BEST PRACTICE
Passing the Vanderbilt test
Most families fight a losing battle to sustain wealth past their third generation. Alison Ebbage asks four experts what families can do to avoid becoming another statistic
T
he Gilded Age was a defining period of massive economic growth in the United States during
the late 19th century. It fuelled a period of extraordinary wealth generation for some of the young nation’s wealthiest families, a period that was tinged with the darker shadow of inequality. One family synonymous with this era was the
Vanderbilts. One of the oldest and most powerful families in the US, they subsequently saw the family’s fortune dwindle by the third generation. Their experience is all too common, with one study of 3,250 families by the Williams Group finding that 90% of the wealth made is lost by grandchildren. Progress on succession planning remains slow, despite the statistical warnings. Nearly 70%
of family offices surveyed in The Global Family Office Report 2016 expected a generational transfer in the next 10 to 15 years. Next-generation family members are taking a more active role within the family office, indicating the handover is beginning to take place. However, as of 2018, half of all family offices did not have a succession plan in place. “All too often, the underlying issue is not being
addressed,” Sara Ferrari, head of Global Family Office Group at UBS, says. “Families need to be much more proactive in
tackling the issue of succession.” So how can wealth managers and other
professionals engage with clients to ensure they pass the Vanderbilt test and transfer wealth past the third generation? And what are the seeds of a successful wealth transition that lasts more than one generation?
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ISSUE 75 SUPPLEMENT | 2019
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