In part three of a series of articles on wealth, Bruce Sheppard looks at the challenges of passing wealth onto the next generation with baby boomers set to preside over the largest passing of wealth in human history

In part three of a series of articles on wealth, Bruce Sheppard looks at the challenges of passing wealth onto the next generation with baby boomers set to preside over the largest passing of wealth in human history

By Bruce Sheppard*

When a G1 (first generation) wealth creator has a business or an activity that they are proud of, and have a dream for its future, the most common mistake they make is to assume that everyone else will have that dream too. In particular their children. Some of the worst tragedies that I have witnessed are the G2 (second generation) children living their lives in pursuit of a G1 dream that is not their own out of obligation.

One example was the grandson of a founding Auckland father who had for over 20 years run his grandparents business. During his tenure he did not grow it at all, it quietly ran down. He came to me and he said…

“I just can’t go into the office anymore, I even struggle to get out of bed, and it is more exciting to watch the rain drops run down the window than facing another minute in the business.”

In his case, he had made the decision not to run the business while his father was still alive. He had his own dream and he had even started down the path of living his own dream. When his father died suddenly his mum said “Come in and run it for a couple of months.” That was two decades earlier. Such is the pressure of family and legacy.

Another grandson was convinced by his father that the family dynasty was all his to run. The grandson became my client while the business was on its way from greatness to mediocrity. The grandson believed that his father’s dream was his own. He was not as passionate about the business as his forebears. The business to him was simply an economic instrument. He did all the right things, he appointed a CEO, also a good capable guy, he retreated to being on the board with some of his own children, and a group of ‘professional’ directors. The business lost its way in terms of leadership, as well as vision. The grandson did not have his forebear’s passion, he had his own suppressed dreams.

In both cases there was no choice but to sell these companies for what we could, to free these people from the dissatisfaction of living other people’s dreams.

There are some good examples however as well. In one of our client groups G1 actively brought their children into the business while they were still actively involved themselves. The children worked in all aspects of the business to find that which they enjoyed. G1 grew the skill and value sets of the children. They also brought some of the employees into the fold in various aspects of the business. The children embraced the families vision, valued the G1 employees and support crew and now G2 are running an even larger enterprise than that run by their parents. What makes this case so compelling is that it involved three families where the G1 team had been partners for over 30 years and the children of two of those families now run the business with the trust and confidence of all three families. Sometimes it is useful to redefine ‘family’ beyond simple bloodlines and marriages. In the words of one of my enterprise partners, “We are whanau.”

Retain the Duchy or commence the journey to serfdom?

The common dilemma with substantial wealth is the decision between trying to keep the critical mass together and dividing it up. Dividing it up, as in feudal times takes a Duke to a crofter, within a few generations.

Keeping it together still requires a driver, and the bigger the family gets the more hierarchical it becomes with some being in the driving seat and some being passengers. Inevitably when it is kept together someone in the family has to run it, and the rest of the family simply receive distributions. Power, information and opportunity becomes unequally held.

Over time this can lead to resentment as some in the family have more power than others. Those with power resent the ‘tit sucking trust fund kids’ who do nothing. Those who have been disempowered resent those that have been favoured with power and control. These resentments often boil over and the family enterprise becomes dysfunctional and the wealth gets broken up and dissipated.

There are many public stories of this type of dysfunction. Few of success. Probably because success rarely gets exposure to sunlight. Perhaps because those who experience success don’t require external validation and better stories come from dysfunction and dissatisfaction.

Having spent time around some wealthy families sorting out the economics left after the fights, and having observed their behaviours. some elements are present in successful outcomes.

Family mentoring

Focus on making your children independent in spirit. Try to get them to understand that no matter what they will be secure, and have choice. With this gift encourage them to discover selflessness and generosity to others. Without this the rest will be hard.

Listen to their dreams and encourage growth and experience. Expose them to what you have done and learnt, tell them your story.

Get the children involved early

Introduce them to your networks and encourage them to make the best of those if they wish. Involve them if they wish in what you do. Let them see and understand what is important in each business. To be clear what they think is important, not what you think is important.

Identify and grow leadership

If some of your children are willing to lead a combined family endeavour, remind them that the purpose of leadership is to get everyone to the end of the journey, and to treat their followers with fairness, respect and understanding. Teach these children business leadership skills, and more importantly the skills of governance. Remind them that governance’s purpose is to…

“Run an enterprise knowing that those who are not making decisions around the table with you are utterly dependant on the quality of the decisions you make.”

With your remaining children, try to get them to appreciate that staying part of a big pie will protect, secure and reward them better than having 100% of a smaller pie on their own.

Trust is everything. Nothing new in that!

