The next decade or two will see the largest transfer of wealth between generations in human history. Millennials are on track to become the richest generation ever. This will happen either through natural succession or earlier planning. According to a report from Owner.one, most asset owners are ill-prepared for this shift.
Wealth accumulation often demands time and steadfastness. So, careful planning is essential.
This is a key lesson for families experiencing wealth generation for the first time. For example, families with a net worth of $3M–$99M are in the most vulnerable position. When it comes to the transfer of assets and capital, they account for up to 75% of all losses.
Consequently, fortunes between $1M to $99M often last just one generation, with the family’s lifestyle declining post-transfer in almost 70% of instances, often irreversibly.
Challenges in Intergenerational Wealth Transfer
The Owner.one report highlights a lack of awareness among capital founders and heirs. It notes only 7% know they usually have three to six months after a force majeure event to manage asset transfers.
A big problem is the gaps in asset data . This leads to successors accessing only the assets that are readily available in emergencies. The remainder often undergoes a prolonged, costly process of tracing and transferring.
This oversight contributes to capital founders potentially losing up to one-sixth of their asset record history annually, with even higher risks when involving family members.
Nearly half (48%) of capital founders doubt their family’s ability to manage wealth and assets effectively, indicating a widespread concern over smooth asset transfers.
This apprehension is further evidenced by only about 6% of capital owners having established wealth transfer plans, showcasing a prevalent mistrust in families’ abilities to manage assets.
The main barrier to loss-free capital transfer? Informational asymmetry. A mere 4.5% of capital founders realize their lack of action shifts the burden of asset and capital transfer to their family and children, leaving them without the necessary means to tackle the issue.
Reducing Wealth Loss Risks
The report from Owner.one reveals that a mere 2% of capital founders are aware of the significant wealth loss typically incurred during transfers, mainly due to incomplete asset data.
Traditional wealth data transfer methods, which often depend on personal trust, are seen as unreliable by 89.1% of capital founders. They lack confidence in designated individuals’ ability to follow through in critical moments.
However, advancements like blockchain technology offer secure, trustless solutions for financial data management. Owner.one, for instance, provides a private digital vault that enables secure, timely asset and capital data transfers without third-party intervention.
Such technological innovations play a crucial role in minimizing losses of capital and asset records across generations.
