The family's failure makes a wretched story (4,8)

I believe the answer is:

poor relation

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'the family's failure makes a' is the definition.
I can't judge whether this definition defines the answer.

'wretched story' is the wordplay.
'wretched' becomes 'poor' (synonyms).
'story' becomes 'relation' (relation is a kind of story).
'poor'+'relation'='POOR RELATION'

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(Other definitions for poor relation that I've seen before include "Inferior member of group" , "Inferior person/thing" .)

I've seen this clue in The Guardian and The Globe and Mail.

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