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Shirtsleeves to shirtsleeves, all around the world

Most major languages have their own version of the idiom “Shirtsleeves to Shirtsleeves in three generations”.  From the very literal Chinese “wealth never survives three generations” to the more musical Italian “dalle stalle alle stelle alle stalle” (from the stalls to the stars to the stalls), this is a phenomenon that has existed for centuries.  However, I believe that in our industry it is poorly understood, continuously under-studied and rarely discussed with clients.

Those discussions which are had regarding estate planning typically focus on simply passing assets tax-efficiently on to the next generation, preferably without giving up control over said assets.  While this is clearly important, I believe that for families with intergenerational wealth, the dialogue should begin with a deeper conversation about how to prepare the next generation and thus ensure that the wealth will benefit and empower them as much as possible.

In his excellent book ‘Family Wealth – Keeping It in the Family’, James E. Hughes, Jr. explores the Family Balance Sheet, in which human and intellectual capitals are crucial to ensuring that financial capital can be maintained.
Some examples of Mr Hughes’ suggestions are:

  • Creating a strong family identity and understanding of how the wealth was built by retelling the family history to younger family members and organising regular family meetings in which all generations of the (wider) family are involved and serve different roles.
  • Running the family as a business in which everyone has a vote to appoint the positions of power (republic).
  • Supporting family members with time (before money) in their pursuit of true happiness, in whatever this may be.
  • Avoiding ‘family secrets’, and tackling these early on as a unit.

This is a complicated area and perhaps some would argue beyond the scope of wealth management, but in my opinion it is the cornerstone to successful planning for families who want to pass on their wealth to future generations.


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