Global Family Success Institute
A Division of Generations Empowerment Enterprises, LLC
Families Learning & Working Together Build Wealth
RESEARCH
Racial Wealth Gap
Family Businesses Biggest Challenges
Of primary importance among family firm wealth holders is transferring not only their financial wealth but also the values surrounding their wealth to subsequent generations. Primary values taught include encouraging children to earn their own money, philanthropy, charitable giving, and volunteering. (Wealth with Responsibility Study/2000, Bankers Trust Private Banking, Deutsche Bank Group)
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From the 2007 American Family Business Survey the top ten challenges for family-owned businesses are:
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Succession
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Labor costs
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Health care costs
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Finding qualified employees
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Foreign competition
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Labor union demands
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Domestic competition
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Oil prices
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Availability of credit from lenders
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Estate taxes
Family Firm Facts
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The greatest part of America’s wealth lies with family-owned businesses. Family firms comprise 80% to 90% of all business enterprises in North America. (J.H. Astrachan and M.C. Shanker, “Family Businesses’ Contribution to the U.S. Economy: A Closer Look,” Family Business Review, September 2003).
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International Family Owned Businesses contribute 64% of the GDP or $5,907 billion ($5+ trillion) and employ 62% of the U.S. workforce. (J.H. Astrachan and M.C. Shanker, “Family Businesses’ Contribution to the U.S. Economy: A Closer Look,” Family Business Review, September 2003)
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The oldest FOB operating in the United States is the Zildjian Cymbal Co. of Norwood, MA. Founded in 1623 in Constantinople and moved with the family to the United States in 1929. (Family Business Magazine, Spring 2001)
FAMILY ENTERPRISE USA – FAMILY ENTERPRISES DATA
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The tenure of leadership in a Family Enterprise is four to five times longer than their counterparts.
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There are 5.5 million family-owned businesses in the United States.
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Family Enterprises generate 57% of the nation’s GDP.
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Family Enterprises employ 63% of the U.S. workforce.
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75% of all new jobs are generated by family businesses.
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60% of all publicly held U.S. companies are family-controlled.
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95% of family businesses engage in some form of philanthropy.
SUCCESSION FACTS
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85% of family-owned firms that have identified a successor say it will be a family member. (Raymond Institute/MassMutual, American Family Business Survey, 2003)
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More than 30% of all family-owned businesses survive into the second generation. Twelve percent will still be viable into the third generation, with 3% of all family businesses operating at the fourth-generation level and beyond. (Joseph Astrachan, Ph.D., editor, Family Business Review)
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Within 10 years, 40% of business owners expect to retire, creating a significant transition. Of these, fewer than half (45.5%) of those expecting to retire in five years and fewer than a third (29%) of those expecting to retire between six and 11 years have selected a successor. (MassMutual, American Family Business Survey, 2007)
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Almost a third (30.5%) have no plans to retire, ever; and nearly another third (29.2%) report that retirement is more than 11 years away. (MassMutal, American Family Business Survey, 2007)
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Nearly a third (31.4%) have no estate plan beyond a will. (MassMutual, American Family Business Survey, 2007)
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37.4% of Family Businesses have buy-sell agreements or other arrangements defining who can own stock and how it is transferred (MassMutual, American Family Business Survey, 2007)
The black-white economic divide is as wide as it was in 1968
14 charts show how deep the economic gap is and how little it has changed in decades. The covid-19 recession is also hitting black families and business owners far harder than whites.
As Black Lives Matter protests grow across the nation over policing, the deep economic inequalities that African Americans face are coming to the forefront.
In many ways, the gap between the finances of blacks and whites is still as wide in 2020 as it was in 1968, when a run of landmark civil rights legislation culminated in the Fair Housing Act in response to centuries of unequal treatment of African Americans in nearly every part of society and business.
In the decades since, white wealth has soared while black wealth has stagnated. Many have pointed out the far larger share of white millionaires than black, but even among the middle class, the inequities are stark.
