Wealth preservation across generations requires more than just prudent financial management — it demands transparency, open communication, and the courage to engage in honest self-reflection.
From my experience working with high-net-worth families, I believe there are two fundamental reasons behind the common saying that “wealth rarely lasts beyond three generations.”
- Lack of Communication of Financial Literacy and Family Values:
The first generation often fails to openly communicate their financial principles, values, and beliefs to subsequent generations. Without regular discussions and reviews, these guiding principles are easily lost or misunderstood. - Avoidance of Honest Dialogue on Control and Trust:
Many families struggle to confront the sensitive questions of power, control, and trust. Few are willing to examine how wealth and decision-making authority are shared among family members — a critical step in sustaining harmony and purpose.
A landmark 20-year study by The Williams Group, involving over 3,200 families, revealed that 70% of families lose their wealth by the second generation, and 90% by the third. This striking pattern underscores the importance of transparency, education, and shared values.
The wealth creators — the first generation — must lead by example, fostering open dialogue and instilling a legacy of communication and trust. Once strong family beliefs and values are established, future generations must also be honest with themselves:
Do they truly wish to take on the responsibility of managing the family enterprise, or would they prefer to pursue their own path supported by the family’s resources?
Education and understanding are essential to making sound decisions — but as Confucius wisely said, “The essence of knowledge is, having it, to apply it; not having it, to confess your ignorance.”
To support this process, I have developed a self-reflection checklist that helps guide important decisions, encourages introspection, and promotes continuous improvement through reviewing and correcting past choices.