The child or group that will run and govern the bigger pie, have to have the trust and respect of the others. Remind them that trust is hard earned and easily lost. Consistency and transparency is important. Absent that, the family endeavour will fail.

The rewards of staying together have to be measurable and tangible. Just as in business.

If all do not feel part of the whole, and trust the leadership and governance of the child leading the family enterprise, that child’s life will be a living hell of sibling snipping and resentment. Either the followers will force the dissolution of the enterprise, or the child leading it will. Life is too short.

Philanthropy… a grooming act or is it an acknowledgement of failure?

Some wealthy families give their children an allowance for charity. The aim is multifaceted but includes the aim of giving the child a sense of the scale of wealth while not allowing it for themselves. Prohibited cake. A hope is that the act of giving money always will teach selflessness. It doesn’t usually work.

In well-established families charity is often a core purpose and legacy.

“We make money so we can give it away.”

Thus a fundamental grooming act of the children is to understand the giving it away part, in order to understand the family legacy. I have found in most cases, two or three generations on, families struggle to understand this. If the G1 dream is to fund charities, it is unlikely that this dream will be shared by G2 and G3.

Charities can often become like the ‘tit sucking trust fund kids’, needy and demanding. Getting needy kids to admit more needy kids into the family, is often a struggle. The leaders in the family will probably be indifferent to a squawking fledging, be it a family or a charity, the noise is the same. The guilt trips they will have to endure are different however. Not bad training in itself if you want to really kill empathy in your family leaders.

The Will

Treat all your children equally on your death. I guarantee you, no matter how much is involved, do so, otherwise you’ll create a Sicilian blood feud that will last generations.

Make sure enough is distributed that the independence of spirit is able to be free to fly, so that each child has the choice to pursue their own dreams if they wish and on their own terms. Give them free will and choice. It will make it easier to leave the surplus wealth in a joint pot.

If you have critical mass of wealth beyond the reasonable needs of your children to achieve freedom, what do you do? Distribute the lot and divide up the estate into smaller sub critical mass units or keep it together? How do you decide how much is enough, what would your children say if you asked them? Have the conversation.

If having asked them you find that you have more than enough to allow your children to achieve freedom and choice, treat the surplus with responsibility, and treat its possession as a privilege.

If you have obtained wealth through business, remember the lessons of business and governance in thinking about how to deal with an enterprise, which your family has become. Who among your children will take this responsibility, and if none of them how will the governance processes work? Power and responsibility rarely devolve equally but it does have to devolve and extreme care and preparation is essential.

For many, when faced with the fear of ruining their children’s lives through wealth that they are unprepared for, or facing the trauma of continuing without leadership from a family member, choose charity or charitable trust structures to alienate their wealth from the family. This usually just creates resentment of the G1 by G2 through to G infinity. If your legacy is the memories you leave behind taking the chocolate cake away and leaving a permanent reminder of the deprivation is a sure fire way to impact your memory legacy. By the way some are not too concerned about this, it is their conscious and planned purpose.

Some also choose to skip a generation and drop wealth and control down to grandchildren. Without procuring your own children’s agreement to this, you will drive a wedge between your children and their own children that will struggle to heal. Just as it is your responsibility to parent your own children, it is your children’s responsibility to parent their children, don’t interfere with that, it will be resented. Perhaps when considering this you should reflect that this is the ultimate acknowledgement of your own failings, and this is the most charitable interpretation your children can put on such an act.

If you have failed in the preparation of your family, keep it simple throw the lot at them equally and let them sink or swim, Darwinism at its finest. You will still be resented for not preparing them especially if they lose the lot, which mostly they will.

Help is out there

The final act of the baby boomer generation, is to preside over the largest passing of wealth in human history. They are the wealthiest generation in history. The next few years is both a threat and an opportunity as to how our society will look over the next 50 years if this transition occurs without planning and purpose.

Better to have a plan and good preparation if you want any dream at all to flourish.

*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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"Get the children involved early". I read recently that the family of Visy, the world's largest privately-owned paper, packaging and recycling company; founded in Melbourne by Dick Pratt some decades ago, brings the family children into the Board room when they turn 12. It seems to be working for them! Their mantra? :
- Look after your best customers
- Look after your best staff, and
-Collect every cent of every dollar you are owed ( otherwise, those who owe you money will start 'asking' for a discount if they know you won't enforce 100% collection)

Here are good U tube videos to watch 10 rules to success by some very famous people

Lee Kuan Yew former prime minister of Singapore

Warren Buffett

Robert Kiyosaki

Bob Proctor

These people will inspire you


Very insightful Bruce.

