It’s estimated that 90% of high-net-worth families lose their wealth by the third generation, which means that family offices need to be proactive about tackling the inevitable obstacles that these family businesses encounter – especially as it pertains to succession and preserving multi-generational wealth. When approaching these issues, family offices need a clear understanding of the challenges and risks the family may face and learn how to manage and mitigate them.
Three common issues can lead to family wealth erosion, but with the right mindset, they can be easily managed.
Preserving multigenerational wealth starts with engaging the next generation
In many cases, family wealth erodes due to a lack of trust, transparency and communication between current leaders and their heirs. Oftentimes, the biggest concern is that the future generation isn’t fully capable of leading the business into the future, nor managing the family’s wealth. Inevitably, this becomes a self-fulfilling prophecy as future leaders aren’t given the necessary exposure to the inner workings of the business and family financial matters, which doesn’t grant them an opportunity to learn properly. Without this crucial understanding of the business, they’re also unable to show how they can make a positive contribution.