Many family enterprises and Family Offices are built over decades through hard work, vision, and a deep commitment to family values. Yet despite these strong foundations, relatively few successfully preserve both their wealth and their business beyond the third generation. Echoed by Julius Baer's How to Plan Your Family Business Succession report, which suggests that 88% of wealth transfers to the third generation fail. It is a challenge often summarised by the phrase "shirtsleeves to shirtsleeves in three generations" – the idea that wealth created by one generation is often lost by the third.
While market conditions, investment performance and economic cycles are often cited when family wealth declines, the reality is frequently more complex. In many cases, the greatest risks emerge from within the family itself. Governance gaps, unclear leadership structures, delayed succession planning and poor communication can quietly undermine even the most successful enterprises.
The succession challenge
Every family business and Family Office will eventually face a transition of leadership and ownership. For the wealth creators and long-serving leaders, this can be one of the most significant and challenging periods in the lifecycle of the business.
Succession planning is often delayed because the conversation itself can be uncomfortable. Discussions around retirement, transition, wealth transfer and future leadership inevitably touch on family dynamics, personal relationships and differing expectations. As a result, many families postpone these conversations until a change becomes unavoidable.
But the challenge is not simply identifying who comes next. Recent research from McKinsey, analysing more than 200 family-owned businesses across 50 countries, found that many organisations experience declines in revenue growth, earnings, and shareholder returns in the years following a CEO transition. Notably, these challenges were evident regardless of whether the successor was a family member or an external executive.
This suggests that succession failures are often less about the capability of the incoming leader and more about the transition process itself. In many cases, the way leadership is transferred can have a greater impact on long-term outcomes than who ultimately assumes the role. This is one of the core reasons so many family businesses fail to make it beyond the third generation. It is rarely the absence of wealth or opportunity that causes decline, but the accumulation of small, unresolved transition issues across generations. Over time, weak handovers, unclear authority, and delayed planning compound until the business is no longer operating on the original foundations that created its success.
The often-overlooked role of the outgoing leader
While much of the succession conversation focuses on preparing the next generation, we believe that the role of the outgoing leader is equally important.
For many wealth creators and Family Office leaders, personal identity is closely linked to the organisation they have spent years building. Stepping away from that responsibility is rarely straightforward. McKinsey's research points to the outgoing CEO as one of the most influential factors in determining the success of a transition. Some leaders leave too abruptly, passing unresolved operational challenges, legacy systems and organisational complexities to their successor. Others remain heavily involved after formally stepping down, creating a blurred line around authority and decision-making. Both scenarios can make it difficult for new leaders to establish credibility and execute their own vision.
The most effective leaders recognise that succession begins long before they leave. They use their final years to strengthen governance, simplify decision-making structures, resolve potential conflicts and create clarity around future leadership. In doing so, they help ensure that their successor can focus on leading the business forward rather than managing inherited challenges.
Just as importantly, successful transitions often involve a clear plan for the outgoing leader's future role. Whether that involves board participation, mentoring, or other strategic activities, clarity around responsibilities and boundaries helps support continuity while allowing new leadership to establish itself. The goal is not complete disengagement, but rather a structured transition that allows authority to transfer effectively.
Governance matters more than many families realise
One of the recurring themes in discussions around long-term family business and Family Office success is governance, especially within a Family Office.
In the small and intimate environment of a Family Office, decision-making is often highly centralised. Informal structures can work effectively when leadership is concentrated within a single individual. However, as the entity grows and ownership expands across generations, these arrangements often become increasingly difficult to sustain.
Good governance practices are not about creating bureaucracy. It is about creating transparency, consistency and trust. A formal governance framework can foster well-managed transitions by defining leadership responsibilities, establishing decision-making processes and creating clear pathways for succession. These structures help remove ambiguity during periods of change and allow succession to become a structured process rather than a purely personal one.
Through our work with families and their Family Offices, Agreus regularly sees governance emerge as one of the defining factors separating organisations that successfully transition across generations from those that struggle with continuity and leadership challenges.
Preparing the next generation
A common misconception is that succession simply involves identifying who will take over the business. In reality, successful succession planning focuses just as much on preparation as it does on selection.
Findings from the UBS Global Family Office Report highlight this challenge. While many Family Offices recognise the importance of succession planning, relatively few have formal processes in place to prepare the next generation for future responsibilities. The report also found that next-generation’s disengagement is often misunderstood. In many cases, what appears to be a lack of interest is actually a lack of involvement, education or empowerment.
Future leaders require time to develop the skills, experience and confidence necessary to lead effectively. This requires mentoring, exposure to decision-making and structured leadership development over many years.
The most successful families begin early. They introduce younger generations to the family's values, governance structures and long-term objectives well before leadership transitions become imminent. As involvement increases over time, future leaders gain a deeper understanding of both the opportunities and responsibilities associated with ownership and stewardship. For many families, this process also involves seeking external perspective to assess leadership readiness objectively and ensure succession decisions balance family dynamics with long-term business requirements.
Not every family member will want to lead, and not every family member will be the right fit for leadership. Which is why communication is important. Conversations about leadership, ownership, and future responsibilities can understandably carry significant emotional weight, but it needs to be done in the early years. Through conversations, a family may realise that, incumbent leaders struggle to relinquish control, while successors have differing expectations and visions. When these conversations are avoided, over time, this can create misunderstandings, frustration, and conflict. Open and structured communication allows families to address concerns before they become larger issues. It creates alignment around shared objectives and helps ensure that future leaders understand both the opportunities and responsibilities that come with succession.
Viewing succession as a strategic opportunity
While succession is often discussed as a risk, it should also be viewed as an opportunity.
A well-managed transition can strengthen governance, clarify strategic priorities and create a platform for long-term growth. New generations often bring fresh perspectives, new skills and a different understanding of emerging opportunities.
Succession planning also provides an opportunity to revisit the family's values, purpose and long-term vision, helping align future leadership with long-term objectives. When approached proactively, succession becomes far more than a transfer of ownership. It becomes a process of strengthening the organisation, developing future leaders and creating the foundations for continued success.
Looking beyond the third generation
Through our years of working with families and Family Offices, we see a consistent theme: successful succession is rarely determined by a single decision or individual. Instead, long-term continuity depends on governance, communication, leadership development and careful planning long before a transition takes place.
This is why the “third generation failure” is so persistent. By the time a business reaches its third transition, the effects of earlier governance gaps, incomplete succession planning and unclear leadership handovers are often fully exposed. What looks like a sudden loss of capability or direction is usually the result of long-term structural weaknesses that were never fully addressed
So start planning early. Start investing in governance. And start preparing future leaders long before succession becomes necessary. If your Family Office is beginning to think about succession, governance or leadership continuity, speak to Agreus about how we can support you.