Imagine spending a lifetime building a fortune, only to see it vanish within two generations. This is the devastating reality for 70% of families, with 90% losing it entirely by the third. Advisers are uniquely placed to help break this cycle.
Why families lose wealth
A cautionary tale
The story of Cornelius Vanderbilt’s vanished fortune illustrates the fragility of wealth preservation. Vanderbilt, renowned for constructing vast railroad networks across the U.S., amassed a fortune of $100 million by the late 1800s. When he passed in 1877, his wealth exceeded the U.S. Treasury’s holdings.
His son initially managed to double the family fortune to $200 million, but subsequent generations lacked the same discipline. By the third generation, lavish spending, extravagant parties and frequent liquidation of assets had depleted the fortune.
The Vanderbilt case is far from isolated. A comprehensive 20-year study of 3,200 families by the Williams Group (source) reveals that 70% of families lose their wealth by the second generation. Alarmingly, 90% of families see their wealth completely dissipated by the third generation.
Common wealth transfer pitfalls
1. Lack of a wealth transfer plan
According to one survey, 68% of wealthy families do not have a formal wealth transfer plan (source). Without a plan, heirs are often unprepared to manage the complexities of inherited wealth, leading to inadequate decision-making and financial mismanagement.
2. Poor financial literacy among heirs
Many heirs lack the necessary knowledge to manage their wealth effectively. Without proper education, they may overspend, make disastrous investment decisions or fail to recognise tax implications.
3. Inefficient communication and family conflict
Estate planning often involves sensitive issues, such as fairness among heirs or control of assets. When these conversations are avoided, misunderstandings can lead to disputes that destroy family cohesion and drain resources. 58% of families experience disputes over inheritance issues (source).
4. Failure to plan for tax and legal complexities
The absence of an estate plan also often results in high probate costs and tax liabilities. For example, inheritance tax in Belgium can be as high as 30% for transfers between spouses, cohabitants and direct relatives and up to 70% for transfers between uncles, aunts, nephews and nieces, significantly reducing the wealth passed on to heirs.
5. Over-reliance on a single successor
In family businesses, the lack of a succession roadmap often leaves the business vulnerable. If one person holds all the critical knowledge, the business risks failure if that person is no longer available.
How to build a legacy that lasts
Transparent communication
Wealth preservation requires openness and cooperation among family members. Regular meetings to discuss financial goals, estate plans, and expectations ensure alignment and minimise disputes. These conversations are the foundation for shared values and conflict-free decision-making.
Holistic estate planning
Creating a robust estate framework involves more than just drafting a will. Families should consider tools such as:
- Trusts: To protect assets and ensure structured distributions.
- Gifting strategies: Gifts to heirs can reduce the size of a taxable estate.
- Family governance: Establishing roles, rules, and responsibilities for wealth management creates clarity and minimises disputes.
Leveraging digital tools
Digital platforms such as Abbove are revolutionising estate planning, addressing many traditional pitfalls:
- Enable real-time monitoring of family wealth structures.
- Simulate future scenarios, reducing risks from ill-informed informed decisions.
- Centralise access to financial plans and secure document sharing, improving collaboration between advisers, clients, and family members.
- Dynamically track and adapt to life events, such as births, deaths, or divorces.
These tools don’t just organise data. They empower advisers and families to make proactive decisions that traditional methods cannot match. They help families to adapt quickly to life events while maintaining transparency and alignment with long-term financial goals.
Why advisers are indispensable...
Advisers are the cornerstone of multigenerational wealth management, offering invaluable expertise that spans several crucial areas. They play a key role in helping to educate heirs, ensuring they grasp both the principles of financial literacy and the responsibilities that come with wealth.
Advisers also facilitate essential but often difficult conversations between family members, helping to navigate sensitive issues such as inheritance and asset control. Beyond these interpersonal dynamics, they develop tailored succession planning strategies to ensure that wealth is preserved and efficiently transferred across generations.
… and Abbove provides the tools to tackle their challenges
Building on the challenges advisers face, Abbove provides them with tools to overcome obstacles such as:
- Time inefficiencies caused by scattered data.
- Missed opportunities due to outdated tools.
- Difficulty coordinating with other professionals.
- Loss client confidence due to lack of transparency.
- Limited scalability.
Abbove helps advisers spend more time focusing on clients and less on administrative tasks, reinforcing their role as trusted partners.
Securing a prosperous future
Breaking the cycle of wealth dissipation requires more than luck; it requires deliberate planning, transparent communication, and the right tools. Financial advisers and families must work hand-in-hand to develop strategies that prioritise education, collaboration, and adaptability. By using platforms like Abbove, families can turn the daunting task of wealth transfer into an opportunity to strengthen their legacy.
Empower your clients to create lasting legacies
Leverage the Abbove platform to provide comprehensive wealth preservation solutions tailored to multigenerational needs. Book your demo today and see how technology can transform your advisory practice and strengthen client relationships for generations to come.
