I think people are often unfair towards second or third generation wealth owners. The adage claims rags to rags in three generations – i.e. the first generation in a family makes money (goes from rags to riches); the second generation starts spending the money; and the third generation squanders the money (and so goes back to rags). Whilst this is often true, if you scratch below the surface the reasons are usually more complicated than the second and third generations being born with silver spoons and being assumed to have no motivation to make money. It should not be forgotten that there are a huge number of examples of second and third generations building on their inherited legacy and taking their family wealth to new stratospheres.
It is not easy to be the child of someone very rich and successful. Often the parent has been so busy making money that the child has not had as much attention as they might have had with a 9-5 job parent. Very successful people are hugely demanding on themselves and often exert the same high expectations onto their children without actually giving them the opportunity to fail and develop their own life lessons. Some kids grow up with the expectation that they will join the family business for which their parent is passionate, but which may not hold the same interest for the child. This is not because the child is spoilt, but because they want to find their own way and be their own person. Where a parent wishes the child to go into the family business, it needs to be handled very delicately in order that the second generation can bring the same level of vigour as the first.
It is very difficult for first generations (who are often self-confessed control freaks) to pass the reins, and you sometimes see them trying to retain control from even beyond the grave with overly elaborate trust structures that only really empower the advisors. It is very difficult for next generations to maintain and grow wealth if they are permanently infantilised.
For the third generation it can be even harder. With the wealth creator/ original patriarch out of the picture you often see swarms of advisors deliberately holding back information in order to protect their own professional position. I have been working this month with a very clever and charming third generation wealth “owner”, whose family office holds a bit over £1b, but employs over 200 people when he (rightly) feels it probably only needs about 9 or 10. Unpicking the situation and allowing the beneficiaries to once again properly benefit from the family wealth is a delicate task, and we will work closely with lawyers as well as making sure all family members feel enfranchised.
The successful transfer of wealth involves being brave and not being afraid to make changes. A structure and set of advisers that worked two generations ago is unlikely to still be fit for purpose. Embracing your family legacy ironically sometimes means breaking with the past.