Almost every culture has a saying about fortunes that do not last. In England it was “clogs to clogs is only three generations,” said to come from Lancashire. In America it became “shirtsleeves to shirtsleeves in three generations,” often credited to Andrew Carnegie, although the phrase has not been found in his writings; the earliest recorded use is from 1907. In Chinese, the saying is 富不过三代: wealth does not pass three generations.
This last post in the series looks at why that happens, and at the five mistakes that family office surveys flag again and again.
First, about that famous statistic
You will often read that 70% of wealthy families lose their wealth by the second generation and 90% by the third. The 70% figure comes from Roy Williams and Vic Preisser’s 2003 book Preparing Heirs, which reported that 70% of wealth transfers fail. As far as we could find, the underlying data and method have not been published. The family wealth consultant James Grubman has argued that the “70% rule” traces back mainly to a 1987 study of 200 Illinois manufacturing companies, in which the 70% “failure” rate is simply the reverse of the 30% of businesses that stayed in the family. Selling a business is not the same as losing a fortune, and Harvard Business Review has pointed out that family businesses last far longer than a typical public company does.
The erosion itself is real, though. A 2015 study in the Cato Journal by Robert Arnott, William Bernstein, and Lillian Wu found that heirs tend to halve their inherited wealth, relative to the growth of the economy, every 20 years or less. Only 34 names from the 1982 Forbes 400 list of richest Americans were still on it in 2014. The main reasons were ordinary: spending, splitting the money among more heirs, taxes, and fees.
Mistake 1: No succession plan
In the UBS 2025 survey of 317 family offices, only 53% had a plan for passing on the family’s wealth, up from 47% a year earlier. Among those without one, the most common reasons were that the owners thought they had plenty of time (29%), had not decided how to divide the wealth (21%), or had not found time to discuss it (18%). J.P. Morgan’s 2026 report found that 86% of family offices had no clear succession plan for their own decision-makers.
Onassis shows what happens when plans are overtaken by events. His son Alexander died in 1973. When Onassis died in 1975, his daughter Christina, then 24, inherited a large share of the fortune. She died in 1988, and her only child, Athina, was three. Years of disputes followed between Athina’s father and the Greek trustees over control, until Athina took over at 18. (Our Onassis series and Part 4 cover the structures he left behind.)
Mistake 2: Keeping everything in one basket
Concentration builds fortunes. Rockefeller and Onassis both bet heavily on one industry. Keeping a fortune is a different task. In Citi’s 2025 survey, about two-thirds of family offices held at least one concentrated position in a private or public company, and most of them did not use any strategy to reduce the risk.
The risk is not theoretical. A J.P. Morgan study by Michael Cembalest looked at stocks in the Russell 3000 index from 1980 to 2014 and found that roughly 40% of them suffered a permanent decline of 70% or more from their peak. An extreme case was Archegos, a family office that collapsed in 2021 after combining concentrated bets with heavy borrowing; banks lost more than $10 billion, and its founder was later sentenced to 18 years in prison for fraud. Most concentration is far less dramatic, but the logic is the same: one asset can fail.
Mistake 3: No written rules for decisions
Families argue, and that is normal. The problem is having no agreed way to decide. PwC’s 2023 survey of more than 2,000 family businesses found that only 30% had a family constitution or similar written rules, and only 19% had a way to resolve conflicts. J.P. Morgan found that just 35% of family offices had a formal investment policy and 32% had a board. Williams and Preisser attributed 60% of failed wealth transfers to a breakdown of communication and trust.
Written rules do not prevent disagreement, but they decide how it ends. The Rockefeller trusts of 1934 named a committee that could instruct the trustee, an early example of writing down who decides.
Mistake 4: Not preparing the next generation
Heirs are often the last to know. In the UBS 2025 survey, among family offices that did have a succession plan, only 26% had involved the next generation from the start, and 35% had not consulted them at all. Forty-three percent said preparing heirs to manage wealth responsibly was a challenge. In Citi’s survey, 58% of family offices named next-generation preparation as a gap in their services.
The Vanderbilt fortune is the classic warning. When Cornelius Vanderbilt died in 1877, he was the richest man in America, leaving about $100 million. According to the family history Fortune’s Children, when about 120 of his descendants gathered at Vanderbilt University in 1973, there was not a millionaire among them.
Mistake 5: Ignoring costs and quiet risks
Some risks grow slowly. A 1% higher cost each year can leave a portfolio about a quarter smaller after 30 years, as we showed in Part 3. Others arrive suddenly:
- People risk. In J.P. Morgan’s 2026 report, a third of family offices named over-reliance on particular providers or individuals as a top risk.
- Cyber risk. In Deloitte’s 2024 survey, 43% of family offices had suffered a cyberattack in the previous 12 to 24 months, rising to 62% among offices with more than $1 billion. Almost a third had no plan for responding to an incident.
A fair caveat
Most of the figures above come from surveys of a few hundred family offices that chose to respond, and the best-known statistic in this field rests on weak evidence. A family that sells its business, spends on its members, or gives to charity has not necessarily failed. The goal is not to keep every dollar forever. It is to make choices on purpose rather than by accident.
Five lessons to take away
- Plan succession before you need it. “Plenty of time” was the most common reason for having no plan.
- Keep the asset that built the fortune separate from the money that protects it. Concentration builds wealth; diversification keeps it.
- Write down how the family decides. A constitution, a council, or a committee turns arguments into decisions.
- Involve heirs early. A plan the next generation has never seen is a plan they may not follow.
- Watch slow costs and sudden risks. Fees compound, and one key person or one breach can stop everything.
The whole series in five lines
- What a family office is: decide whether you need one before you build one.
- Single or multi: choose the model by the job and the budget.
- Cost: measure it as a share of assets, and know what is included.
- Structures: separate who owns, who decides, and who benefits, on paper.
- Mistakes: plan succession, diversify, write rules, prepare heirs, and watch costs.
Questions to bring to your advisors
If we died tomorrow, who would decide what happens to our wealth? How much of our net worth sits in one company or asset? Does the next generation know the plan? What would happen if our key advisor left or our systems were breached? These are questions to bring to your advisors, not advice.