Do you worry about what your children and grandchildren will do with the wealth they inherit? How it will impact their lives, their communities, their world? Do they have the skills and mindset needed to preserve your legacy—or will it be lost?
You’re not alone.
Preparing future generations to not only preserve, but build on, the legacy you’ve worked hard for is a perilous journey.
So why do some families succeed—and others fail?
In part, because they’ve found a way to pass along not only wealth, but the intangible wealth of their values and their purpose. And they’ve understood the vital role that preserving family stories plays in doing this.
1. Your values, purpose, and stories are what made you who you are today. If your children don’t understand what got you here, how will they be expected to preserve and build on what you have?
A family's wealth-creation journey is often forged through difficulties, failures, and obstacles. Many times, these experiences provide irreplaceable insights for future generations. They can provide preparation and education for heirs that cannot be obtained in any school.
In her Forbes article on “Wealth Transfers: How to Reverse the 70% Failure Rate,” Carolyn Rosenblatt unpacks their findings, and says that failure to prepare the next generation to take over the reins was a major contributor to failures.
In contrast, the 30% of families who succeeded prepared heirs for their futures. “A key component was to identify a family mission as well as a strategy to attain it,” she says.
What’s worked, what hasn’t, how you’ve navigated success and failure—all of these represent a body of knowledge that can’t be obtained in any MBA course. The path of your journey can only be passed along through you.
2. Preserving a family’s values, purpose, and stories increases the chances of preserving wealth and generational success.
According to a white paper by BNY Mellon’s Pershing, 60% of family fortunes are squandered due to a lack of communication and trust and only 3% disappear due to poor wealth planning.
Catherine Schnaubelt, Senior Wealth Strategist at CIBC Private Wealth Management, puts it this way in her “Three Principles for a Successful Family Legacy” Forbes article: “Often, the families who are most successful in developing a healthy family wealth culture preserve stories and history, articulate a common purpose and foster communication. Families who develop a healthy attitude toward their wealth through open and honest discussion are typically more likely to see that wealth preserved from generation to generation.”
“Beyond traditional estate planning, legacy planning is an opportunity to define, reflect on, and express what wealth really means to a family so that not only financial wealth, but also a family’s core values, are passed on to future generations,” she says.
A study of more than 650 high net worth people conducted by Merrill Private Wealth Management found only 46% have talked with heirs about fundamental family values and operating principles. “Decisions about family money have the potential to change lives, yet the outcome depends on how well the purpose and reasoning behind those decisions are understood, and too often that is left unsaid,” states Stacy Allred, head of the Merrill Center for Family Wealth.
Communicating a family’s purpose and values is an essential part of the education required for heirs to be successful.
3. Connecting family members to their shared purpose and values can create a more unified family and can bring increased meaning to the lives of individual members.
Beyond providing a road map, communicating a family’s purpose and values can also help individual members clarify their own. And this can lead to a more meaningful life.
“If we pass only money to the next generation, we lay a crushing load upon them. The inheritance of greater value is the sum of how we live, what we believe, and the content of the dreams that carry us to success. This is what the next generation needs most from us...” —DAVID GREEN with Bill High, A Generous Life: 10 Steps to Living a Life Money Can’t Buy
Family Wealth Advisor Bingham C. Jamison believes looking into the past can instill feelings of inspiration and gratitude, fortitude and belonging, and wisdom and experience. He writes, “We look to our elders, and to those that have gone before us, for direction and guidance, which gives us a renewed sense of purpose and the confidence to pursue it. Honoring a life well-lived doesn’t just benefit the younger generations—it empowers the elders themselves, and in the process, assigns meaning to their life and permanence to their story.”