Date: Oct 29 2020
Maarten de Groot, Enterprise Family Researcher at Vu Amsterdam University School of Business, and also the CEO of a single family office Eligius, explores why the rate of failure is so high when transferring wealth from one generation to the next.
Over the last four years, de Groot conducted a number of research studies about wealth preservation and tested his findings by looking at over 1,000 global enterprise families, and working more closely with a few hundred of them. He studied multiple kinds of enterprise families – some with legacies going back over 300 years and spanning across 12 family branches.
In wealth preservation, the goal is for the extended family to security monetary prosperity for successive generations. Wealth preservation considers long-term success, well-being of the whole family, and much more than just investment management.
And where money management and investment capabilities seem all important, several concepts emerged that are clearly more important. de Groot shows that the key drivers of wealth transfer are relational, rather than purely financial.
Maarten de Groot identified the “Big Five” wealth preservation attributes. To succeed in wealth preservation family enterprises need a distinct focus and a strategy on each of these areas:
- Family social capital
- Family governance
- Family learning
- Family identity
- Transgenerational orientation
Here are DeGroot’s most notable results:
- Family social capital hardly varies within contextual factors such as wealth level, family size, or generational or regional background.
- North American enterprise families score lower than European families on all attributes.
- Enterprise families with a family office score higher on all attributes than families without a family office.
- Enterprise families with a family business score lower on all attributes.
When looking at family wealth preservation, investment management is important, but a focus on money alone does not lead to wealth preservation. Focus instead on the important function of supporting family communication, connectivity and structures. The role of the family office is instrumental in balancing the financial considerations with all other soft attributes.
Miguel López de Silanes Gómez is the market leader for Europe and Latin America at Family Office Exchange (FOX). He is responsible for delivering FOX services to current members, and also actively works to expand the network in Europe and Latin America. His base is in Madrid, but he spends half of his time in Latin America.
Areas of Expertise: Enterprise Families, International Trends