In part two of a series of articles on wealth Bruce Sheppard looks at how to retain and grow money once you have it

In part two of a series of articles on wealth Bruce Sheppard looks at how to retain and grow money once you have it

By Bruce Sheppard*

New money only becomes old money if you manage to keep it. The probability of retention is vastly improved by how it is derived. Blood, sweat and tears that convert into money over time has considerably more meaning to the earner than quick money or good luck. 

Without preparation and an understanding of the way in which these resources were accumulated, when it passes to the next generation it starts again as new money. But worse luck rather than sweat money. 

Lucky money has the highest chance of disappearing. For many decades now we have run a state lottery, Lotto. A very high number of Lotto winners lose most of the money they have won. Some lose all of it. Some even lose what they had before. Very few have grown it. While not as bad as Lotto winners, second generation (G2) wealth follows the same course.

Old money has to be new money first, it generally comes from four methods:

  1. As said above, patience, persistence, and grit in doing something purposefully over a long period of time. (Have a read of Amy’s article on grit here.)
  2. Building a business from a small business into a large business, and selling it for a large chunk of change. Sistema for example.
  3. A lucky break investment. For example, bought A2 milk at 10c and now worth $15.
  4. Or straight luck, Lotto or the like.

In NZ most by number, if the rich list is any guide, appears to have come from property. The most wealthy and the most wealth appears however to have come from creating businesses. The Todd family, Graeme Hart, Stephen Tindall, Doug Myers, Colin Giltrap, Owen Glen… the list goes on. 

The mega property wealthy, such as Bob Jones and others of his ilk, have made it not in residential property, but rather commercial, in itself an investment in a business, the tenant.

A key characteristic of G1 and the creation of sustainable family wealth is an understanding and an embracing of measured risk. Risk is not a bet-it-all craps-shoot, that is lucky wealth. 

Detailed below are the common behavioural weaknesses of new money.

Over confidence and arrogance

“I have done it once I can do it again, what worked last time will work next time, and in every room I am the smartest guy present.”

“My number is bigger than yours nah nah nah nah nah!”

Over confidence makes you vulnerable to being closed minded and unrealistically optimistic. Rest assured there is always a bigger smarter predator somewhere out there than you.

My first experience of this was in the mid-1990s, when we helped a client sell a software business. In his case this was his second exit for a significant sum. The first sum was one fifth the size of the second. With the first sum he bought property and started the second. With the second which was nearly NZ$50m (around $200m in today’s equivalents) it was one of the first very large IT exits and a big headline exit. He was a hero, and a nutter magnate.

I gave him a pre-printed cheque book with 25 cheques in it so that I could help him see that he was now only 25 cheques away from zero to try and curb his over confidence.

I pitched him an investment, one of my first VC investments. He had been writing cheques for $1m to any dopey project that he liked and was running the pile down fast. I said I thought this new investment I pitched was a good one. And it was for a while, until 1999 came along and the ‘Asian Crisis’ and a flawed chasing of a NASDAQ listing near killed it.

Instead of just doing $1m, I did $250k, he did $5m and within five years of his investment in it, his was at nearer $16m. Progressively he became unadvisable and we parted ways. While he was gifted, and entrepreneurial, he failed to thrive through over confidence and arrogance. 

I am sure we have all met at least one know-it-all… and I might behave like one of those from time to time… maybe all the time.


Put another way, lust for the adrenaline hit of the next big win. In effect the sentiment is…

“It was fun bagging $100m, I got a high from that. Now I am bored and feel…”

In effect a downer from the last money drug hit.

This often leads to depression and a deep sense of dissatisfaction and failure. Irrational to onlookers, who see them as so successful. In the words of one guy, when we bagged over $40m, and the cheque was banked…

“Is this it?”

It was a statement by him as to how most people react to such wins after a battle to get it, and even though it was a great result, it was when it turned from a possibility into an actuality, somehow a bit of a let-down. When a client asks me to list a business for sale I usually start with the preparation;

“Are you really ready to have your life test scored?”