As you will be aware, the rothschilds chose the most capable on the next generation (and it doesnt matter what part of the family they have come from) to keep running their ship and collectively they have enormous wealth; probably (definitely) too much.

The indian and chinese are particularly strong with keeping it in the family; and the germans have been particularly successful at it too. It seems to me what appears wrong with the rest of us in aggregating wealth is the lack of governance, and as you'll be aware this is ingrained early in life with self discipline.

Not everyone can be rich, and its the worst measure on the true worth of a person anyway. Alot of rich have died very lonely. The key is to be comfortable with what you have; remembering that once you have reached independence, the returns from additional cashflow and equity are relatively marginal.

that is a problem for the one per cent,millenials waiting for dad to croak would be lucky to get enough to take the kids to disneyland if they have siblings,lawyers and funerals are pricey.

Some people have vision some people don't.

Indeed. I read Richard Branson's book. As you read it, each step along the way to what Virgin became seems so simple. Yet only he did it.


I heard a little while ago that there is some type of rule that describes how inherited money lasts. The most is three generations.

My experience is that children want the wealth NOW, like yesterday. They do not understand that and resent me reminding them, with me in my 60s my current wealth (one house, no mortgage) is based on a life time of work, often on not great incomes, and with a couple of serious setbacks. The first time I could afford to fund my own travel was in my very late 50's. The young in my family think that it is unfair that they cannot travel when in their 30's, after having chosen not to work, and have three kids each. They think I am mean when I ask how they will pay back loans they ask for.

Something that is seldom discussed; Why should we teach children to get jobs? We teach them to get jobs to be self-sufficient, so that when we die they can continue to be self-sufficient. We teach them to get jobs because we want them to have good lives, to be fulfilled, to realise their potential and most of all have the benefits of that labour in their maturity so they too can enjoy their toys and travel. We teach them all these thing so that they will teach their children these too. And most of all, if the world melts down seriously and the societal safety nets we have developed vanish, we have taught them a work ethic and standards that should hopefully ensure they can and will survive.

This is a truly inspiring post. Thanks murray86

Bring on euthanasia. The next generation will use it to access inheritance.. subtlely mistreat grandad till he feels depressed and wants a doctor to sanction his death.

A good point, first it was a abortion where the unborn child has NO say what so ever, this is another subject, now its euthanasia for the terminally ill. There will be a next, euthanasia for retarded people and severe mental illness, then people that are too old and need expensive operations, give it time , WHEN DOES IT STOP. the naysayers will say this will never happen, they said that for euthanasia twenty to thirty years ago. Also all the above happened in Nazi Germany, which was stopped by WW2.

You should have a read of 'slippery slope fallacy', learn what it means and then reread your comment. Great example btw!

OK Boomer


You are perfectly entitled to be against the legalization of euthanasia and many are. You are not entitled to compare what is being proposed with the horrors of Nazi Germany. It is not just disproportionate,but grossly insulting to those who hold a different view.

Thats what happened, the Nazis started slowly and conditioned people to accept it, thats what happening now, it all being Planned on a decade basis

I assume you understand anyone requesting assisted dying has to have a terminal illness with a prognosis of six months or less (or 12 months for a neuro-degenerative disease). That is a scenario that is not as easy to arrange as you might think...

When we are young we have dreams and ideas but often no access to capital. When we are older we have capital but not the dreams and ideas of youth. We become careful and conservative.
The idea is to somehow help our children to overcome the hurdle of not much capital, letting them try new things without damaging future income streams.
Our experiences are all in the rear vision mirror, young people are still looking though the front windscreen. It's really an issue of leadership.

Im a farmer, when I look at farm leaders nearly everyone of them inherited farms when young, debt loading not so important but if you hit the jackpot of a large farm with low debt, only one sibling (or you buy them out when you are young and land was cheap), parents either older or wanting to retire early. These are our farm leaders and i'm not sure it's the best way to choose them, but these are the the ones set up by 40 and with the time to invest. The rest are too busy working to look up.

Andrewj - in my experience in the rural sector you are 100% right. We made a major mistake letting those that "made their money the easy way" be in charge of our co-ops, the results of this error are now history............

Unfortunately they have done a huge amount of damage. They let management run the show for management, like many councils today ,where councillors are little mire than goodwill ambassadors.

Yet your children aren't working. It sounds like they either didn't listen or you didn't engage them in enough financial discussions when young. In the end it's their choice. However some retirees that find they have an excess of wealth are choosing small distributions rather than saving it all for the end. That's a matter of what position people are in but in general current retirees are living a lot longer so there's still the consideration about having enough to maintain lifestyle to the very end.

