Archive for family heritage

The 70/80/90 Metaphor

by Mark Hartnett, President, Argent Family Wealth ServicesHT Mark Hartnett

What is the significance of these three numbers?

The 70/80/90 Story is a statistical one that many financially successful fami- lies either don’t want to hear or have chosen to ignore. They tell a story of harm and suffering when the intention is usually the opposite. Let’s take a closer look:

70: The percentage of all generational transfers that fail (defined as, follow- ing the transition, the beneficiaries lose control of their wealth through foolish expenditures, bad investments, mismanagement, inattention, in- competence, family feuding or other causes within their control).

80: The percentage of trust beneficiaries that believe their trust is more of a burden than a blessing. 90: Of the generational financial transfers that are successful, 90% of assets are transferred into trusts by the third generation.

These numbers explain in great simplicity why the “shirtsleeves to shirtsleeves in three genera- tions” proverb is a reality for so many families. In other words: 1) most transfers fail; 2) of those financial transfers that are successful, almost all assets are transferred into trusts whereby; 3) the vast majority of beneficiaries are unsatisfied with their role as a beneficiary. So the answer to the question,“What comes next?” is usually… shirtsleeves for the third generation.

My first introduction to the 70/80/90 phenomena was early in my journey as a professional trustee. I was introduced to a third generation beneficiary who had recently dropped out of high school when she found out she was a beneficiary of her grandfather’s trust. She was “set for life” and didn’t need to waste her time getting an education. While $500,000 may have seemed like a lot of money to a bright-eyed teenager, neither my counsel nor her quickly decreasing trust ac- count balance convinced her to change her course and results of her foolish decisions.

So what do families who beat those odds do differently?

  • Recognize their assets are not only financial, but also human, intellectual, spiritual and social – the families also work very hard at being intentional in growing all forms;
  • Create a shared vision (their “why”) and mission (their “how”) for the family’s wealth;
  • Communicate on a consistent basis in both structured and non-structured settings;
  • Learn how to become mindful givers as well as receivers;
  • Create trust cultures that seek to grow excellent beneficiaries;
  • Tell and retell the family’s stories.

    As you can guess, this requires great effort for the families that seek to defeat the 70/80/90 Story. However, the families that are intentional and committed to the process are much more likely to be successful and leave a lasting legacy for generations to come. Let that be our guiding thoughts as we enter a new year in our lives.

    Roy Williams and Vic Preisser, Preparing Heirs (San Francisco: Robert D. Reed Publishers, 2003).
    Hartley Goldstone, James E. Hughes, Jr. and Keith Whitaker, Family Trusts (Hoboken: John Wiley & Sons, Inc, 2015)