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Intentional Wealth: An Intergenerational Challenge

StratiFi Technologies Inc

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For many families of wealth, the true value of money is in the shared value it can create for society by leveraging their gifts to leave the world a better place.

Families of wealth can successfully maximize their financial capital across multiple generations along with the critical human and intellectual capital that will define the family, its values, and its legacy. The enduring principles followed by long prosperous families in securing their financial and emotional legacies are as valid today as they were centuries ago. Yet, history also shows that, according to the Family Firm Institute of Brookline, Mass., just one out of 10 families achieve their vision of asset preservation with intergenerational harmony.

Fighting the Tide of History

Sadly, for many of the nine out of 10 families who failed to solidify their legacies both their financial capital and human capital is often depleted within just two generations. In most cases, it’s not due to a lack of financial planning; rather it is their inability to coalesce family members across multiple generations around the objectives of risk management. The resulting loss of wealth and the devastation of the core family, while tragic, pale in comparison to the lost opportunity for creating enduring, shared economic value for future generations and for society.


Only 1/10 families achieve their vision of asset preservation with intergenerational harmony – Learn the leading causes behind this, and how to help your clients succeed Click To Tweet

The record of failed generational transfers of wealth and the causes are well-documented. It is accepted doctrine that families that adhere to certain, essential principles, are more likely to create long-lasting legacies. However, the disconnect stems from the fact that these time-tested principles have yet to permeate the traditional practices of wealth managers and financial planners who tend to focus strictly on the financial aspects of wealth transfer.

Families hoping to affect a transition of values and tradition from one generation to the next must have the same structure of leadership and communications required of a business enterprise that wants to build a trust culture from top-down and bottom-up. In top performing companies, leadership creates a transparent atmosphere of trust and shared purpose by giving all employees equal access to the lines of communication while making them feel safe in expressing themselves. Successful families can do no less.

Planning for Intentional Wealth

That is why it is critical for families with legacy ambitions to have well-conceived plans anchored by a strong vision of what they want to happen. A strong vision incorporates the family’s values, and purpose, unique abilities, traditions and the principles that will guide future decisions.

Essentially, it requires planning well beyond the numbers to capture the true intent of a legacy and its meaning for every member of the family. Much of the upfront planning focuses on clarifying and solidifying the vision by answering some key questions:

  • What does wealth mean to you in terms of your beliefs and attitudes regarding family, health, security and service to others? Why are they important to you?
  • What would you want to be able to say about your family? What would you want other people to say about your family?
  • What are your ambitions, and why are they important to you?
  • How would you like to use your wealth to create the most shared economic value for your family, the children of your children, and your community?

More critically, the vision must be communicated and revisited often as it becomes the beacon that draws family members and generations together. It forms the preamble of a family constitution that governs family decisions in matters of finance, administration, communication challenges, life style, community; philanthropy, education, investments, as well as the family business.

The key to creating an enduring family constitution is the process in which all family members have a role and individual aspirations are set aside but respected. And, similar to our country’s constitution, it is ratified by family units and leaders within each generation. Only then, will it be fully embraced as the source of governance through transitions and the emergence of future generations.


Out of 100% of families who suffered a failed wealth transfer, only 3% point lack of financial advice as the reason – Discover the leading causes here Click To Tweet

How To Discuss Inheritance With Your Clients?

In a study, conducted by Roy Williams and Vic Pressier, 3,200 families who suffered a failed wealth transfer were asked to identify the primary factor that contributed to their loss of wealth. More than 60% of the 3,200 respondents pointed to a lack of communication and trust and 25% blamed unprepared heirs. Only 3% faulted poor financial planning or risk management strategy plan.

Establishing trust through clear and honest communication doesn’t happen overnight; it requires a structured approach, shared leadership, and accountability to the process – a fairly daunting endeavor for any family. Families that are intent on steering a course for success will make strict adherence to this principle a top priority, going to the extent of hiring a trained facilitator to help cement it into the family structure.

To be sure, the principles for successfully maximizing the transfer of assets are well-defined and expertly applied by many wealth managers; however, the guiding principles for preparing family members and future generations for the emotional transfer of values and beliefs are often neglected. Family legacy planning focused on strategies is critical to ensure the intentional use of wealth and the perpetuation of a purposeful legacy.

Akhil Lodha Author
Co-founder & CEO StratiFi Technologies

Building the industry standard for understanding portfolio risk through cutting-edge technology at StratiFi.

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