Most vendors think what they have, is around twice as valuable as what a buyer thinks it is, and being told that brings on all sorts of behaviours that usually mean they fail to sell it. And if succession has not been dealt with it goes to zero. A different iteration of the ‘is this it’ syndrome.

This depression or sense of failure sometimes drives increasingly desperate or risky behaviour in the pursuit of the next big adrenalin hit.

One real success story from nothing, an Invercargill teacher, one of the most psychologically stable and successful guys I know, said to me once…

“Bruce, most rich people are very sad dissatisfied and depressed people.
The reason is, they do not define success.”  

The best cure of this boredom-must-do-something aliment, is write down what success looks like. When you get there, stop pat yourself on the back, celebrate, and either remain stopped or set a new success goal. Everyone needs a pat on the back occasionally.

The ‘more’ disease

The endless chase of more wealth for its own sake. The addiction of continual growth can be its own undoing. Why because such a pursuit burns time, health and energy which invariably means that the preparation of G2 is missed. This can result in G1 being resented by G2 and the probability of dissipation increases.

Excess consumption

When the big windfall arrives it enables a complete change in life for the recipient. Sometimes they respond to this with stupid consumption.

“Bruce, I want to buy a formula one race car, can we make it a business?

Sure, you can afford one, but don’t fool yourself, it will burn money not make it, please only buy one.

He ended up with three as he also had the ‘over confidence disease’ and a need for an adrenaline rush. Three years later and he’s back to ground zero. 

“Bruce, it’s my money, why can’t I drive around a pink Bentley if I want to, or even  two!”

Because others judge you and the flaunting of wealth just isolates you. New Zealand is a tall poppy resenting country.

Fear and paranoia

In effect this is a fear that having made it, someone is going to come along and take it from you. This drives complete inertia in terms of capital deployment, and a default to zero or near zero risk taking. In time of course, asset inflation makes monetary sums increasingly insignificant.

Fear and paranoia is a sort of living death for any who suffer from it. In the wealthy it also usually brings about a slow decline in their wealth over time. This sometimes feeds the depression and sense of failure.


If you are a working class kid from South Auckland, with the manners and cultural nuances to go with it and you have the wealth to live in Paratai Drive, where do you belong? Will the Northern Club members truly welcome you? Will you be comfortable around them? Will you feel insecure in their presence? What about your mates from Mangere, how can you relate to them? If you buy a new car what will they think? You don’t want to go camping anymore. Fred can’t afford to do what you want to try now. How will Fred feel if you offer to shout him?

It is bloody hard moving around the societal hierarchy. You end up either having to pretend everywhere, highly stressful, and then you run the risk of losing your sense of self.

It is actually quite tough for those that make it. They are vulnerable, and unprotected by the law. The financial markets regulations protect retail investors, those with less than $5m of assets. The shiny shoe car salesman know that all these psychological traumas are going on in the heads of the new rich, and they target them.

Many fail post success for all sort of reasons, but the survivors then have to think about what will happen to their kids. If they have survived the psychological and societal trauma of rapid wealth they will want their kids to as well and are often at a loss as to how to prepare them. That topic will keep for another article.

Quick check list of things to help you survive getting rich

  • Define what success looks like so you can pat yourself on the back.
  • Avoid the envy of others. Celebrate your own success.
  • For at least 12 months post a significant change in your wealth, do nothing. Pat yourself on the back feel good about it, make no decisions on anything big.
  • Work out who to trust, and not. Make sure you find a trusted advisor if you do not already have one. Someone who you will listen to when they tell you, you are being a dick head.
  • Avoid arrogance and being flashy.
  • Remember to keep walking, i.e. don’t get so scared that you do nothing.
  • Start spending time with your family and the preparation of them for what is coming down the pipe at them.
  • But above all else, remain real. A purpose of wealth is choice and freedom. Learn to not give a f*ck. Compulsory reading: The subtle art of not giving a f*ck, click here for the book. (This link no longer appears to work so here's author Mark Manson's website, Ed).

*Bruce Sheppard is founder and managing partner of accounting firm Gilligan Sheppard. He's also the former chairman of the New Zealand Shareholders' Association. This article first appeared here and is used with permission. 

