Family office insights this week:

• 7 ways lose all your wealth (and how to avoid this!)

• The latest on family office asset allocation

• Are family members taking the best family office jobs?

• One of my favorite books of the year

• Family office jobs in New York, London, Singapore

7 Ways To Lose Generational Wealth

How to lose it all - and lessons from family offices

We’ve all seen it happen - people losing it all, squandering wealth that should last generations.

Through poor decisions and bad behavior, people’s legacy can go up in smoke in an instant.

Unless wealth is managed properly, it can slip through your fingers, leaving future generations with nothing but stories of what once was.

Today it’s a look at seven ways generational wealth can disappear and the lessons family offices offer to prevent this.

1️⃣ Financial Illiteracy: The Fast Track to Poverty 📉

It is estimated that 70% of lottery winners end up going broke. The reason is clear - the winners are usually financially illiterate (the cynic in me says that you have to be financially illiterate to enter the lottery in the first place).

Most schools don’t teach financial literacy.

Most families don’t teach financial literacy.

So most people coming into wealth, whether it’s a liquidity event, an inheritance or even a lottery win, have never been taught how to handle that wealth. Without proper financial education, sudden wealth can quickly dissipate, leaving winners in worse financial shape than before.

Lesson: Education is Key 🧠

Start financial education early.

Teach younger generations about money management, budgeting, and investing. Give them staged responsibilities and real-world practice to build their financial acumen.

Highlight the importance of saving and investing over frivolous spending.

Encouraging family members to be involved in family businesses can create a sense of ownership and responsibility.

It also provides practical experience in managing and growing wealth.

Hiring external advisors and mentors can provide unbiased guidance and prevent potential conflicts of interest. These professionals bring expertise and objectivity to wealth management.

Some more on family office education:

2️⃣ Estate Errors: The Pitfall of Poor Planning ⚠️

It’s one of life’s injustices that the very wealthy often avoid inheritance or estate taxes altogether while the merely wealthy can end up paying fortunes to the government.

Poor estate planning can result in unnecessary taxes or family disputes and legal battles that can drain resources.

Lesson: Plan Ahead with Precision 📝

Create wills and trusts to ensure your wealth is distributed according to your wishes.

Regularly update your estate plans to reflect changes in your family and financial situation. Involve family members in the planning process to avoid surprises and ensure everyone is on the same page.

Take a look at the newsletter on Private Trust Companies for insights into how family offices utilize this structure to plan their estates effectively.

3️⃣ Spending Sprees: The Luxury Lifestyle Trap 🏖️

Heirs or spouses often indulge themselves. When the money comes easily, so can the spending.

Founders are usually more grounded, but their successors often lack the same discipline.

Lesson: Educate on Wealth Sustainability 📚

Overspending can creep up on people and without someone sounding the alarm, spending can get out of control.

Family offices help teach family members the importance of saving and sustainable spending. They emphasize the basic concept that income should always exceed expenditure.

A family culture that va^{lues financial prudence over extravagance. Regular financial check-ins can help k} eep spending in line with long-term goals.

4️⃣ Diversification Fail: The All-In Gamble 🎲

Putting all your eggs in one basket can end in disaster. Whether it’s Bitcoin, real estate, or single stocks, lack of investment diversity can lead to catastrophic losses.

Going all in may be the way to build wealth in the first place, but diversification helps people hold on to that wealth.

Lesson: Diversify Wisely 🌍

Work with a smart investment team or advisors to diversify your investments across various asset classes. Regularly review and adjust your investment portfolio to align with market changes and your financial goals.

Diversification spreads risk but also increases the potential for stable returns over time.

5️⃣ Economic Shifts: The Unpredictable Threat 🌪️

Recessions, wars, and other global events can wipe out fortunes overnight. Economic shifts are beyond anyone's control but preparing for them is within everyone’s control.

Lesson: Build a Resilient Strategy 🛡️

Develop an adaptable and resilient investment strategy.

Maintain liquid assets to weather economic storms. Invest in assets that hedge against inflation, such as real estate or commodities. Consider the level of leverage the family is comfortable with.

Staying adaptable and ready for economic shifts can protect your wealth during uncertain times.

6️⃣ Poor Planning: The Ostrich Approach 🦩

Many people fail to accept their own mortality, neglecting to plan for a future without them.

Only 63% of family offices have a succession plan in place - that number should be 100%.

Lesson: Embrace Long-Term Planning 🌟

Accept the necessity of long-term planning.

Accept that we won’t all live forever.

Have those difficult discussions with family members and make sure you have the best advisors who can guide you through the complexities of wealth management and succession planning.

Holding regular family meetings to discuss finances, investments, and plans can build a sense of responsibility and unity.

Transparency ensures that everyone understands the family’s financial position and future goals.

7️⃣ Die with Nothing: The Extreme Approach 🚫

Some founders believe in cutting children off from wealth entirely, subscribing to the “die with nothing” philosophy. It’s become quite fashionable - although whether people will follow through is another matter.

Die with nothing is a sure-fire way to end generational wealth. For those who follow through, there will be some horror stories.

Lesson: Find a Balanced Approach ⚖️

There are better ways to handle wealth. Well-run family offices can help avoid the pitfalls of wealth while maintaining its advantages.

Engaging in philanthropic efforts benefits society and instills a sense of duty and purpose in heirs. See the X highlights below for more on The Giving Pledge.

It shifts the focus from mere consumption to contribution.

More than just money

Generational wealth is more than just passing down money.

It’s about imparting knowledge, values, and strategies that ensure long-term prosperity and stability.

Avoiding the common pitfalls and embracing the lessons from seasoned family offices can help you build a lasting legacy that your descendants will thank you for. 🌟

𝕏 highlights

The latest on where family offices are investing.

Who take the top jobs in family offices.

The Giving Pledge - UHNW commitments to philanthropy.

 💼 where to work

Three notable family office job opportunities currently open…

Senior Director of Tax - Private Family Office (New York / Multi-Family Office

Head of Finance - Private Family Office (United Kingdom / Single Family Office) 

Assistant Director, Family Office & Philanthropy - Monetary Authority of Singapore (Singapore / Central Bank) 

📚 what to read

I blasted through Never Enough by Andrew Wilkinson this week and it’s easily one of my favorite books of the year. The memoir details Wilkinson’s journey from humble beginnings to co-founding the wildly successful Tiny - a holding company described as the Berkshire Hathaway of the internet. His descriptions of how wealth impacted his life and his family are particularly poignant. Highly recommend!

📻 what to listen to

The Defuse Podcast – Family Office Risk Management with Edward V Marshall. This episode dives into family office risks and the measures that can be taken to mitigate them. A fascinating listen.

📺 what to watch

The Olympics. 🤷‍♂️

And finally…

Time for a quick survey. Lots of family offices look to fly under the radar. It helps them avoid unwanted solicitation and criminal attention. Other family offices are making tentative steps to put themselves out there.

So today’s questions for family office people are around online visibility:

Results next week.

That’s all for this week, Family Office Buzz will be back on Monday (here’s the last edition if you missed it) with more of the best content on family offices and beyond.

Until next week, see you on 𝕏 or LinkedIn

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