Five Essential Keys for Families Building Legacies of Stewardship and Wealth

In his book, Intentional Wealth: How Families Build Legacies of Stewardship and Financial Health, author Courtney Pullen takes readers through various techniques to build and preserve family wealth and legacy.

Pullen starts with the critical issue facing affluent families: 90% of affluent families lose their wealth by the third generation. In the US, this phenomenon is commonly referred to as “from shirtsleeves to shirtsleeves in three generations.” Interestingly enough, this phenomenon persists across the globe, with the Japanese saying “rice paddies to rice paddies in three generations” or England’s “clogs to clogs in three generations.”

While Pullen notes that the loss of family wealth is a significant setback, he writes that the actual loss is that often “as the wealth dissolves, so does the family.” He tells of families torn apart, fighting over who gets what, as the last bits of wealth slip through their grasp. 

As a specialist in family wealth counseling, Pullen asks the critical question: if 90% of affluent families lose their wealth by the third generation, what are the other 10% doing?

In his book, Pullen answers that question and more. Here are five key factors Pullen offers affluent families to avoid going from shirtsleeves to shirtsleeves in three generations:

Intentionality

Pullen writes that the majority of the families who succeed beyond three generations are very intentional with their wealth. They view their wealth as a tool they can use to live the life they desire and make deliberate choices about how they will use their money and why. In addition, Pullen writes that they “say yes to wealth,” never pretending like it doesn’t exist or using it carelessly. Instead, they accept both the responsibility and advantages their wealth offers and create an intentional plan for their money.

A Focus on Future Generations

One of the key markers of a successful legacy of wealth is when a family takes the time to train and educate future generations. The bottom line is this: money can be confusing, but it doesn’t have to be. With the right amount of education, training, and conversation, families can set future generations up for success in managing, building, and preserving their wealth. Pullen writes that “successful families make a deliberate choice to train family members in stewardship and responsibility.”

Often, families will bring in outside counsel or financial professionals to help train and educate future generations, as they may not be comfortable educating them independently. But, whatever the case may be, one thing is certain, a family’s ability to thrive for generations to come is highly dependent on a family’s willingness to teach and invest in future generations.

Open Communication

Above all else, families need to communicate openly and honestly with one another. Pullen writes: “Families who can talk about problems are the ones most likely to be able to solve those problems, and family members who communicate well build better relationships.” By keeping the communication lines open and healthy, families can better navigate the inevitable ups and downs along their wealth journey, solving problems together as they arise, all while building strong and healthy family relationships.

In addition, Pullen adds that it’s imperative for earlier generations, the wealth creators, to be open and honest regarding their legacy intentions. This helps the future generations understand the goals and directions with the wealth and avoid unnecessary confusion and unmet expectations.

Creating a Family Brand or Identity

One of the more interesting conversations in the book is around creating a family brand or identity. Pullen writes that one of the critical predictors of generational success is that each family member clearly understands what the family stands for—the family brand.

This is often articulated in a clear and concise mission statement crafted with input from each generation. This allows families to work together, rowing in sync in the same direction, knowing what they stand for and what they are working to create and leave behind.

Notably, Pullen writes that there is no one-size-fits-all for a family brand. For example, some families might be focused on maximizing their charitable donations through family foundations or trusts, while others emphasize building and preserving family wealth. Whatever the case may be, the ability for members of each generation to articulate “what this family stands for” is an essential key towards financial health within the family.

Redefining Success for Future Generations

Lastly, families need to redefine what success looks like for future generations. While early generations may have been successful in generating significant family wealth, often taking risks or going above and beyond in their work to be the best, that doesn’t mean success will look the same for future generations.

The challenge is to adapt those same skills and values used to create wealth to manage and live with wealth. For some families, this may mean putting less emphasis on working in the family business and more focus on pursuing a career that aligns with the passions and interests of the individual family member, regardless of the financial compensation.

Pullen writes that often success transcends the financial capital of a family, and encompasses the intellectual and human capital as well. He quotes James Hughes, author of Family Wealth:

“The wealth of a family consists in the human and intellectual capital of its individual members. A family’s financial capital is a tool to support the growth of the family’s human and intellectual capital.”

TrueNorth Wealth: We’re Here to Help

If you’re interested in working with a fiduciary CFP® professional to help create a legacy of stewardship and wealth for your loved ones, complete with a custom investment portfolio to produce tangible financial goals, then our financial advisors in Utah are here to help.

TrueNorth Wealth is among the top wealth management firms in Utah and Idaho, with offices in Logan, Salt Lake City, St. George, and Boise. At TrueNorth Wealth, our focus is on helping clients build long-term wealth while maximizing the enjoyment they receive from their assets. We achieve this by partnering our clients with a dedicated CFP® professional backed by an expert team.

For our team at TrueNorth, it’s about so much more than making money. It’s about serving our clients and helping them achieve true financial freedom and flexibility in their lives. To schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.