A family dynasty is defined as a cohesive economic entity that perpetuates family wealth, values and objectives for five or more generations. About 60% of ultra-wealthy families are intensely interested in having a family dynasty. The interest in creating a family dynasty is highest among ultra-wealthy families with single-family offices. Percentage-wise, the founders of the single-family offices find the prospect of a family dynasty more appealing. At the same time, two out of five C-level ultra-wealthy business owners are very interested in creating a family dynasty.
The Appeal Of A Family Dynasty
Generation Single-family office Family business Weighted average Founders 76.4% 32.1% 64.9% Inheritors 69.9% 49.1% 58.7% Weighted average 74.5% 43.3% 61.8%
N = 403 family enterprise respondents
Source: Family Fortunes: How Family Enterprises Thrive Across Generations
According to Paul Saganey, founder and president of Integrated Partners and co-author of Optimizing the Financial Lives of Clients: Harness the Power of an Accounting Firm’s Elite Wealth Management Practice, “With family dynasties, ultra-wealthy families not only share financial interests across generations, they also share values and goals resulting in an ongoing commitment to the family. For a family dynasty to exist, each generation must transfer the family fortune in one form or another, along with their core belief system, to subsequent generations. A well-formulated succession plan is essential to achieving both aims.”
Accountants are regularly among the professionals the ultra-wealthy turn to for guidance on establishing family dynasties. A major problem with creating a family dynasty is the ability to maintain or increase the family fortune across generations. As most families grow in size and establish multiple branches, the amount of wealth required can escalate significantly. Ultra-wealthy families, thinking generationally, must first understand what it will take to ensure the level of wealth they want for their heirs and later generations. Accountants are helpful with these calculations and can then focus on developing the best solutions.
“Without question, one of the major obstacles to creating family dynasties is inheritance taxes,” says Frank Seneco, president of the advanced life insurance planning boutique Seneco Global Advisors. “While an obstacle, it is often surmountable. To transfer wealth across multiple generations, professionals have to think creatively. For example, more or fewer tools are available depending on the jurisdictions involved and the time available for implementation.”
Family dynasties are also about transferring values. Families can use many tools to help them transfer their values to future generations. Examples include family meetings, vision and mission statements, family constitutions, and family banks. What often proves very effective is setting up a private foundation if the family is philanthropic.
According to Andree Mohr, chief implementation officer for Integrated Partners, a leading financial advisory firm where she oversees the growth initiatives, including the CPA Alliance program, “It’s common for the ultra-wealthy to turn to their accountants to ensure they have the right team to help them establish family dynasties. It’s often up to the accountants to bring the best specialists together and drive the process.”
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.