In our conversations with families, we often hear a familiar refrain: the millennial generation is not interested in the family business. A 2008 study conducted on family businesses revealed that only 15% of family-owned companies would pass on to the next generation.(1) That statistic alarms many first generation business owners, especially if future generations appear less inclined to continue the family business.
One reason that may explain the reluctance of younger generations to associate themselves with the source of the family’s wealth is that these millennials are coming of age in a remarkably unwelcoming environment toward business, investing, and wealth. At our recent Liquidity Event at the Harvard Club, we heard numerous stories of family advisors who struggled to engage the next generation and much of that disinterest was attributed to changing attitudes among the younger generations, particularly millennials.
If you talk to the principal of a first generation ultra-wealthy family, most often you will find him or her to be concerned by the lack of business engagement from the next generation. The well-worn phrase, shirt-sleeves to shirt-sleeves in three generations is engrained the minds of the heads of these families. They recognize that their legacy and wealth could be squandered by the next generation and they often struggle with the decision of whether to hand off the business to a less capable family member or sell off the business they have built to a private equity or strategic buyer.
The more that the Baby Boomers and Generation X can make an effort to understand the distinct qualities and interests of the Millennial generation, the more families can adjust their expectations for what successive generations will be able to contribute and where their real passions lie.
(1) Source: U.S. Trust, Bank of America Private Wealth Management. “Study Reveals Ultra-High-Net-Worth Family Businesses Are Not Implementing Succession Plans and Asset Protection Strategies.” https://newsroom.bankofamerica.com/press-release/global-wealth-investment-management/study-reveals-ultra-high-net-worth-family-business