Family Wealth - Endangered Species? - Superior Planning

by Buddy Thomas

Beating the odds of “Shirtsleeves to Shirtsleeves in Three Generations”

Around 2550 BC, the Great Pyramids of Giza were built thirty years apart by three generations of Pharaohs, evidence that supports the alarming statistic that 90% of family wealth disappears over three generations.

This phenomenon has been going on so long that one can conclude it is human nature. Except, some very prominent families have overcome it, the Rothschild, Rockefeller, and Walton families to name a few. But how did they, and a small percentage of other not so famous families do it when most failed?

They did it on purpose, organized for it, planned for it, and put systems and people in place to help them operate in a way to beat the odds….what some call…a family office.

The underlying issue, particularly in America where individualism seems to prevail, is that family members are usually looking out for themselves and the families they form and pay less and less attention to the families that formed them. So they start over.

What about the family leaders who built the wealth? Don’t they know better? The insightful ones like the families mentioned above do, but most can’t seem to see it coming because things appear to be going so well while they are alive, they can’t imagine how everything will change once they’re gone and no longer in charge.

From the families who have successfully transferred their wealth for three or more generations, we have identified seven essential keys to an effective family office (beyond the technical aspects of wealth management, and tax and estate planning).

For the purposes of preserving and enriching a family’s wealth, which we see as a family’s love (human capital), wisdom (intellectual capital), and money (financial capital) for generations to come, a family office must be a place that can do the following:

1.  Bring family members together for the benefit of the group
2. Keep the family updated on important family matters as they unfold
3. Act as an “operation central” for estate planning and implementation
4. Integrate the efforts and develop the relationships among and between the family members and the advisory team members
5. Provide an ongoing forum for discussion, decision making and conflict resolution
6. Provide a base of continuous support for the family to fall back on…when people pass away…things change… and family members and the organization have to adapt.
7. Be positioned to facilitate the ongoing collaboration of the advisory team members so each specialist can integrate their expertise into the ever evolving big-picture plan.

Other than the family office, there is very little in our society to support the continuity of the family enterprise.  Each family is on its own to do what they can about it… or disappear!

Buddy Thomas is Founder and Chief Planning Officer of Superior Planning. He can be reached at buddy@superplan.com