A report from UBS and Agreus, drawing from family offices worldwide, looks at the ingredients that make for good governance.

A new report shows that among some of the world’s richest families, a significant number need to put in work to become fully prepared for business and to manage wealth.

The findings are in a 27-page joint study from UBS and Agreus, entitled Family Enterprise Governance Report. It covers families with $2.4 billion in average net worth showing that just under half (45 per cent) say the next generation is “somewhat prepared” to manage their dynasty’s wealth, with 25 per cent unprepared, 14 per cent prepared, 9 per cent “highly prepared” and 7 per cent unsure. A total of 106 family office figures took part in the survey.

Having a family constitution can be a game changer for effective governance by providing a reference point, the study said. More than twice as many families are likely to rate themselves as being effective communicators if they have a constitution than those who don’t; families that have constitutions are 1.5 times as effective at joint decision-making, and say they are 1.5 times more likely to effectively oversee family decision-makers if there's a constitution in place.

Other figures showed that families that engage in succession planning are four times more likely to rate their next generation as prepared versus those who don’t have a plan. 

The report showed that respondents indicated whether their family enterprise governance was effective at communicating (44 per cent); joint decision-making (43 per cent), and oversight of family decision-makers (28 per cent). 

Such findings, while they can sometimes be dubbed the “soft” side of how ultra-HNW families manage their affairs, are increasingly considered as important elements of preserving wealth over time. 

The UBS/Agreus report also delved into the benefits of structures such as investment committees; family business boards, and foundations.

“Families that rated their governance as effective shared a common theme: they invested in time, people and purpose. These families were deliberate in choosing individuals – both from within and outside the family – who could contribute to long-term decision-making. They were intentional about creating governance practices that do more than just check a box,” the reports' authors said.