If your family has struggled with wealth issues, you may well have heard the old saw about the loss of wealth: “from shirtsleeves to shirtsleeves in three generations.” For those familiar with the pitfalls of wealth, this famous quote (most often attributed to Andrew Carnegie) hooks into parents’ fear for their children: what will become of them?

Intergenerational Wealth Can Succeed

This fundamental question can call up a reaction in the most sanguine of parents, but when backed up with the myth that wealthy families must fail across generations, it becomes a galvanizing fear. Wait a minute, myth? Did I say, myth? Yes — it is a myth — because there are families whose story sounds very different. These families are strong and entrepreneurial even into the third generation. The question then transforms from: How do I avoid that old shirtsleeves-to-shirtsleeves trap? to: How do I get my family over there?

Let’s take a look at the fundamental problem. In physics, one of the key elements of solving problems lies in defining what factors are important. The same goes here — family wealth is a very complex problem, so you need to simplify it and define root causes to come up with a strategy. Fundamentally, on the financial side, if you have a pot of wealth, and have three children, you split it in three, and the pot of wealth gets divided by three, which then gets divided further in the next generation. The smaller amounts lead to worse contract conditions at banks as time goes on. If you shave off half a percent of the total wealth over 30 years, you get a substantial difference in value. The root cause of this is that you don’t keep the wealth together. And that’s the most important factor: keeping the wealth together. The first generation’s lack of vision is critical. If parents are raising their children in constant fear of losing everything, they are not looking to the future. They will be protective and less likely to trust their children with tasks that would open the doors to exactly those crucial experiences necessary for the kind of growth that creates an entrepreneurial attitude. But what can you do about it? The remedy is to unite the family around a common cause. Common causes are crucial to holding the family together both emotionally and financially. A common cause gives you some reason to come back and find another path, together, after an argument. It also gives family members a sense of purpose and achievement. With a well-chosen common cause, family members can find their niche, whatever walk of life they choose.

Common Cause

What might be a common cause? It has to be bigger than any individual and can inspire family members with very different personalities to use their unique abilities to achieve success. Most successful families unite either around a business, or a philanthropic cause.

These common causes can fail in two ways. With the family company, the handover of the company may be unsuccessful due to a lack of a succession plan. The important thing with the succession plan is that it caters to every family member’s interest, to ensure universal support for the succession plan. As an example, two of the children may want to continue in the family business, and the third wants to go his or her own way as an artist. How do you deal with that? One solution is to divide the company three ways and then let the two children who are interested in the business control the interest of the third, however that can lead to a sense of betrayal if the third sibling perceives that this division is unfair, or badly managed, to his or her disadvantage. It’s not a good solution unless the third sibling loses interest in his or her share of the wealth.

In terms of what can fail for philanthropy, ordinarily, the failure is a lack of cohesion around the objectives of philanthropy. Sometimes, parents don’t see the strategic value of doing philanthropy, so either they do no philanthropy at all, or they do a sort of “checkbook philanthropy” which is done spontaneously, is based on personal relationships, and stops when a certain limit is reached. There’s no guiding principle to serve as a vision or provide cohesion between different points of view.

Family Councils Provide the Solution

The best solution to the problem of cohesion is to form a family company or foundation using the family council module. The family comes together under the guidance of one vision. The vision will provide the principles to hold the wealth together by giving everyone something to do, by giving everyone their personal feeling of success based on the principle of unique ability, and by fostering responsibility through a sense of togetherness and purpose. If purpose and togetherness are core attributes of how the family does things, if that is what the grandfather and grandmother do, then this continues into the next generation, and the next, because the children see that this leads to success and financial reward—which creates a stronger bond to reinforce in the children’s minds the reason why they should continue with the family council way of thinking. The symptom of loss of wealth can be ameliorated by fostering a deep sense of purpose and togetherness in the family, at the same time recognizing each individual’s need to express their essential qualities.

Example of a Family Who Has Lost Wealth in This Way

One example I saw when I was working as an accountant was a man who had his own electronics business. This man didn’t want to hand any significant financial responsibility over to his adult son because he didn’t trust him. So he set him up with a shop and sent over 100K a year for him to live on. The other side of the company was a thriving import/export business that was doing great. It was such a shame that they couldn’t find their own son’s unique abilities to include him in the business and let him grow into taking it over. Instead, the son was just waiting for his parents to pass away so that he could get his share of the inheritance. If wealthy persons do not trust their children, and can’t transition from parents to mentors, the children are unlikely to succeed. To do that, however, what is needed is a structure. The answer for this man could have been so simple: let’s imagine another ending for him and his son. He establishes regular meetings with his adult son, together with an experienced counselor who can keep the focus of the meeting on finding what key elements the two share. They find they have a common interest in fly-fishing, and maintaining wild rivers. The father and son team set up a foundation for the recovery of a local water system, which provides the two men with a common purpose. As the results of their work bear fruit, they have not only enriched their relationship, but the lives of so many other fathers and sons, who can now experience fishing in the wild for the first time. By working together on something they both enjoy, they have found a way to look past their many, deep differences and see each other with new eyes. Now the son has a reason to spend time with his father and spend thought on growing the family wealth, which is nourishing his passion for fly-fishing and providing sustainable intangible wealth for many others. He has gone from being a passive consumer of wealth to being an active steward with a vital interest in continuing what his father started. The key to success as a family is not to go it alone, then try to manipulate and control, but to work together, trust, and invest in each family member’s unique abilities. Doing that requires experienced counsel and a structure that with the help of professionals can keep family members on course to find their common cause.

The Family Council Strategy

For the family council to work, you have to allow children to go through the cycle of the five C’s—to foster curiosity in every family member, then commit to something, and dare to keep pressing on when things don’t work well, then they will go into the capabilities phase—where they say, “I am capable of doing this—” which leads straight into confidence, where the individual then asks, “Well, now that I have achieved this, what else can I do?” This will lead straight back into the curiosity phase, and the cycle begins again. Ultimately, this is what everyone should try to do with their children—going through the five C’s—allowing the children to gain the experience necessary to continue the family wealth.

The 5 C’s: Curiosity, Commitment, Courage, Capability, Confidence

This is also where philanthropy becomes much more strategic—because that’s where the “artist” child can thrive as well. The positive PR created by philanthropy will feed back into the business. Philanthropy can provide a sense of connection to the world that you lose when you only deal with value as presented on a balance sheet. The sense of connection to the world provides satisfaction that endures beyond the point where you reach the peak in your field. Once you have achieved wealth, checkbook philanthropy doesn’t work, because you want to be more involved than that. Philanthropy can provide the second, third, and fourth chapters of success for those individuals who have already achieved their wealth.


If wealthy parents don’t plan for the outcome of their actions early enough, they end up having a comeuppance. What will help them avoid the pitfalls of “shirtsleeves to shirtsleeves in three generations?” It is, surprisingly, to recognize that the fear they feel stems from negative stereotypes about wealthy families that don’t have to hold for their own if they can look beyond their struggles to find their family’s common cause. Together with their children, parents can look forward to maintaining financial and emotional wealth through the generations, following the vision of their common cause. The family council provides the structure they need to keep on track and keep long-term, sustainable goals as the core of that vision, without sacrificing their children’s individuality.

The Cecily Group

At the Cecily Group, we provide families with the tools they need to establish common causes and grow their financial and emotional wealth within a structured environment, guided by experienced professionals. Contact us for more information.