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Yan’s Notes32
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Vertical and Horizontal Family Capital

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Yan from Owner.One

There are many myths and illogical behaviors among wealthy families in our field. Many of these have been analyzed in Penguin Analytics. One prevalent myth is that family money typically transfers vertically (to children). In reality, most transfers are horizontal (to spouses), both planned and unexpected. Analysts (Owner.One, UBS, and local banks) estimate that over the next 10-20 years, $75-95 trillion in capital will be transferred within families. In the next few years alone, $8-10 trillion will be moved horizontally to spouses. This capital will likely stay at the horizontal level for another 10-15 years before moving vertically to children. Key insight: much of the capital loss happens during the transfer itself, not afterward, doubling the actual loss rate. Founders need to pass on not only their wealth but also its detailed and formalized history to meet the increasing KYC (Know Your Customer) demands from financial institutions. Without the founder’s active involvement, it’s almost impossible to reconstruct the capital’s history, leaving family members vulnerable when questions arise about the funds' origins. A surprising 42.86% of capital founders don’t know the details needed for KYC preparation, and an alarming 88.06% of their family members are unaware of these requirements. Only 4.50% of family heads understand that inaction now merely delays the problem, passing it on to their family. Preparing for this is crucial, but that’s a discussion for another time. Recognizing the complexity of capital transfer is the first step.

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