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To Read the entire article go to https://www.washingtonpost.com/business/2020/06/04/economic-divide-black-households/
Washington Post, By Heather Longand Andrew Van Dam, June 4, 2020
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The Black-white wealth gap left Black households more vulnerable
The COVID-19 pandemic has inflicted devastating effects on the U.S. economy, with job losses especially concentrated among women, minorities, and low-wage workers. Economists have described the uneven and unequal economic recovery from the COVID-19 recession as a “K-shaped” recovery, characterized by divergent recovery trajectories for the affluent relative to those of less means. While considerable attention has been devoted to examining the preexisting disparities in labor market outcomes that left some households more vulnerable than others to the COVID-19 recession, less attention has been paid to the role of wealth in determining a household’s ability to buffer the pandemic’s economic shocks.
Full article: https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/
Brookings: Up Front - Emily Moss, Kriston McIntosh, Wendy Edelberg, and Kristen BroadyTuesday, December 8, 2020
Updates: Billionaire Wealth, U.S. Job Losses and Pandemic Profiteers
Since the beginning of the pandemic, the Institute for Policy Studies has partnered with Americans for Tax Fairness to track the explosive growth of U.S. billionaire wealth — one of the most disturbing signs of inequality during a crisis that has devastated ordinary families. The top five billionaires have seen their fortunes expand even more rapidly than the U.S. billionaire class as a whole.
The $5 trillion in wealth now held by 745 billionaires is two-thirds more than the $3 trillion in wealth held by the bottom 50 percent of U.S. households estimated by the Federal Reserve Board.
Check back for our regular updates on U.S. unemployment and billionaire wealth during the pandemic emergency.
BLOGGING OUR GREAT DIVIDE
OCTOBER 18, 2021
Website: https://inequality.org/great-divide/updates-billionaire-pandemic/
REASONS BEHIND THE BUILDING AND LOSS OF FAMILY WEALTH
Quotes by John Messervey: He is an organization behavior consultant who counsels high wealth families throughout the United States and overseas. He often guides families, owners and managers through very difficult conversations and is known for his consultations with very complex family challenges.
"Almost incalculable. Individually, the cost is in the millions; over generations the cost can be in the billions. No one ever said running a family business was easy, but far too much money is lost by unresolved conflict, status quo management and indifferent family owners."
'Absolutely, the primary reason families lose their wealth isn’t estate taxes, poor succession planning or inept heirs. They fail because of multiple unresolved conflicts, family litigation, divorce and far too much energy spent on inter/intra generational differences. Family business owners are smart. They have completed their tax planning, estate transfer strategies and investment allocations. The conflicts are like a constant bell ringing, calling for attention."
Source: https://www.privatefamilyadvisor.com/resources/real-reasons-behind-loss-family-wealth/
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Quotes by Dr. Kirby Rosplock, The Complete Family Office Handbook: A Guide For Affluent Families and the Advisers Who Serve Them; Former Director of Research & Development at GenSprings Family Office
"When a family does not have a shared family vision of the future it become increasing more challenging to keep the family together."
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In a study conducted by JP Morgan Private Bank, researches identified eight best practices that helped families manage their wealth (personal and business) successfully over the long-term. The #1 Family Best Practice: Articulate a Clear and Powerful Vision.
Source: Amy Braden and Dennis Jaffe, The Eight Proactive Principles of Wealthy Families (New York: JP Morgan, 2003), 80-82.
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SCORE found that of the 28.8 million small businesses in the U.S., 19% are family-owned businesses (any business in which two or more family members operate the company and the majority control lies within the family). These businesses employ 60% of the U.S. workforce and generate 64% of America’s gross domestic product (GDP). Yet these businesses face unique challenges. Here are five to consider, and what to do about them:
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Company culture: The values of the owner’s family often become the values of the business. One research report* suggests that “clan culture” is prevalent in family businesses where loyalty and traditions are highly valued. This type of culture can make it difficult for outsiders to remain and thrive.
