Many family principals have been there. They prepare a meeting on an important aspect of financial stewardship, only to be met with indifference from the next generation. One adult child scrolls through their phone, another asks politely how much longer it will take, and one doesn’t come at all. The principal is left wondering how to draw in adult children whose lives and interests differ so widely, and how to start a conversation that actually goes somewhere.
The statistics are brutal: research consistently shows that 70% of family wealth is lost by the second generation, and only 30% of family businesses survive into the second generation, with a mere 13% making it to the third. The primary culprit isn’t bad investments. It’s a breakdown in trust and communication, accounting for 60% of failures, and an unprepared next generation, accounting for another 25%.
When this happens, the usual guidance from well-intentioned advisers is to highlight what the family hopes to achieve and explain how stewardship supports everyone. Offer personalised educational sessions so each person can build on their strengths and take part in a way that suits them. The idea is to prepare heirs by strengthening their confidence, sense of responsibility, and financial understanding. It also seeks to ease concerns that wealth might dull motivation or lead to poor decisions in the next generation.
This forms an essential base, yet it is rarely enough on its own. The harder truth is that in families with very different heirs, an education-first approach often falls short and can even create more distance. We have seen it many times: the sessions feel condescending, overly directive, or irrelevant to an heir who is focused on a completely different path. The young person, feeling out of place and unsure why they are there, quite reasonably asks, Why do we have to know this at all?
This kind of approach falters when the real barriers to engagement are emotional and relational rather than technical.
The Pitfall of Confusing Literacy with Identity
The first major pitfall is confusing financial literacy with a Stewardship Identity. Financial education efforts show remarkably poor evidence of actual behavioural change. You can teach someone how to read an investment report, but that doesn’t teach them the judgment of what the money is for. A ‘Stewardship Identity’ isn’t about technical skill: it’s a profound psychological shift from a mindset of entitlement to responsibility. It’s the acceptance that wealth is a vehicle to achieve a life purpose, not the definition of one’s self. When education is delivered as a ‘top-down narrative’, it can trigger resentment, particularly if it feels like a parent’s attempt to exercise control. This often leads to surface compliance or total emotional disengagement.
The second piece of common advice — to ‘focus on shared goals’ — also breaks down under scrutiny. What does a ‘shared goal’ mean to an environmental scientist heir and a private equity heir? Too often, the ‘shared goal’ is simply the founder’s vision, imposed on the next generation. When a vision lacks genuine emotional relevance or alignment with an heir’s personal identity and aspirations, engagement will be conditional at best.
This is especially clear when the heirs’ lives differ markedly from those of the older generations. Their values may also differ, for example, when they place far more importance on sustainability or social impact than on traditional legacy assets.
Their definition of ‘fairness’ may differ from ‘equality’. Research on Socioemotional Wealth (SEW) is critical here. SEW is defined as the non-financial value families derive from their enterprise: the sense of identity, belonging, legacy, and family control. For many heirs, this is the real inheritance. Their desire to protect the family’s reputation and identity (the SEW) often remains strong, even if their life path takes them far outside the family business.
The Real Barriers to Engagement
If education and financial goals aren’t the answer, it’s because they fail to address the true barriers. Constructive engagement is often blocked by invisible emotional burdens. These include:
- Unresolved Relational Dynamics: Deep-seated sibling rivalries are a significant barrier. It’s crucial to understand these disputes are rarely about greed; they are symptoms of a lifelong struggle to feel loved and important. An heir who feels overlooked won’t be receptive to a financial lecture.
- Fear of Mortality: Discussions about inheritance are often discussions about parental death. This can trigger deep-rooted psychological worries about abandonment, making participation too painful.
- Power and Control: Financial discussions are frequently a proxy for the ongoing negotiation for power between generations. Founders struggle to ‘let go’, and heirs perceive a double standard—a welcome smile that hides a fear of losing control.
Here lies a truly counterintuitive truth: focusing on the financial benefits of stewardship can actually decrease long-term engagement. Research identifies a ‘substitution effect’. When heirs — particularly passive, non-managing ones — are encouraged to focus on material returns, it can weaken their ‘Affective Commitment’ (their emotional bond) to the family legacy. The motivation to perpetuate the family legacy is often strongest when it’s rooted in non-financial drivers. In fact, studies show that for passive heirs, childhood exposure and nostalgia for the family enterprise are far more powerful long-term motivators than current financial returns.
What truly engages diverse heirs isn’t just the prospect of wealth, but the opportunity to co-author a story that aligns with their personal identity and values.
A Measured Solution: The Primacy of Process
So, what actually works? The solution is to shift the focus from outcome (financial literacy) to process (fair engagement). This is the principle of Procedural Justice, which refers to the fairness of the procedures used to make decisions.
Research is indisputable on this point: for heirs, feeling that the process is fair is often more critical for buy-in than the final financial outcome. A fair process is the central mechanism for success. It gives heirs a voice, mitigates the inherent power imbalances, and builds the trust that communication breakdowns so often destroy. When heirs, especially those who do not work in the family business, feel the process is fair, they are far more willing to take an interest and learn what responsible ownership requires. They engage because they feel respected and treated as a genuine partner.
This is where ‘different lives’ become an asset, not a liability. A family that includes diverse perspectives — an artist, a scientist, a soldier, an entrepreneur — is more innovative, more adaptable, and better able to navigate change.
An Actionable Framework for Real Engagement
Implementing procedural justice requires concrete, actionable steps that replace the top-down lecture with a collaborative framework.
- Initiate Dialogue, Not a Lecture: The first conversation should begin by acknowledging the discomfort and framing the discussion as an act of love and protection, not a financial transaction. The goal is to listen first, to understand their expectations and fears.
- Use a Neutral Facilitator: Hire an experienced facilitator to manage the complex emotional and technical dynamics. A neutral party can establish ground rules (like a ‘circle of chairs’ for equality), ensure everyone is heard, and help the family navigate the “unaddressed emotional issues” that often masquerade as financial disputes.
- Articulate Values Before Financials: The most effective starting point is the creation of a Family Constitution or Charter. This process begins with the question, “Who are we as a family?”. By allowing all members to co-author this vision, you align values with goals and create a shared narrative that has genuine emotional relevance. Tools like the Family Council Canvas offer a structured way to support this discovery and value-setting process.
- Create Inclusive Governance Structures: Formalise engagement through a Family Council. This representative body is the perfect place to blend diverse perspectives, ensuring that the “alpha people and beta people, male and female… and generations” are all taken into consideration. This structure proves that every voice matters.
- Provide Experiential Learning Over Lectures: Instead of a mandatory workshop, create pathways for practical, low-pressure involvement. Offer ‘listener places’ on boards or committees, allowing heirs to observe and learn. Institute mentorship programmes, and note that an uncle or aunt is often a more effective mentor than a parent. This allows heirs to gain psychological ownership and demonstrate competence on their own terms.
Engaging a diverse next generation is one of the most difficult challenges in wealth stewardship. It demands moving beyond metrics of financial literacy and acknowledging the messy and emotional reality of family dynamics. Progress isn’t linear, but it is possible. It starts by trading the lecturer’s podium for the facilitator’s roundtable, prioritising fair process over financial outcome, and valuing a co-authored identity over an imposed goal.
How is your family creating a process where every member, regardless of their life path, truly feels heard?
