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Wealth Management is Legacy Management

9 out of 10 Families in the U.S. will create and destroy all of their wealth within 3 generations.

We call it the “3G Curse”.

Have you ever heard the phrase “shirtsleeves to shirtsleeves in three generations”? This American proverb is echoed in Ireland (“Clogs to clogs in three generations”) as well as in China (“Rice paddy to rice paddy in three generations”). The cycle of rags to riches to rags is universally human.

The cycle is not inevitable, however.

Family dynasties such as the Rockefellers provide useful examples of how the rags to riches to rags cycle can be overcome. Hint: It’s not accidental or random, but rather, a purposeful focus on the family’s all-encompassing legacy, and the wealth that supports it. But we’re not talking about financial or material wealth. In fact, we’re specifically talking about everything but financial and material wealth.

Legacy-minded families frequently come to us with the following questions:

  • We realize that our wealth is a blessing. How do I ensure it continues to be a blessing for me and my family?
  • We want my legacy to be more than just financial. How do we create it?
  • We recognize our wealth can be a powerful tool for our family. How do we ensure that it unifies and supports them?
  • We hope our children will have an abundance of opportunities to be successful. How do we endow them with the values and experiences necessary to create opportunities, without defeating their ambition and drive?
  • We recognize that communication is a critical component that holds our family together. But when it comes to our wealth, how much, when, or even how, should we communicate with our child(ren)?
  • We recognize the importance of giving back, and want to do so. How do we ensure that our philanthropic efforts are both meaningful and fulfilling?

These questions all point to a desire to establish a legacy, to be the 1 in 10 family that succeeds in creating sustainable wealth. But they also point to an intrinsic sense of how important wisdom is. The families asking these questions already possess the basic wisdom to become the 1 in 10 family.

A family’s wealth starts first and foremost with its wisdom.

Why do we use the term “wisdom”? Consider Solomon’s legacy. Solomon’s material wealth and wisdom were equally unprecedented.  Why then, is he known for his wisdom, and not his material wealth?

Wisdom is, in and of itself, precious; material wealth is not.

This is evident in the fact that Solomon’s wisdom was the portal through which all of his material wealth came. The ancient world’s leaders sought audience with Solomon to ask his counsel, and because there was nothing he could not answer, they lavished material wealth on him. The Book of Wisdom, which some attribute to Solomon himself, states: And if riches be a desirable possession in life, what is more rich than Wisdom, who produces all things? Is today’s society any different?

The truth is, wisdom, in all of its forms, has always been the genesis of sustainable wealth.

Whether wisdom comes in the form of experience (success and failure), innovation, inquisitiveness, prudence, or discernment, material wealth is created and sustained only as a result of wisdom. Luck can create ephemeral wealth, but only wisdom creates legacies.

Relegating financial wealth to its appropriate, subordinate role, is the wisdom the 1 in 10 family possesses.

Legacy-minded families embrace a holistic definition of wealth, one that includes human, intellectual, and financial, in that order. Successful families work hard to nurture and cultivate their human and intellectual wealth, and use their financial wealth to do so. In other words, the financial wealth becomes a tool, a means to an ends, not the ends itself. A family’s wealth, in all of its forms, defines and supports its legacy.

If you find yourself asking these questions and are motivated to find the answers, you are a legacy-minded family.

However, simply asking these questions will not guarantee that you will be the 1 in 10 family. Asking these questions is just the beginning. The truth is, families face a multitude of obstacles when it comes to defining, establishing, and sustaining their legacy. The obstacles are both internal and external to the family, visible and invisible, transparent and opaque.

