The old saying, “shirtsleeves to shirtsleeves in three generations,” resonates with an understandable anxiety for any family that has built significant wealth. It’s a fear that a lifetime of work, risk, and sacrifice could simply evaporate, leaving future generations without the security and opportunity intended for them. The potential dissipation of a family’s legacy, the erosion of its values, and the unfulfilled potential of its heirs pose a danger that extends beyond financial loss. It is a question fraught with the emotional weight of a grantor’s fears and hopes for their family’s future.

When this critical concern is raised with trusted advisors, a common and perfectly logical starting point is often proposed: “A well-diversified investment portfolio and a solid trust structure are key to long-term wealth preservation. Teach them basic financial literacy.”

This initial response is practical and essential. A diversified portfolio is the engine of financial growth, while a well-crafted trust provides the legal chassis designed to protect assets from unforeseen risks and guide their distribution over time. Teaching financial literacy is, of course, a fundamental prerequisite for any interaction with wealth. These elements constitute the indispensable “hardware” of wealth preservation — the tangible structures and foundational knowledge required to manage financial capital.

However, this initial advice, while necessary, is often insufficient. Financial and legal tools provide a degree of scaffolding, but the critical component is the successor’s preparedness. This is not about saving money, but about building capabilities and applying a more holistic strategy centred on developing the non-financial capitals that truly determine a family’s long-term resilience and success.

Beyond Fear: Reimagining the Proverb

The “shirtsleeves to shirtsleeves” adage, while a powerful narrative, can inadvertently create a fear-based approach to planning. Recent research, in fact, has begun to question its empirical validity, suggesting that many enterprising families endure by adapting and creating new ventures across generations. The practitioner will see many examples in their practice confirming the empirical validity, so let’s settle for a more nuanced “it depends; families need to be very thoughtful to put in place the practices to create an environment that supports an intergenerational wealth transfer. The real risk, therefore, may not be the proverb itself, but the restrictive, control-oriented plans it inspires, plans that can stifle the very engagement and resilience needed in future generations.

A more constructive approach shifts the focus from fear-based restriction to purpose-driven preparation. This involves recognising that a family’s total wealth is comprised of more than just its financial assets. Lasting success is built on three interdependent pillars: Financial Capital, Human Capital, and Social Capital. The common advice addresses the first, but the antidote to the “shirtsleeves” cycle lies in the deliberate cultivation of the other two.

Pillar 1: Cultivating Human Capital – The Competence to Lead

Human Capital refers to the knowledge, skills, capabilities, and resilience of each individual within a family. Investing in your heirs’ human capital is the most direct way to prepare them for the responsibilities ahead, moving them from passive recipients to active, capable stewards.

This goes far beyond basic financial literacy. It involves:

  • Comprehensive Education and Experiential Learning: Lasting capability is forged through experience. This includes encouraging the pursuit of higher education, which is strongly linked to better financial decision-making. Crucially, it also means championing real-world experience. Supporting heirs in gaining work experience outside the family enterprise before joining is invaluable for building discipline, a strong work ethic, self-confidence, and transferable skills. This provides opportunities for “mastery experiences” and personal responsibility, which are essential for developing leadership effectiveness. But also consider that when you send your child abroad for education or work experience, they will be exposed to other cultures and you will have to have an open mind to embrace the changes when the child returns home.
  • Structured Mentorship: Knowledge and wisdom are often transferred through apprenticeship. Establishing formal mentorship programs, where heirs can learn from experienced family members, board members, or trusted advisors, is a powerful tool. This provides a safe environment to learn the cadence of decision-making, ask questions, and absorb the tacit knowledge that is never written down in a trust document. 

Pillar 2: Strengthening Social Capital – The Cohesion to Endure

Social Capital is the relational wealth of a family — the trust, communication, shared values, and governance structures that bind it together. It is the “connective tissue” that allows a family to navigate challenges and make effective decisions collectively. Without it, even the best-laid financial plans can be derailed by conflict and mistrust.

Strengthening social capital involves:

  • Formalising Governance: This is where we elevate the conversation about trusts and legal structures. Rather than simply being restrictive instruments, governance should be a proactive platform for family engagement. Establishing a Family Council can provide a forum for educating the next generation, discussing shared values, and making collective decisions. A Family Constitution can articulate the family’s shared vision and values, creating a “social compact” that guides behaviour and decision-making for generations to come. 
  • Prioritising Open Communication: A climate of openness, trust, and transparent communication is consistently cited as a critical factor for long-term family success. This means holding regular family meetings to discuss not just the business and the portfolio, but also the family’s values, its legacy, and the responsibilities that come with wealth. It means encouraging members to express opinions, listen respectfully, and work through difficult issues directly. 

Pillar 3: Cultivating a Purpose-Driven Mindset – The ‘Why’ Behind the Wealth

Perhaps the most crucial and most overlooked element is the psychological and behavioural dimension of wealth. The ultimate goal is to instil a sense of purpose and intrinsic motivation that moves beyond fear and entitlement.

Cultivating this mindset includes:

  • Countering Entitlement with Responsibility: An attitude of entitlement is a primary driver of wealth dissipation. The most effective way to counter it is by promoting discipline, a strong work ethic, and a clear link between effort and outcome. When heirs are required to truly “earn” their roles, whether through external work or by taking on meaningful responsibilities within family ventures, their commitment deepens and their sense of purpose grows.
  • Balancing Legacy with Autonomy: The family legacy should serve as an inspiring example, not a “straitjacket.” Heirs, particularly those in younger generations, need the space to define their own paths and find personal fulfilment, whether inside or outside the family enterprise. Supporting their individual dreams and journeys ultimately benefits the entire family system by raising competent, responsible, and self-actualised individuals.

From Preservation to Potential

To genuinely prepare the next generation, we must move beyond a narrow focus on preserving financial assets and embrace a broader, more profound mission: cultivating human potential. The “shirtsleeves to shirtsleeves” proverb need not be a self-fulfilling prophecy. By shifting our strategy from one of fear and control to one of empowerment and engagement, we can change the narrative.

The journey involves investing deeply in the three pillars of enduring wealth: the financial capital that provides the means, the human capital that provides the competence, and the social capital that provides the cohesion. By building robust governance,  encouraging open dialogue, and supporting the development of capable, purpose-driven individuals, you give your heirs something far more valuable than wealth alone. You give them the foundation to build upon a legacy.