We’ve all heard the saying: “clogs-to-clogs (OR shirtsleeves to shirtsleeves) in three generations.” This age-old adage reflects a challenge many UK families face: preserving wealth beyond the second or third generation.
When we talk about “generations” in wealth transfer, we typically mean:
- First generation (G1): The wealth creators—individuals who establish and build a successful business or accumulate the initial wealth.
- Second generation (G2): The children of the wealth creators, who inherit or take over the assets or business.
- Third generation (G3): The grandchildren, often further removed from the origins of the wealth.
The risk of wealth dissipation often begins with the second generation, who may not share the entrepreneurial mindset or financial discipline of the first. By the third generation, the disconnection grows, with family wealth frequently lost due to lack of stewardship, planning, and shared purpose.
Why Wealth Fails to Survive Three Generations
Research highlights the following statistical outcomes:
- 70% of wealth is lost by the second generation.
- 90% is gone by the third.
For wealth creators and their advisers, the risks to wealth preservation are significant. However, these risks are avoidable with proactive planning and strategies tailored to specific scenarios. The type of wealth being passed is very significant in this context:
Challenges for different types of Wealth
- For Wealth Creators passing on a Business:
- Concentration Risk: Wealth tied to a single business or industry is vulnerable to market shifts or operational mismanagement.
- Intergenerational Gaps: Without clear succession planning, businesses can fail when passed to the next generation.
- Family Tensions: Disputes over leadership or ownership can lead to fragmentation and wealth loss.
- For Wealth Creators passing on the sale proceeds of a Business:
- Sudden Wealth Syndrome: Liquidity from a sale can erode through poor investments or unsustainable spending.
- Loss of Purpose: A family business often provides identity and direction; selling can create a void if the family lacks a future vision.
- New Financial Risks: Taxes, inflation, and market volatility can reduce wealth, especially without careful planning.
Breaking the Cycle: Transformative Legacy Planning
The Hereditas Legacy Planning Process directly addresses these risks, ensuring families can preserve and grow their wealth across generations.
The Four Pillars of Legacy Planning:
- Family Governance: Establish clear decision-making frameworks, rules, and structures that align with family values and reduce conflict.
- Wealth Diversification: Transition wealth from a single business or asset into a balanced portfolio to minimise risk and enhance resilience.
- Education and Stewardship: Prepare future generations with financial literacy, leadership skills, and access to professional guidance to manage wealth effectively.
- Purpose-Driven Wealth: Align family wealth with shared values and goals, creating a meaningful legacy that reflects the family’s identity and aspirations.
For Financial Advisers and Planners
As a UK-based financial adviser, offering legacy planning services creates a unique opportunity to differentiate yourself while delivering unmatched value to your clients. By partnering with Hereditas, you can:
- Expand your proposition: Add a future-focused, value-adding and fee-generating service that sets you apart.
- Create long-term relationships: Build trust with clients and their families by helping them achieve multigenerational goals.
- Achieve tangible outcomes: Empower clients to create structures and governance processes that protect and grow their wealth while aligning it with their most important values.
Hereditas training provides you with the tools, frameworks, and expertise to confidently guide families through these complex yet rewarding conversations.
Call to Action
Ready to secure your legacy—or help your clients preserve theirs?
📩 Contact Me to start your journey –
👉 Visit **HereditasUK.co.uk