The good news is that there are plenty of successful multi-generational families that serve as useful examples for all of us. If you’re interested in learning more about the obstacles every family confronts, and how successful families overcome them, we encourage you to review the following sections:

  • Values – A family’s values embody the foundation of the family’s wealth. Values give the family direction and support. Values are a family’s DNA. Extracting the underlying, often hidden, values requires a deliberate process that goes beyond a brief consideration and simple conversation. Family values are simultaneously the family’s values collectively, as well as the values of each individual within the family.
  • Human and Intellectual Wealth –Family legacies are often described in terms of a family’s material wealth, but they are established, nurtured, and sustained solely by their Human and Intellectual wealth. Legacies cannot be guaranteed or mandated, because the obstacles to creating a lasting legacy abound. But there is one obstacle that rises above the rest in terms of its ability to separate the 1 out of 10 family from the other 9: The transition of Human and Intellectual wealth from one generation to the next.
  • Purposeful Estate Planning – The estate planning process as we know it fails almost every family that engages in it. Why? Because the process is almost entirely focused on minimizing the tax burden during a generational transition, the least important aspect of a family’s legacy. Purposeful estate planning supplants this inferior approach with a focus on expressing the family’s values, and facilitates an effective transition of Human and Intellectual capital from one generation to the next.
  • Philanthropic Planning – Philanthropic planning has a clear benefit for the community. But legacy-minded families also realize that philanthropic planning is one of the best tools a family can use to perpetuate both Human and Intellectual wealth within its own family. In most cases, when philanthropic planning is used to benefit both the family and the community, the benefit to both is even greater than it would be if the family was doing it purely for the benefit of the community. There is indeed a selfish side to philanthropy.

We relish the opportunity to help our clients create long-lasting, and in our opinion, more fulfilling,
family wealth through wisdom.

It is after all, the source of our own wealth.

If you want to learn more about the importance of legacy and wealth management, find yourself asking any of the above questions, or have your own questions and would like answers, we encourage you to contact us only to answer your questions, not to sell you our services.

If you’re not ready to contact us but would like to learn more about the importance of legacy and wealth management, we encourage you to review the following resources:

Books

  • Wealth in Families by Charles Collier
  • The Legacy Family by Lee Hausner and Douglas Freeman
  • Beating the Midas Curse by Perry Cochell and Rodney Zeeb with William Eck
  • Your Legacy: Meaningful Estate Planning by Steven R. Owens, J.D.
  • Family Wealth: Keeping it in the Family by James E. Hughes Jr.
  • Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values by Roy Williams and Vic Preisser
  • Raising Financially Fit Kids by Joline Godfrey
  • Preserving Family Lands, by Stephen J. Small
  • Strategic Giving by Peter Frumkin
  • Understanding Philanthropy: It’s Meaning and Mission by Robert Payton
  • Philanthrocapitalism: How the Rich Can Save the World by Matthew Bishop
  • Inspired Philanthropy: Your Step-by-Step Guide to Creating a Giving Plan and Leaving a Legacy by Tracy Gary
  • Raising Charitable Children by Carol Weisman

Websites

  • www.valuementors.com – Promotes the identification and conscious awareness of values, in organizations and in families.
  • www.purposefulplanninginstitute.com – Promotes an estate planning process that focuses on the Human and Intellectual wealth that families possess.
  • National Center for Family Philanthropy – Promotes philanthropic values and excellence across generations of donors and donor families.
  • Wealth and Giving Forum – Organization of individuals and families of significant means created to promote greater generosity and serve as a resource for its members when making philanthropic decisions.
  • Guidestar – Resource for researching non-profit organizations.
  • Learning to Give – Develops lessons and resources that teach children K-12 about giving, civic engagement, and volunteering.
  • Council on Foundations – Nonprofit membership organization of more than 2,100 grant-making foundations and corporations. Provides resources for Foundations and philanthropic advocacy.
  • Women’s Funding Network – 135 organizations that fund women’s solutions worldwide, in an effort to combat poverty, advance health care, education, and human rights.
  • The Chronicle of Philanthropy – A leading subscription-based newspaper for the leaders of non-profit organizations, especially those that rely on external donors for funds.
  • Giving Institute – Educational resources for those providing counsel to non-profits, including research, advocacy, and best practices studies.
  • Foundation Source – Provider of outsourced support solutions for private foundations.