Coming into wealth suddenly – such as through inheritance or a windfall liquidity event of a family business – can carry serious risks. The rapid change in financial circumstance can lead to poor decision-making, a loss of perspective, and social isolation. It can lead to a dysfunctional relationship with money/wealth. In the case of inheritance, there can be mixed or conflicting emotions of loss and gain. It can be like winning the lottery, and research…
This is a difficult topic to broach, and needs to be done only in appropriate settings – indeed, that might be the most important message of this topic. After the story of BMW heiress Susanne Klatten went public, she was slammed on social media. Her personal challenges – the responsibility, self-doubt, and being targeted by scammers – are real. But it’s very hard for anyone brought up without wealth to have any sympathy (and often it’s the reverse), so seeking it from ‘outsiders’ is almost a waste of time.
A “universal truth” about the imbalance of inputs and outputs is what became known as the Pareto principle, or the 80/20 rule. While it doesn’t always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases, Here we will address how not to sell a family business. 0% of all businesses do not sell, and only about 30% of family businesses get handed down to the next generation. If…
Family offices (FOs) come in so many shapes and sizes that the term ceases to have specific meaning. It’s simply a set of services provided for a family. The origins of the FO often determine their primary focus: there are plenty of FOs that are simply vehicles for co-investment, or glorified reporting platforms. Having a FO essentially means taking a professional approach to managing the affairs of the family. It’s interesting that 92% of FO…
You join a family through birth or marriage, and leave it through death or divorce. But if by divorce, it may not be possible to fully “leave”, and the process itself can be traumatic for a wide stakeholder group. A significant focus of estate planning for families is about ensuring that the family assets are “protected” in the event of a divorce. But how about the time until a couple divorces, i.e. the time they…
I have a lot of empathy for Tom Brady. While not in his ‘league’ on several fronts, I can fully appreciate his exasperation at the challenges of teaching children with wealth to understand “the real world”. Anyone facing these and similar challenges deserves to be taken seriously, and to get the support and empathy they need to deal with the issues. There’s just one small catch. People who don’t have or genuinely understand the experience…
Wealthy people are a soft target at the best of times. The media revels in sensational stories about wealthy families, especially when things go wrong. And if that wasn’t enough, neo-socialists in the US preach redistribution and question whether the world should have billionaires. The emerging “wealth minimisation” movement encourages inheritors to redistribute “excess wealth” for the betterment of society. In some cases, this is about making up for the “harm” done by the wealth…
Family business has positives and negatives – our aim should be leverage the positives and seek to mitigate the negatives. One important distinguishing feature of family businesses is that they can embody a sense of purpose. The original purpose of the business founder may have been wealth creation. However, as the business evolves and additional family members join, it’s an opportunity for the family as a group to discuss and articulate their collective values and…
It’s a most quoted statistic – “just 13% of family businesses survive the third generation” – and it has finally been challenged. It comes from a single study of US manufacturing companies in the 1980s, and for some reason it has stuck and become almost axiomatic. But it is deeply flawed. Most importantly, it never compared family businesses to non-family businesses (family businesses on average do last longer), and it also never considered the reasons why those…
Research has shown that in HNW families, daughters were rarely encouraged nor received support to pursue entrepreneurship education. Entrepreneurial families often prepare their daughters and sons differently for their careers. Cultural factors and their associated gender biases may result in the problem being far more pronounced. Things are changing. Some 82 per cent of women from wealthy families expect to inherit substantial wealth over the next 20 years, but 41 per cent of women are…
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