Half of Business Owners Do Not Want Their Children to Inherit, Run Business
93% surveyed want their children to forge their own path, Wells Fargo survey finds
Operating your own business is considered an “American Dream” by many, yet when it comes to succession planning, half (52%) of business owners do not want their children to inherit and run the business, according to a recent Wells Fargo study.
On behalf of Wells Fargo, Versta Research conducted a national online survey of 1,008 “wealth creators,” defined as U.S. adults aged 50 or over who have at least $1 million in investable assets, excluding those who inherited most of their assets.
“As we work with clients, they tell us that reasons vary from a lack of confidence that their children will keep the company on solid footing, to believing large inheritances can be a disincentive to earning one’s own financial success,” said Michael Liersch, head of Advice & Planning for Wells Fargo Wealth & Investment Management. “More parents are recognizing their children simply are not interested in joining the family business and are not pressuring them to do so. Knowing what your children are interested in and where their strengths lie is key to effective succession planning.”
Among parents, nearly all (94%) want their children to forge their own path, rather than follow in their footsteps.
“My father originally planned to sell our 110-year-old family business, Pioneer Linens; yet a year before he passed away, he named me as successor—and it’s been my honor to continue the legacy of both my father and grandfather,” said Penny Murphy, third-generation business owner. “My brother, on the other hand, was the recipient of my father’s real estate. We are grateful that our father thoughtfully created an equitable estate plan that aligned with our respective interests.”
Where the wealth comes from
Nine out of ten (90%) wealth creators attribute their financial success specifically to hard work and determination. In addition, two-thirds (63%) of wealth creators cite the advantages of a good education, and almost half (43%) acknowledge the importance of living in the land of opportunity, while a quarter (24%) acknowledge the role of luck.
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Helping to move this success down through family lines tends to get trickier for some, though. Three out of four wealth creator parents (73%) believe they have succeeded in passing down their financial values, and (75%) feel they have done a good job raising their children to be financially successful on their own—yet almost half (44%) worry about their children not knowing how to build wealth of their own.
In line with wealth creators expressing concern about their children’s ability to build their own wealth, they also said they provide a good deal of financial support to their adult children, with four out of five (81%) saying they will bail them out of financial trouble. Although 88% of Gen X parents said they believe that wealth can ruin children (compared to 81% of respondents overall), nearly half (48%) acknowledge they tend to overdo it when it comes to giving things to their children (compared to 40% of respondents overall).
Most wealth creators help their adult children financially in multiple areas:
Education
80%
Cars
51%
Travel or vacations
46%
Ongoing expenses
35%
Healthcare
29%
Houses
27%
Grandchildren’s education
25%
Childcare
6%
Notably, parents who said they help their adult children with houses rises to 47% among those with $5 million or more in investable assets (compared to 27% of respondents overall).
And while a large majority (70%) want their children to live up to their family’s standards of wealth and success, nearly a third (30%) report it has been hard to transmit their work ethic to their children—and this is higher (40%) among Gen X parents.
“Family business owners may be tempted to transfer ownership as an incentive for family members to join the business,” said Bob Marshall, business growth strategy executive at Wells Fargo Bank, N.A. “While well intentioned, these transfers may lead to unintended consequences, especially if the family member does not have the required skills, engagement, or desire to take over the business.”
Two out of five (39%) say their business has been an important source of meaning and purpose in their lives, and one in six (17%) say it is part of the legacy they want to leave.
“Whether the family discussion is about estate planning or business succession planning, what’s important is that everyone is aligned and there are no surprises,” added Liersch. “Without a thoughtful conversation and formal plan, assumptions can be made and disruption to the family dynamics are highly likely.”
About the Survey
On behalf of Wells Fargo, Versta Research conducted a national survey of 1,008 Wealth Creators, defined as U.S. adults, age 50 or over who have at least $1 million in investable assets, excluding those who inherited most of their assets. The sample included 136 respondents from Generation X (ages 50 to 57), 771 Baby Boomers (ages 58 to 76), and 101 from the Silent Generation (ages 77 or older). Data were weighted by age to match current population estimates of U.S. households with more than $1 million in investable assets, derived from the Federal Reserve Board’s Survey of Consumer Finances. The survey was conducted January 3–18, 2023. Assuming no sample bias, the maximum margin of error for full-sample estimates is ±3%.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a leading financial services company that has approximately $1.9 trillion in assets, proudly serves one in three U.S. households and more than 10% of small businesses in the U.S., and is a leading middle market banking provider in the U.S. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth & Investment Management. Wells Fargo ranked No. 41 on Fortune’s 2022 rankings of America’s largest corporations. In the communities we serve, the company focuses its social impact on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and a low-carbon economy. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.
Additional information may be found at www.wellsfargo.com | Twitter: @WellsFargo.
About Wells Fargo Wealth & Investment Management
Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company and is one of the largest wealth managers in the U.S., with more than $1.9 trillion in client assets. WIM provides personalized wealth management, brokerage, financial planning, lending, private banking, trust, and fiduciary products and services to affluent, high-net worth, and ultra-high-net worth clients. WIM operates through advisors in Wells Fargo Advisors, independent brokerage offices, and digitally through Intuitive Investor and WellsTrade, as well as through advisors in The Private Bank and other banking centers.
Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A., Member FDIC, and its various affiliates and subsidiaries. Wells Fargo Bank, N.A., is a bank affiliate of Wells Fargo & Company.
Brokerage services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo