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Separate business from pleasure: Small businesses are often like family, with co-workers caring about each other. But when that family is actually family because of relationships by blood or marriage, special problems can arise. It can be challenging to make business decisions and operate without bringing personal feelings into the mix.
Source: U.S. Small Business Administration, https://www.sba.gov/blog/5-challenges-family-owned-businesses
Racial Wealth Gap Published by Harvard
Per the Federal Reserve Bank in Minneapolis in 2018, “The historical data also reveal that no progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years.”
Per Pew Research Center, the wealth racial gap has continued for decades. The typical white American family has roughly 10 times as much wealth as the typical African American family and the typical Latino family. In other words, while the median white household has about $100,000-$200,000 net worth, Blacks and Latinos have $10,000-$20,000 net worth.
Growing inequality is spoiling the chances to have a better life than the previous generation. Recent numbers show that the top 1 percent has seen their wages grow by 157 percent over the last four decades, while the wages of the bottom 90 percent grew by only 24 percent.
Source: https://news.harvard.edu/gazette/story/2021/06/racial-wealth-gap-may-be-a-key-to-other-inequities/
MULTIGENERATIONAL LIFESTYLE FACTS
A record 64 million Americans live in multigenerational households BY D’VERA COHN AND JEFFREY S. PASSEL, April 5, 2018., Pew Research Institute
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Why Living With Your Parents Can Be the Best Money Decision You Make BY MELANIE LOCKERT, Updated August 07, 2021
You can save money by not paying:
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Rent/mortgage
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Utilities (gas, electricity, internet)
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Renters or mortgage insurance
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You can reduce your debt by paying:
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Student loans
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Car loans
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Etck
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Source: https://www.thebalance.com/why-living-with-parents-is-best-money-decision-4146428
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RACIAL WEALTH GAP FACTS
Here are the Facts:
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Source: https://blackmeninamerica.com/updated-how-do-black-people-spend-their-money-3/
WHO OWNS THE WEALTH IN THE USA
According to data from the Federal Reserve, in 1990, white households owned 90.7% of household wealth in the United States, whereas Black households owned 3.8% and Hispanic households owned 2.1%.
These numbers have changed little over the past 30 years, with white households now owning 85.5% of wealth in 2019, and Black households owning 4.2% and Hispanic households owning 3.1%. Most of the white wealth decline is due to other racial groups attaining a share of the wealth.
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Another way to look at this is the net worth, or assets (such as stocks and real estate) minus liabilities (such as loans and mortgages left to pay), by race. The average net worth per capita among white Americans is roughly $437,000 per person, whereas this value is $105,000 among Black people and $53,000 among Hispanic people.
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Source: https://usafacts.org/articles/white-people-own-86-wealth-despite-making-60-population/
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USA Facts: White people own 86% of wealth and make up 60% of the population
White wealth is diversified among real estate, equities, and other assets, whereas non-white wealth is mostly in pensions and real estate.
Published on Thu, June 25, 2020 3:47PM PDT | Updated Wed, September 23, 2020 4:48PM PDT
BLACK OWNED BANKS FACTS
BLACK EMPOWERMENT FACTS
DOLLAR LIFE SPAN BY RACE/ COMMUNITY
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Currently, a dollar circulates in Asian communities for a month, in Jewish communities approximately 20 days and white communities 17 days. How long does a dollar circulate in the black community? 6 hours!!! African American buying power is at 1.1 Trillion; and yet only 2 cents of every dollar an African American spends in this country goes to black owned businesses.
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THE GREAT WEALTH TRANSFER
Baby Boomers, the generation of people born between 1944 and 1964 (age 54-74), are expected to transfer $30 trillion in wealth to younger generations over the next many years. This jaw-dropping amount has led many journalists and financial experts to refer to the gradual event as the “great wealth transfer.”
