A failure to communicate within families will be responsible for the loss of 90% of family fortunes within the next three generations, according to a new report.
The study, carried out by the Stonehage Group, suggests that "succession risk" – when ultra wealthy families fail to carry out cross-generational succession planning – constitutes the greatest risk to family-owned wealth.
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This danger – according to the study – is even more of a threat than a banking crisis or collapse in market confidence.
Lack of leadership in families
The report says that a perceived absence of clear leadership, effective communication and well-documented governance structures are responsible for the failure of most family fortunes to survive three generations.
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By GlobalDataIt adds that this is particularly damaging if there are directly-held business assets.
According to Andrew Nolan, managing director and head of Stonehage’s family office division, disagreements in families that result in a loss of direction and leadership can lead to "full-scale family war".
He said that this happens as family members "fight each other for the assets, the legacy or the family leadership".
Weight of fortunes on young shoulders
Nolan added that younger generations with little-to-no experience of handling financial issues will be relied upon in the third or fourth generation.
A lifetime of luxury for many in these generations that resulted in little work ethic, he said, has left them unsuited to inheriting and managing family fortunes.
