Last week, we discussed how a mismanaged wealth transition can put a family in conflict and send them into a financial and emotional crisis. This next blog goes into detail about causes and symptoms of a failed transition.

Global statistics show that only 1/3 of families will successfully transition their wealth from the founder generation to the second generation; by the third generation that percentage drops to only 10%. Research has established that family wealth transition failures are attributable to a variety of factors:

  • breakdown in communication and trust. (60%)
  • lack of preparation of the rising generation (25%)
  • no family vision (10%)
  • inadequate tax and financial planning (3%)

As we saw with the Bailey family, parents tend to focus on the 3%. Typically, a triggering event will push parents to meet with their accountant, tax, and estate advisors.

The common process that ensues is the parents agree on a plan that is presented to them with few questions asked by trusted advisors and they proceed to sign documents without fully understanding how the documents will actually play out. Sometimes the documents are then stored in a “safe” location for future disclosure at the so called “right time.”

There is a saying: “plans that affect us but do not involve us, are not for us” which sums up how these approaches typically play out.

Problems arise when parents do not involve the rising generation – those who will be affected by the plans – in critical wealth transition discussions This is often coupled with a failure of parents to coach their children to be good owners and stewards of the family wealth they will inherit.

This happens for all kinds of reasons such as:

  • planning by default (this is the way our parents/friends/colleagues “did it”)
  • this is what our advisors recommended
  • we don’t talk about these things in our family
  • we just wanted to get it over with and the documents in place
  • “Father knows best” or “it’s my stuff, so I’ll decide what happens with it and when”
  • they are smart kids and they will figure it out
  • they know what we would want them to do
  • we’ve done our job, it’s up to them after we’re gone

With conflict such a prevalent outcome of traditional approaches to wealth transition,  many plans for the future are unwound at great financial expense, with litigation being the only way out.

Even worse, this conflict comes at a high emotional cost.  Families can be torn apart for current and future generations: summer vacations, weddings, births, graduations, and other family traditions become tension points instead of something to look forward to.

Excuses are made and events are avoided. Cousins don’t get to know one another or share experiences that create life-long family bonds.

The health of families, our communities, the economy, and charitable institutions are all in play as we face the largest global wealth transition in history. There is too much at stake to not get this right. So how do we get to the 95% and avoid the path of mediation or litigation?

  • How do we get ahead and stay ahead of conflict?
  • What would it look like for a family to be able to discuss challenges, concerns, dreams, goals, and opportunities?
  • How does a family develop listening, communication, and negotiation skills and learn to have difficult conversations?
  • What does decision making and conflict resolution processes in a family look like?
  • How can families pursue financial growth and stability, and also nurture each person’s intellectual, social, and human growth?
  • Where do our values and vision for the future fit in?

When the need to discuss business and wealth transition arises, this assumption alone can prevent us from engaging in proper communication with them. Without an open dialogue and a fulsome sharing of stories for understanding and not fault and blame, these discussions quickly breakdown.

This was authored by Dave Gould and Cindy Radu.

David Gould LLB KC C Med


For help managing a high-conflict wealth transition, or to learn about how we can help you prepare for these conflicts, feel free to contact me today. I offer conflict coaching, conflict management training, and mediation services.