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The Dilemmas of Family Wealth
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The Dilemmas of Family Wealth

Insights On Succession, Cohesion, and Legacy

Judy Martel
Bloomberg Press, 2006
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7

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Recommendation

Before soap operas, people could follow the rise and fall of actual famous families’ fortunes. The soaps borrowed heavily from the sagas of wealthy families, stories with the essential elements of any good drama: money, nepotism, jealousy, decadence and conflict. Family businesses are the world's most popular form of corporate ownership, yet few family businesses make it past the second generation. Judy Martel offers case histories and aptly describes the problems associated with family fortunes, but tends to fall short of fully explaining solutions. She repeats some remedies often, such as forming a "family council." And, some remedies seem slight, such as ways to resolve differences over sharing a summer house. getAbstract appreciates Martel's emphasis on family values, while wishing this book's solutions were all as solid as the fascinating problems it describes.

Summary

Squandered Fortunes

Family fortunes are overwhelmingly often made by one generation and lost by the next. One study of 3,250 wealthy families found that, in the course of a decade, 70% did not transfer any wealth from one generation to the next. While the popular conception of wealth management often involves squads of lawyers and accountants, the study found that the lack of professional estate planning caused only 3% of the families in the study to lose their fortunes. The prevailing reason was that family members did not trust one another or founders failed to state their intentions.

Every family has three potential types of capital: financial (land, securities, cash), human (other family members) and intellectual (family knowledge). These areas are intertwined, so a cohesive family with common goals can use its accumulated knowledge to build wealth. When a family works in unity for a common purpose over time, it can increase each type of capital and build a legacy. But, when one form of capital starts to decline, that drop can have a cascade effect on the other types. If human and intellectual capital begins to decline, relatives often panic and decide to cash...

About the Author

Judy Martel, CFP, is a vice president at an asset management company. She has 20 years of experience in journalism and public relations, and was a newspaper reporter for 11 years. She has written extensively on wealth issues and family dynamics for the Robb Report, Worth, Town & Country and Vive magazine.

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