Beating the “third-generation curse” is no easy feat. According to a 25-year study conducted by wealth consultancy, The Williams Group, 70 per cent of multi-generational wealth transfers fail due to the involuntary loss of control of assets. A majority of these failures were attributed to inadequate preparation of heirs, lack of family mission, and the breakdown of family communication and trust.
Today’s problem with succession planning is that many tend to forget that an ongoing family business isn’t just about balance sheets but also about the dynamics between the respect, traditions and original vision of the company, with the need for constant innovation and evolution of talent, skills and thus, wealth.
Here, we delve into the various ways a family can prevent or overcome the repercussions of “sudden wealth syndrome” and sustain their legacy with a shared identity across the generations.
Preserve wealth through passing down wisdom
When we speak about education, we’re talking beyond—and way before—attending the finest universities. Founders built companies with their own blood, sweat and tears, and more importantly, with a strong vision and wealth of experience that no school could ever teach. This is why education at home is crucial to instil core values and life lessons in the next generation from a very young age. Open communication is key—ask and answer questions like “What is our wealth for?”, “What is our family’s purpose?”, “What is our true value?” and give them the tools and opportunities to nurture paths of their own towards these shared goals and values.
Without this, heirs who have always had wealth in their lives can be left lost and anxious (or ignorant) about what they’d do or who they would be without it. Similarly, if heirs are unclear about what wealth means to them or the family, they can be left with chaotic goals and an irresponsible work ethic from the lack of wisdom and leadership.