What six centuries of Florentine tax records tell us about family wealth

Some families still hold wealth several generations on, while others see it thin out within one or two. What makes the difference? Florence offers an unusually long record of which families kept their wealth and which didn’t. It shows us the outcome in remarkable detail, yet says very little about the cause. That’s where our own experience of working with families comes in.

In 1427, Florence’s government carried out a detailed census of the city’s 60,000 residents. The city needed money after years of war with Milan, so officials recorded everyone’s job, income and assets. Six centuries later, economists Guglielmo Barone and Sauro Mocetti used that same record to trace Florentine families all the way to their present-day descendants, publishing their findings in the Review of Economic Studies in 2021.

Their review showed that across roughly twenty generations, the pattern held. Families near the top of the wealth rankings in 1427 were still more likely than most to be near the top today. Certain professions ran in families for centuries too, well beyond what income and opportunity alone would explain.

What the records can’t tell us

https://www.itakehistory.com/post/the-florentine-catasto-of-1427

The study measured wealth and occupation and shows that advantage clearly persisted throughout the generations, but what it doesn’t explain is why. From our own work with families, we see two things at play. One is the legal and financial structure around wealth. The other is what the next generation understands and expects about it: the habits around saving and spending, attitudes to risk, a sense of what the family is “for.” Families who attend to both tend to keep the wealth working for them, and families who attend to only one often find the gap later.

The structure around wealth

Most families we work with think hard about the technical side of passing on wealth: wills, trusts, tax thresholds, the mechanics of who receives what. Done well, they protect a family’s wealth from avoidable tax and from disputes over the paperwork. They are also the part that most families already take seriously.

Far fewer have had an open conversation about the expectations sitting behind those documents. A father dies, and his adult children discover they’d each assumed something different about the business he built. One assumed she’d run it. One assumed it would be sold. Nobody had actually said so out loud.

Two habits worth borrowing

Families who handle this well share two habits. They talk about money across generations before it becomes urgent, rather than waiting for a health scare or a death to force the conversation. And they treat succession as something to revisit as circumstances change, not a single document signed once and filed away.

Part of that conversation is preparing children to actually handle what they’ll inherit, not just deciding what they’ll receive. A young adult who understands how to manage money is in a very different position to one who simply arrives at a windfall. How a family thinks about saving and spending, how it treats risk and what it believes the wealth is for gets absorbed over decades, long before any solicitor writes to the beneficiaries. Families can shape that deliberately, and a few habits help:

• Start before it is urgent. A conversation held while everyone is well goes very differently from one held after a health scare.
• Share in proportion to age. A twenty-year-old can begin with how the family thinks about money and what it is for. Someone in their forties can take on the detail of the structures and who will do what.
• Say the expectations out loud, including about the business. Who might run it, who would rather not, and what happens if someone wants out.
• Revisit it as life changes. A marriage, a grandchild, a sale or an illness can all alter what the family needs, and a plan signed once and filed away stops describing the family quite quickly.

A first conversation can be small

One question is enough to begin with, such as which of the children, if any, would want a role in the business. The answer usually opens up the rest. We are experienced in helping families navigate these conversations. You can chat it through with your Financial Planner at your next review meeting to see how best to tackle it. If you’re not yet a Chesterton House client, we offer a free initial conversation with one of our qualified Financial Planners. You can book yours online or call us on 01509 610472 to speak with our team.

Back to Florence

Six hundred years is a long time to plan for, and most of us are thinking two or three generations ahead at most. The Florentine records suggest that whatever a family passes on, financial or otherwise, tends to travel further than expected. That is a good reason to be deliberate about what goes with it.

Source: Barone, G. and Mocetti, S. (2021) “Intergenerational Mobility in the Very Long Run: Florence 1427–2011”, Review of Economic Studies, 88(4), pp. 1863–1891.