Shirtsleeves to Shirtsleeves in three generations
“Only the man who does not need it is fit to inherit wealth—the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him.
Did it? Or did he corrupt his money? “
- Francisco d’Anconia
Generational wealth.
Everyone talks about it.
Many claim to be building it, yet few truly comprehend the depths required to forge a legacy that extends far beyond one's lifetime.
The secret lies in not only laying the groundwork for enduring prosperity but also empowering future beneficiaries to navigate its grandeur.
A common adage among the wealthy is that FIRST generation creates the wealth.
SECOND generation stewards the wealth.
THIRD generation loses the wealth.
Why does this cycle persist?
Numerous studies unveil a staggering reality: approximately 70% of affluent families fail to preserve their wealth or their cherished enterprises beyond the third generation.
A glaring cause for this disheartening trend is the erosion of communication and trust between kin, coupled with ill-prepared heirs and a lack of intergenerational financial vision.
While meticulous strategies abound to preserve financial wealth, few take into account the nurturing of the family's social, human, and intellectual capital.
Regrettably, the focus frequently fixates on monetary matters, overshadowing the well-being of those destined to inherit.
Typically, the first generation dedicates itself to amassing wealth while raising their progeny. As the second generation witnesses the toils and triumphs of wealth creation, they bask in its partial splendor as their parents elevate their lifestyles. Yearning to spare their offspring from the hardships they endured, first-generation parents resort to lavish indulgence. And so, the unraveling begins.
Inevitably, for family businesses, the time comes when parents yearn to retire, passing the baton to the second generation. However, these successors are often plagued by entitlement or woefully ill-equipped.
Misguided confidence convinces them of their ability to govern the empire or believe it to be an entitlement. Consequently, resentment festers between the first and second generations.
The only reason why second generation “stewards” the wealth is either because the first generation never fully retires/ relinquishes control or they put a really good wealth preservation plan in place.
All this is going on while third generation is living in the lap of luxury without a care in the world. Which is why, when it comes time, they typically have no clue how to manage the family wealth and/or enterprise- Therefore squandering it away.
This is why it is imperative that intergenerational family members personal development and education is a part of a long-term wealth preservation plan.
Every current and future custodian must acquire financial acumen, enrich their emotional intelligence, and shoulder the responsibility of stewarding their ancestral legacy.
Without meticulous preparation, intergenerational family members may find themselves overwhelmed, lacking confidence, and grappling with effective business communication.
Their place within the intricate tapestry of the family or business might elude them, causing feelings of isolation, emptiness, stress, confusion, or even guilt—emotions inconceivable to the outside world
To forge generational wealth, one must transcend the narrow focus on mere financial growth and preservation.
By nurturing heirs who are poised to receive the torch, you can ensure your legacy transcends three generations and beyond.