The saying goes, "The first generation builds it; the second generation maintains it; the third generation loses it." This proverb reflects the commonly held belief about the cycle of wealth accumulation and loss. Unfortunately, it has become a proverb precisely because it often rings true. Many financial legacies created by the founding generation, intended to secure the future of their descendants, are squandered due to reckless spending and poor financial decisions. According to a 20-year study of 3,000 affluent families, 70% had lost their wealth by the second generation, and a staggering 90% had lost it by the third generation.
In our work with family stewards, we dedicate a substantial amount of time to educating about the process of building and preserving family fortunes, and the unfortunate reality of their potential loss. While each situation is as unique as the individuals comprising the family organization, there are fundamental principles for establishing and safeguarding a family's financial legacy. Understanding and consistently implementing these principles can provide significant advantages.
Seek expert guidance to preserve and grow your wealth. While hard work and creativity are often the building blocks of fortunes, the chances of long-term preservation are significantly enhanced by the assistance of qualified professionals. As wealth accumulates, taxation, estate planning, conservation, and investment management become increasingly vital to safeguarding its value. Founders who receive sound advice on investing, tax minimization, and effective utilization of estate planning tools are far more likely to leave behind substantial legacies for their loved ones.
To establish a lasting legacy of wealth preservation, it is crucial to cultivate a multigenerational culture centered around financial education. While first-generation wealth builders may naturally grasp the concepts of saving, budgeting, and prudent spending, their children, who may have grown up with the assumption of wealth and its privileges, may not inherently understand these principles. This is where a knowledgeable and trustworthy wealth advisor can provide invaluable support as a financial educator. By nurturing an environment that emphasizes the importance of sound financial management, children are more likely to embrace these principles as they come of age.
Properly utilizing trusts and other estate planning tools is crucial. This emphasizes the significance of assembling a team of trusted and qualified advisors. By carefully designing trusts and other estate planning strategies that cater to the specific needs of your family, you can ensure security for future generations and protect against the inexperience of heirs who may not be fully prepared to manage a financial legacy. When combined with a comprehensive financial education program, a well-crafted trust can serve as a guiding framework for younger generations, while also preserving and stewarding assets for years to come.
At Moscaret Investment Advisory, we specialize in assisting family stewards in creating enduring financial legacies. Whether your primary objectives revolve around ensuring financial security for future generations, establishing a philanthropic tradition, or achieving any other goal, we are dedicated to providing the expertise necessary to develop a customized plan that suits your needs. To learn more about our services for family stewards, get in touch with us today.