My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, May 6, 2019

How to Vanquish the Odds and Preserve Family Wealth

There’s a pithy saying that galvanizes wealth management professionals and wealthy families: “From shirtsleeves to shirtsleeves in three generations.” It or its variants exist around the globe — from Canada to Scotland to China.

The English-language version paints a perfect image: the first generation rises from poverty – shirtsleeves – to build wealth. The second generation may retain or even grow the nest egg. By the third generation, that wealth has eroded or vanished. The bottom line: While founders often build incredible wealth, subsequent generations excel at losing it.

This week I’d like to bring you the sage words of my colleague Jeff Noble. Jeff has advised hundreds of business families on how they can beat the odds and preserve their wealth to the fourth generation and beyond. I wanted to get his take on beating the three-generation curse.


We all have a different set of thoughts and feelings on the value of life and wealth. When considering a multi-generational wealth plan that will endure and be the basis of successful and sustainable wealth transition, it is critical to clarify and communicate our values. This is no idle exercise. By sharing our philosophy about wealth creation, wealth management and wealth divestiture — we can increase the chances that the wealth will truly be generational.

Here’s the challenge: The time-honoured statistics on successful wealth transition are not promising. Wealth creators are often painfully aware that at least two-thirds of the time, wealth erodes or even disappears when it gets in the hands of the next generation or the one after that.

Building a wealth philosophy

Defining principles and values and developing a belief system – a philosophy – from those principles and values with your family will significantly increase the opportunities for you and your family to beat the statistics.

As constant and reliable as the true north in navigation tradition, choosing direction and purpose for wealth will define your legacy and help your beneficiaries and their beneficiaries to be best prepared to receive and to give. Some examples:

  • Don’t give away the golden eggs. The goal is to teach family how to look after the golden goose.
  • Recurring wealth is like gardening. You enjoy the flowers and then nurture the plant with care and attention so you can enjoy even more prolific blooms the next season.
  • Your standard of living is not equal to your cost of living. Always live within your means, not to a standard to which you may feel entitled.
  • Spend, save, give. Buy the things you need. Set aside money to buy things in the future. Donate money to help people, animals and the environment.
  • Leave the word a better place. Some wealthy families make a point of educating their children on this mantra: I have a personal sense of responsibility to leave the world a better place than it was when I got here.


The three Cs of wealth preservation

In my experience, families that successfully beat the odds at preserving and even increasing wealth through multiple generations excel at what I call the three Cs: collaboration, communication and common vision. This is what family governance is all about.

When speaking about collaboration, we speak of working with others among generations, between generations and with a group of external advisors to make the best decisions, together.

To do that, positive communication is critical. This will tie right back to family values as to how we treat each ourselves and how we treat others. Understand and learn from history, relationship dynamics, moods and personalities. Use structure and deal in facts. This will create a positive and safe environment for open, honest and productive communication.

Perhaps the most important of the three Cs is a common vision. This is your wealth-strategy true north. With this alignment of purpose, the focus is not on any individual “me.” The focus is on “us.” Adopt a future focus when managing your wealth for the long term.

Introducing a new definition of wealth

This brings me to a new definition of wealth. When we think of wealth, or capital, we naturally default to tangible items like money, stocks, bonds, real estate and the like. This is financial capital.

The other types of capital include human, intellectual, social and spiritual capital:

  • Human capital is a family’s greatest wealth. It comprises all the individuals that make up the family.
  • Intellectual capital is the sum of all the information that those individuals know.
  • Social capital is the quality and quantity of relationships within the family’s network.
  • Spiritual capital covers the deepest values that express the nature of the family.

And when you think about it, if we do not look after the human capital and all that means, the financial capital has precious little chance to endure.

Yes, each of us has a different set of thoughts and feelings on the value of life and wealth. Defining your family’s principles and values – the true north that can steer your family through the blips that will no doubt arise – is fundamental to creating alignment for the future and a common vision supported by positive communication and collaborative decision making.

Jeff Noble is a senior consultant and family enterprise advisor in the BDO Advisory Services practice. He can be reached at, or by phone at 905-272-6247.

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

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