Wealth Attrition and Family Business Basics

It’s often been called the Holy Grail of family business succession plans: anyone currently in charge at a company expects that someone within the family will take over operations as the former owners, the parents, step down.

The reality is that it does not happen that often. Most family business owners have this as a goal and dream, but it rarely works out this way, making succession planning options all the more important for parents.

A recent study by Forbes found that although US families have better wealth attrition numbers than Europe, it’s hard for children and future generations to maintain or grow wealth the way their parents did. US families have a 60% wealth attrition rate for each generation, although the European stats show only one-third of the US rate. However, in Europe, up to 75% of family businesses with stay in the family for four or more generations. In the US, it’s rare for a company to stay within the family for even two generations.