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Preparing for the

‘great wealth transfer’

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Marteen Michau

Head of Fiduciary and Tax

A significant proportion of global wealth is owned by individuals who are close to or older than 60 years – it’s been estimated that more than US$30 trillion will be transferred from one generation to the next over the next few decades. There’s a saying in investment circles, however, that ‘the first generation makes the money, the second spends it, and the third wastes it’. How can wealthy families prepare for the smooth transfer of assets to their children to ensure their legacy continues for generations to come?

The old adage has certainly been borne out by recent research: survey results quoted in a 2013 Wall Street Journal article indicate that 70% of affluent families will lose their wealth by the second generation and 90% by the third. The 2016 Knight Frank Wealth Report found that family wealth is now typically squandered by the end of the second generation.

How and why does this happen? In our experience, there are several reasons why following generations end up failing as custodians or stewards of family wealth:

  • 60% of the wealth lost from one generation to the next can be ascribed to a lack of communication and trust between family members
  • 80% of investors plan to transfer their wealth, but only 45% have an actual plan in place
  • Baby boomers (born between 1946 and 1964) transferring wealth to millennials (born between 1982 and 2004) creates challenges of its own, especially without prior consideration for the differences in priorities and behavioural patterns between generations
  • 45% of families do not openly discuss wealth within the family
  • There is a perception that wealth transfer planning needs to be done only towards the end of life, so it’s typically undertaken when it’s already too late
  • Wealth transfer planning relates to end-of-life events, which often triggers emotions such as denial, avoidance or anxiety.

In our view, there are three key ways wealthy families can prepare to transfer wealth to the next generation:

Ensure everyone in the family has some level of financial education. Family members need to:

Engage all generations in a family indaba or gathering, in order to:

Put a support system of trusted advisers in place, and involve members of the next generation in meetings with the family advisers.

In practice, once they are comfortable with the idea of wealth management and investment concepts, members of the younger generation often bring new viewpoints, ideas and renewed energy to the table in discussions about family wealth.

It’s crucial that all members of the family work as a team and focus on a realistic, understandable goal that capitalises on the strength of the sum of the individual members.

Do you need assistance or more information on implementing any of the steps set out above? Call Marteen Michau on 011 778 6656 for an appointment or email

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