5 Reasons Wealth Transfers Fail

5 Reasons Wealth Transfers Fail

Knowing these common legacy pitfalls can help your family avoid them.

Family coach and author Roy Williams surveyed more than 3,000 families and found that over 90% of family wealth transfers fail by the end of the third generation. But, in this context, what does “fail” really mean?

A failed wealth transfer can mean several things – a disappearance of the family’s financial wealth, the dissipation of important memories and values, and even intense discord among family members. So why is this happening so frequently, and how can you help prevent the same thing from occurring within your own family?

Here are five of the most common reasons money doesn’t survive wealth transfers over multiple generations.

Lack of meaningful communication

It’s critical for multiple generations of a family to engage in clear, open dialogue, which sets the foundation for successfully passing down both financial assets and important values. Getting to know how each of your family members prefers to communicate can also decrease the possibility of family discord. Encouraging clear communication can mitigate many of the reasons wealth transfers fail, and dialogue should center on aspects that go beyond just financial wealth.

Little or no shared vision

Once your family is engaged in meaningful communication, the next step is to define your shared vision. Moving in contradictory directions will eventually seed conflict, so build common ground by identifying what you’re all working toward. What do you want your family’s legacy to look like? What family qualities do you want your great-grandchildren to still value? Giving each person a chance to clearly communicate his or her interests will increase understanding by all, and it’ll help the purpose and positive impact of your family’s financial wealth.

Disregard for intangible assets

When family communication focuses too much on financial wealth, the opportunity to foster a sense of gratitude can be lost. Be sure you’re also communicating about things that go beyond money – like your core values, the experiences that have had the greatest impact on your life, and the philanthropic causes you care about most. Structured communications around these non-financial topics can help refocus everyone on what matters most: your family unit.

Erosion of trust and transparency

You may have heard the adage “transparency breeds trust.” Well, it also goes the other way: if family members believe transparency is lacking, trust can also erode. Transparency does not necessarily mean disclosing your net worth to every family member, but it does mean including them in discussions around the intended purpose of wealth you’ll pass down. Encourage family members to ask questions throughout your family dialogues, and be as open as you can with your answers.

Attitude of entitlement, not gratitude

If there’s one emotion that helps support wealth transfer success, it’s gratitude. When family members are focused on what money can do for them, overspending and misuse soon follow. But by communicating about both financial and intangible wealth and participating together in charitable events, you can slowly strengthen an attitude of gratitude.

It’s not always easy to navigate the complexities of family wealth. But with open communication and the guidance of a trusted financial advisor, you can begin these important conversations and help set your family up for wealth transfer success.

This content was created by More than Money 360. Raymond James is not affiliated with More than Money 360.


Important Disclosures

Saling Wealth Advisors is an SEC registered investment adviser located in Louisville, Kentucky. Saling Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Saling Wealth Advisors’ web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Saling Wealth Advisors’ web site on the Internet should not be construed by any consumer and/or prospective client as Saling Wealth Advisors’ solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Saling Wealth Advisors with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Saling Wealth Advisors, please contact the state securities regulators for those states in which Saling Wealth Advisors maintains a registration filing. A copy of Saling Wealth Advisors’ current written disclosure statement discussing Saling Wealth Advisors’ business operations, services, and fees is available at the SEC’s investment adviser public information website – or from Saling Wealth Advisors upon written request. Saling Wealth Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Saling Wealth Advisors’ web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.