How Do Family Offices Sustain Generational Wealth?

We have all heard the saying “shirtsleeves to shirtsleeves in three generations”, there is a similar saying in Chinese that goes “Wealth does not last beyond three generations” (富不过三代 ). Both adages describe the general inability of wealthy families to maintain their wealth for over three generations. This has long been a concern for families worldwide, consequently fostering the growth of Family Offices which are primarily set up for wealth preservation. This article discusses the role of Family Offices and good governance practices in facilitating long-term generational wealth for ultra-high-net-worth families.

Family Offices are often created by families with the intention to preserve wealth and facilitate wealth transfer. According to the survey we conducted for our Global Family Office Compensation benchmarking report 2023 in collaboration with KPMG, 62% of Family Offices globally reported that the purpose of their Family Office is wealth preservation. Simultaneously, we also found that 42% of Family Offices worldwide do not have a formalised governance structure in place, a further 48% do not have an enforceable succession plan and more so, 52% do not have a Family Board. We believe that this is the reason why most Family Offices across the world only have one or two generations at play. To break the “shirtsleeves to shirtsleeves” curse, it is also very important for families to uphold good governance practices. A UK-based Family Office that serves and has managed over 5 generations of wealth for an ultra-high-net-worth family revealed in the European Family Office Report 2022 by Campden Wealth that their key to long-term generational wealth is being “governance heavy”.