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In no prior time in the history of America has such a vast amount of wealth moved through the hands of generations.
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Reference: https://www.forbes.com/sites/markhall/2019/11/11/the-greatest-wealth-transfer-in-history-whats-happening-and-what-are-the-implications/#70f866ad4090. Article: The Greatest Wealth Transfer In History: What’s Happening And What Are The Implications by Mark Hall, Contributor, Technolgy Business Leader.
WHAT ARE THE EIGHT PROACTIVE PRINCLIPLES OF WEALTHY FAMILIES?
The process of articulating a family's vision is one aspect of building continuity and the bridges that will endure through generational wealth and business transfers. In a study conducted by JP Morgan Private Bank, researchers identified eight best practices that help families manage their wealth successfully over the long-term.
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The eight best practices are:
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Articulate a clear and powerful vision
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Cultivate entrepreneurial strengths
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Plan strategically to mitigate risks and capture opportunity
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Build unifying structures to connect family, assets, and environment
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Clarify roles and responsibilities
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Communicate, communicate, communicate
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Help members develop competencies
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Provide independence, including exit options
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Reference: The Complete Family Office Handbook: A Guide For Affluent Famiies and The Advisors Who Serve Them. By Kirby Rosplock, PhD. Published by John Wiley & Sons, Inc., Hoboken, New Jersey, 2014.
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Amy Braden and Dennis Jaffe, The Eight Proactive Principles of Wealthy Families (New York: JP Morgan, 2003), 80-82.
WHAT ARE THE NINE CHARACTERISTICS OF STRONG, HEALTHY FAMILIES?
Based on various assumptions about what a strong family does, researchers have developed lists of structural and behavioral attributes that characterize successful families. Despite differences in discipline and perspective, there seems to be a consensus about the basic dimensions of a strong, healthy family. The following constructs, which are often interrelated and complex, will be identified, defined, and described briefly as they exist in strong, healthy families:
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communication
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encouragement of individuals
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expressing appreciation
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commitment to family
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religious/spiritual orientation
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social connectedness
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ability to adapt
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clear roles
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time together
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The presence of effective communication patterns is one of the most frequently mentioned characteristics of strong families. Researchers characterize the communication patterns of strong families as clear, open, and frequent. Family members talk to each other often, and when they do, they are honest and open with each other (Stinnett and DeFrain, 1985; Lewis, 1979; Epstein, 1983; Olson, 1986).
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For specific information regarding the constructs listed about, go to the reference below.
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Reference:
U.S. Department of Health and Human Services
RESEARCH ON SUCCESSFUL FAMILIES
MARIA KRYSAN, KRISTIN A. MOORE, AND NICHOLAS ZILL
CHILD TRENDS
MAY 10, 1990
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Website: https://aspe.hhs.gov/basic-report/research-successful-families
MIDDLE-CLASS HOUSEHOLDS
In 2016, the typical middle-class black household had $17,150 in wealth versus $171,000 for the median white household per the Historical Survey of Consumer Finances. You have to combine the net worth of 11.5 black households to get the net worth of a typical white U.S. household.
UPPER-CLASS HOUSEHOLDS
There is a far larger number of white millionaires than black millionaires per the Historical Survey of Consumer Finances. In 2016, around 15.2 percent of all white families in the United States had a net worth of one million U.S. dollars or more. This compares to only 1.9 percent of Black families.
Share of U.S. families who are millionaires by ethnicity 2016
Published by Erin Duffin, Jun 17, 2020
OVERALL RACIAL WEALTH GAP
If you take the net worth of all white households and divide it by the number of white households, you get $951,348. If you do the same thing for black households, you get $139,797. The difference between these figures — $811,551 — is the best representation of the overall racial wealth gap. That is how much more wealth black people would need per household to have as much wealth as white people have per household.
