Preserving family wealth: Beyond the balance sheet

Preserving family wealth across generations requires more than just investment advice and tax planning. It demands creating a legacy of respect for what has been built, how it was built, and aligning key values from one generation to the next. Successful multi-generational families approach wealth preservation as a journey that encompasses both financial and family capital.

Understanding the Challenge

Statistics often highlight how family wealth tends to dissipate by the third generation. In fact, studies show that 90% of wealthy families lose their wealth by the third generation – “shirtsleeves to shirtsleeves in three generations” is a common adage to describe it.

However, families who successfully preserve their legacy typically share a common approach, where they: 

• Communicate openly about wealth.
• Engage multiple generations in financial decisions.
• Focus on preparing heirs for the responsibilities that accompany their inheritance.
   

Let’s explore each of these in a little more detail.

The Three Pillars of Wealth Preservation

Open and effective communication

Creating spaces for meaningful family discussions about wealth isn't easy, but it's essential. Consider working with professional facilitators who can help guide these critical conversations, ensuring all family members clearly understand values, wishes, and expectations. This proactive approach helps prevent misunderstandings and maintains family harmony both during one's lifetime and beyond.

Education and preparation

Financial literacy is a journey, not a destination. Successful families often develop customized education programs to prepare the next generation for their future responsibilities. This might include understanding investment principles, business succession strategies, or philanthropic planning – all tailored to the family's specific situation.

Transition of values and morals

Wealth represents more than financial success. It embodies someone’s life's work, values, and aspirations for future generations. It’s important for future generations to understand the hard work and sacrifices that went into building the family's success. This gives them more perspective and greater respect for the previous generation, and can help them prepare effectively for the future.

A Collaborative approach

Successful wealth preservation typically requires expertise beyond simply investing. Many families benefit from relationships with family meeting facilitators and other specialists who can help address the complex dynamics of family wealth transition.

In our experience, the most effective family wealth strategies create safe environments where families can:

• Discuss wealth openly and honestly.
• Address concerns and expectations.
• Develop shared understanding of family values.
• Create structures for decision-making.
• Build financial literacy across generations.
   

Beyond financial capital

Preserving family wealth is about more than dollars and cents – although those are important too! But what good are valuable assets, if the family can’t enjoy them together, or continue to build upon the legacy left by past generations? That’s why true, holistic wealth preservation includes: 

• Family capital: Strengthening relationships and communication between family members.
• Human capital: Developing the next generation's capabilities to continue to build on the family’s success.
• Social capital: Creating meaningful impact for the community through philanthropy.
• Health capital: Ensuring the family is able to enjoy the fruits of their labour.
   

Looking forward

The most effective time to begin wealth preservation planning is now, while family leaders can actively participate in the process. A comprehensive strategy should consider both immediate and long-term family objectives.

We believe that by taking a proactive approach to wealth preservation, families aren't just protecting financial assets—they're creating a lasting legacy that empowers future generations to be good stewards of both family wealth and values.

If you have questions or need support, we’re here to help! We’ve helped families build their capital – both financial and beyond – for generations, and would love to develop a personalized and comprehensive plan for your family.