Three fundamental concepts in the pursuit for maintaining family wealth

 In Investing Family

In the world of family enterprises/businesses and business families, the word perpetuity is often brought up. Undoubtedly, this is one of families’ main goals when they think about their future. A 2015 survey conducted by Campden Research, with 224 Family Offices around the world, evidenced that their main worry was to manage wealth through different generations. Other survey made by PWC in 2014 pointed that the biggest concern from business owners was to assure the future of their companies in the long term.

This is not a recent topic. An old Chinese proverb was adapted to different languages and cultures, since this is a recurring problem in the whole world. In Brazil, it goes as “rich father, noble son, poor grandson”. When it comes to that, it’s common sense that the success of business families in the long term is directly connected to the success of their companies. However, reality shows the struggle among family businesses to survive through generations. Understanding that the longevity of a family’s wealth might not be entirely connected to the longevity of the family’s business is a complex, but fundamental change of mindset in this pursuit.

In this context, this article introduces three fundamental concepts that families must adopt if they aim to perpetuate their legacy and wealth in a sustainable way in the long term:

The investor family

The Investor Family has a global vision of its financial capital, which includes the family’s enterprises, stakes in theIr companies (public or private), real estate, farms and all of its assets and financial investments, as part of their combined wealth. The main difference to the mentality of a “business family” is that the family business is now seen as an “invested” asset, and the family starts to constantly reflect on how to maintain the interests of both family and company always aligned, or in a scenario where there is no alignment, if it makes sense to keep such asset, which is at risk of deterioration over time.

Image 1: adapted from Gersick et. Al; image 2: created by the authors.

The difference may seem subtle, but many times it is crucial for the perpetuity of businesses and wealth in the long term. In fact, this is great for the company. On one hand, because businesses need to reinvent and be updated to survive in a competitive market; that means that a company, to keep itself profitable, needs managers always interested in it, willing to invest and with interests aligned to the company. On the other hand, the destruction of wealth through time, caused by the misalignment between the family’s and the company’s interests, can be avoided much before it becomes a big issue, as it frequently happens.

Wealth Governance

Wealth Governance is the set of practices that aim the total alignment of interests between the decisions taken in wealth management and the goals of the family who owns that wealth. Just like in the corporate and family contexts, this structure is formed by governance organs, statutes and regiments.

The investor family comprehends that the wealth governance is the key tool for its success in the long term, providing the family with governance organs and different instruments that broadly regulate and enable the management of this wealth, so that it works for the family’s long-term goals.

Image 3: created by the authors

In the context of the investor family, family governance and wealth governance form the pillars for that family’s long-term sustainability.

In the intersection between the two triangles is the governance organ responsible for assuring the alignment between the family and its wealth. This role can be played by the Family Council or Board of Directors, depending on the maturity and complexity of the family’s governance model. Corporate governance, on the other hand, is inserted in the context of wealth governance, since the company is seen as one of the assets that are part of a family’s financial capital.

Single Family Office

The Single Family Office (SFO) is a customized, transgenerational structure ruled by both family and wealth governance, with the goal of defending the interests of a single family towards its wealth through time. With its own structure, as simple as it might be, to execute strategies and control family wealth, the family will play an active, leading role in the management of their own wealth.

By becoming a protagonist, through the SFO, the investor family uses this structure to assure that its long-term goals are pursuit in a sustainable way and with total alignment of interests in the decision making process related to its wealth.

Therefore, a family that wants to perpetuate its legacy and wealth in a responsible way implements Family and Wealth Governance aligned. And the structuring of the SFO enables the existence of a transgenerational entity that works exclusively to execute the family’s strategies in the pursuit of its objectives.




Partner at INEO and co-author of The Investor Family and the Family Office.


Partner at INEO and co-author of The Investor Family and the Family Office.


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