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On the other end of the spectrum, white families have a mean net worth of $951,300 while “other” families — a category that includes Asians, Native Americans, and anyone else not fitting into the other three groups — have a mean net worth just over $1 million.
Reference: People's Policy Project, The Racial Wealth Gap Is About the Upper Classes. By Matt Bruenig June 29, 2020
EDUCATION
Higher education has long been touted as a ticket to the middle class, but for black American s that has not been as true as one might hope. The typical black household headed by someone with an advanced degree has less wealth than a white household with only a high school diploma. Reference: The Washington Post, Democracy Dies in Darkness, The black-white economic divide is as wide as it was in 1968. By Heather Long and Andrew Van Dam. June 4, 2020
Top 100 Americans Wealth by Race
American's 100 richest people control more wealth than the entire Black population.
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American's 186 richest people control more wealth than the entire Latino population.
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Stock Ownership in America
The richest 1 percent of Americans now account for more than half the value of equities owned by U.S. households, according to Goldman Sachs.
Since 1990, the wealthiest have bought a net US$1.2-trillion in company stakes, while the rest of the population has sold more than US$1 trillion.
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Three decades ago, ownership was also lopsided, but the top percentage point of Americans by wealth only controlled 46 percent of all U.S. equities held by households. By the end of September 2019, that proportion had hit a record 56 percent, amounting to US$21.4 trillion, according to the investment bank’s calculations. That includes both public stock and ownership stakes in private companies.
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Published by: How America’s 1% came to dominate stock ownership
The market’s tenfold gain since 1990 mostly has gone to the richest part of the population
Financial Times. Robin Wigglesworth, February 11, 2020
https://financialpost.com/investing/how-americas-1-came-to-dominate-stock-ownership
Black Business Ownership
A look at data during Black Business Month shows that Black Americans own 2.2% of the nation’s 6 million businesses with employees. Note: More than 40 million black people live in the United States, making up around 13% of the nation’s population, according to 2016 Census Bureau estimates.
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Published on Thu, August 13, 2020 9:12AM PDT | Updated Wed, September 23, 2020 4:53PM PDT
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LAND OWNERSHIP RACIAL GAP
The five (5) largest landowners in America, all white, own more rural land than all of black America combined. These five white landowners own more than nine (9) million acres will all the African American population combined, own just eight million acres. Go to https://inequality.org/research/owns-land/
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African Americans, despite making up 13 percent of the population, own less than 1 percent of rural land in the county. The combined value of this land is $14 billion. White Americans, by comparison, own more than 98 percent of U.S. land amounting to 856 million acres with a total worth of over $1 trillion. Reference: Who Owns Almost All America's Land? A USDA report is exposing a massive disparity between white and black land ownership in the United States. Research & Commentary February 15, 2016 by Antonio Moore. Go to https://popularresistance.org/who-owns-almost-all-americas-land/
GI BILL LEFT OUT AFRICAN AMERICANS
Veterans Day is always an occasion to talk about the GI Bill. And, indeed, that 1944 registration was truly remarkable, helping millions of returning veterans buy homes in the great post-war suburban land rush. Unfortunately, black veterans weren't able to make use of the housing provision of the GI Bill because banks generally wouldn't make loans for mortgages in Black neighborhoods, and African Americans were excluded from suburbs by a combination of deed covenants and information racism. Resource: How the GI Bill Left Out African Americans. Economic Justice, Racial Wealth Gap, November 11, 2013. By David Gallahan, Blog.
African American Population in the USA
African Americans by Percent: 14.6% (2019)
African Americans by Number: 47.8 million
Source: https://blackdemographics.com/ and
Source: U.S. Census Bureau, Population Division, Release Date: June 2020
African American Population in the USA
Attendance at religious services by race/ethnicity (2014)
% of adults who attend religious services…
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African Americans attend religious services more frequently than any other race in the United States. However, blacks are also at the bottom regarding wealth.
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