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Just under Fear and Paranoia, you could add a segment captioned “Predators.” We used to know an entrepreneur or developer, whatever suits on the day, who at one stage got as far as being numbered on some published list of NZ’s wealthiest. Not there now though. However the point is, we soon realised that if the identity concerned was making money then some person(s) elsewhere were losing money.

Link to the book appears to be broken.
Chapter titles:

1. Don't Try.

2. Happiness is a problem.

3. You are not special.

4. The value of suffering.

5. You are always choosing.

6. You are wrong about everything (But so am I).

7. Failure is the way forward.

8. The importance of saying no.

9. And then you die.

Another great article Bruce, I struggle to believe you're an accountant lol, you display more qualities of a top psychologist

Indeed, looking forward to Part 3, where Bruce explains how to prepare our children as while he said something along the lines of /Education plays an important role but not everything/.
How do we teach our children to make the correct decisions when basic financial literacy education is more or less missing from education.
Is there such a path ?

Great article, so important in life to learn when to not give a f!@# and who not to listen to. Avoid negative people and those who have a chip on their shoulder with an agenda ! There's been many on this site although most have disappeared. Be a people watcher and learn from other people's mistakes. Most of all make your own decisions armed with accurate information and understand trends and cycles, that's my recomendations !

Wise words.

Perhaps what was missed with wealth, and its changes through the generations. Witnessed personally is the need for a continued "Purpose"in life, while also recognising changing times.

You are correct in that Property has made alot of people wealthy; most having benefited from unsustainable
capital appreciation. Its been easy money for those who have participated in aggregation. Look no further than Michael Friedlander for that; reported worth more than anyone in NZ.

You strike a very important point on 'don't try to be someone you're not'. I'm equally at home across the two divides; being the tradesperson and the professional, and can say the hands on business people are those you gain most benefit from; not the professional advisors. Most professional advisors arent worth a tin of fish, and more likely to be snakeoil salespeople trying to steel your intellectual property and feed it to their next client. Choose your network wisely, as you can not buy trust.

Yes yes- lots of "professional advisors" (myself included) are trying to "steel" your intellectual property - cunning as a fox we arrr.

Whose loss is worse? And why?

The retiree on benefit payment, who has total wealth of $1 million and loses half of it in a week,
The rich middle aged who has a wealth of $100 million and loses half in a week?

IMO both lost 50% of their wealth so both equally worse off relative to their own situation

You haven't considered age and remaining earning potential. In addition someone with $50m in assets isn't going to be worrying about whether they can pay the bills or not. Whereas $500k for another 20-30 years is a problem for maintaining lifestyle.

You didnt consider the problem the other person may have maintaining their lifestyle with a 50% reduction in wealth. average life expectancy in NZ - 79 for male, 83 for female from the latest on stats nz. Dont think many retirees that are 65 are living to 20-30 years post retirement

2014 figures: Today's new superannuitants stand to receive New Zealand Superannuation (NZS) for over 20 years (men) and over 23 years (women) on average. Successive cohorts are expected to live increasingly longer, so that today's 25-year-old men live for over 25 years after age 65 on average and women for over 27 years.

You will be using 'OK Boomer' until 2049 for men and 2052 for women, on average.

which source is more accurate? stats nz or vic?

Statistics New Zealand were in their references:

Statistics New Zealand. (2009). "New Zealand Life Tables: 2005-7." Wellington: Statistics New
Statistics New Zealand. (2010). "National Ethnic Population Projections: 2006(base)–2026 update."
Wellington: Statistics New Zealand.
Statistics New Zealand. (2012a). "How long will I live?".
Date Accessed 12 February 2013.
Statistics New Zealand. (2012b). "National Population Projections: 2011 (base) - 2061." Wellington:
Statistics New Zealand.

Your figures likely refer to life expectancy at birth. This is different to the remaining life expectancy of someone who has reached 65 years old.

wouldnt the expectancy at birth be higher than those who are already 65 if the average life expectancy is increasing?

As we all eventually find out, not everyone makes it to 65. Average life expectancy at birth takes those into account.

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