Best Practices to Sustain Family Wealth Across Generations, we identify seven well defined characteristics or competitive advantages that successful multi-generational families often exhibit, drawn on our long experience working with leading families worldwide.
