Contemporary studies of wealthy families have found that for a vast majority, 65 per cent of their wealth is lost by the second generation and 90 per cent of it is gone by the third generation. – (Study published in “Family Wealth Counseling: Getting to the Heart of the Matter, E.G. Link)
If you’re looking at those statistics and feeling overwhelmed, you’re not alone. But here’s something else to reflect on; a breakdown, or lack of communication, is the number one reason that wealth transfers fail. That’s something to feel optimistic about. Why? Because a lack of communication is completely conquerable, manageable and something that you can absolutely overcome. It has nothing to do with factors outside of your control. Increasing the communication between you and your family is within your control. If you are proactive in your approach, and have the conversations you can’t avoid avoiding, then your wealth has dramatically better odds of surviving well into the future.
The antidote to those humbling statistics is to have regular, agenda-driven and open family meetings. They need to have an atmosphere of honesty, respect and candidness and include critical conversations about both family and financial matters. It’s about coming together to get fears and frustrations on the table so that they don’t grow to infest your family and its wealth. One of the most important components of meetings should be your children—the heirs. Family meetings are critical because they allow you to start a dialogue with your children. Having important conversations now about handling wealth is necessary for success since they may be incapable of this once you’re gone.
Here are some other key things to consider for family meetings:
- First, make sure to have some ground rules and review basic tools for good communication to allow for a respectful meeting.
- Meetings should be a forum to have fun and to learn about yourself and your family.
- Family meetings are a great way to introduce your children to your advisory team so that a reporting structure is created early on.
- Remember, keep the tough issues on the meeting agenda and away from your family’s Thanksgiving dinner.
- A great read for more on this topic is Family Meetings: How to Build a Stronger Family and a Stronger Business (Second Edition) by Craig E. Aronoff and John L. Ward.
Your wealth has evolved over your lifetime and it will continue to evolve after you’re gone. Recognize that you have the ability to make sure that it evolves in a positive way well into the future. Initiate the tough conversations now so that your wealth not only survives, it thrives.