As teenagers they refused guidance. Point of fact they are inherited through a second marriage. Both their parents are hard working Dutchies with strong work ethics, but these refused to acknowledge what they had been taught, or any advice as teenagers. My own two boys are both working, one here in the army and one in the US. The two in question though, expect the world to support them and think any move to require them to be self sufficient is both unfair and inappropriate. Today in their 30's both utterly refuse to enter into any conversation with me about money and opportunity because they say I will just be rude and unfair. I just tell them fine, the consequences of their choices are theirs to own.

They will have to accept the outcome of their own decisions. You can always help by looking after the kids now and again, or pop $20 in a Christmas card for them. That way they'd get the help a lot of others get from their family.

We do mind the kids occasionally, and it's a bit more than $20, but it's still never enough.

Adding to my post about teaching children, we should also teach them to be politically aware and to participate. Currently there is a movement which blames the Boomers for being 'rich' compared to current generations. This shallow, superficial thinking is problematic because it never points at the real causes. In the 80's our economy went through a transformational change thanks to the elected Labour Government of the time. The problem with this change is that there were many significantly negative impacts which have led to the current state of affairs. Our current political elite are reluctant to change the model in use significantly. Why? Probably because most are benefiting from it. Additionally the political elite want to extend our parliamentary term. They justify it by saying that it is too hard to achieve anything significant in just three years. But extending the parliamentary term undermines democracy. Our Justice system has already been significantly undermined by getting rid of the Privy Council. Political awareness is very important. We need to be able to hold them to account more effectively.

Hi Murray,
I wholeheartedly agree with you that is it is totally unacceptable that your children expect your inheritance NOW and that "they think that it is unfair that they cannot travel when in their 30's, after having chosen not to work". I would like to point out to you though, that as their parent, it was your responsibility to educate them with better values and I do not accept your post that "they didn't want to listen when they were teenagers". Of course teenagers don't like to listen, it's our job as parents to still instil some good values and guide them to become self-sufficient, fully functional members of society.

I agree totally, but will add that there is a point when the parent must stop trying to direct and let them learn their own lessons. As parents we hope that the lessons take early with small mistakes, but there are times when this doesn't happen. Everyone needs to learn that there are consequences to actions and choices.

There seem to be a fairly common attitude about people having rights. The right to choose, the right to do things. But when it comes to the consequences nobody wants to know, and it's always somebody else's fault.

Teaching children about consequences is not about smacking them (or bashing them), but teaching them that having a choice is a responsibility, not a right, and that any choice has a consequence, and possibly a price. When they make a choice they have to be able to bear the consequence.

On the smacking issue; having grown up in the shadow menace of the dreaded wooden spoon, a few of which I remember being broken on me, and well before the anti-smacking law, I established that we could smack our children, but that it could only ever be a single open handed smack to the buttocks. When told that that wasn't a punishment, my response was that it wasn't supposed to be. Rather it was a means to refocus attention, as other methods were not working. As it happened, i found i had to smack one or the other maybe once every 6 or 8 months or so, and usually because sooner or later I had to put my money where my mouth was. Smacking was never really effective and soon got dropped anyway, when other ways of punishing for infractions when reason didn't work, were identified. An important point; as a child i commonly heard "Because I said so" as a reason for doing something. I hated it! I never said that to my children. I always told them why, and no matter how young they were, they never disappointed me in not being able to understand the explanation. Yes i simplified the explanations but on one occasion i overheard my four year old son explaining to his two year old brother why he should not do something. He demonstrated a fundamental truth that I firmly believe - no matter their age, if you want your children to be and act like intelligent people, treat them as though they are intelligent and respectfully, (this doesn't mean assuming they know something) and at least 80% of the time they will prove that they are just that. the other 20%? Well they will show you that they are just children and they need their parents to keep them safe, and help teach and guide them. They are after all your gift to the world. make it a good one.

Murray86 - Very interesting thanks. It is challenging around children and inheritance. I have 2 children around 30 one self driven and exceptionally successful the other a cruiser and very happy. I like the idea of old money developing for future generations but neither are interested in my financial dealings to build a dynasty for our families economic future.
They have their own lives to live.
I have accepted this now and moved on. I have created what I have so my active plan is to spend at least half of it in the next 30 years, feels somewhat selfish but I deserve to enjoy it more than them. They are happy with that and want me to have the best life before I pop off.
Strange how life works out !

Thanks for all the feed back. In my first marriage I recall my wife asking me what i wanted my boys to be when they grew up. I responded that I wanted them to be happy. She told me she wanted them to be Policemen. I asked her what would she do if they didn't want to be cops. She wouldn't accept that. I told her that i intended and was teaching them to be inquisitive, to be confident in themselves, have discipline and standards, and on that basis to be able to make good decisions for themselves and those around them, but that the choices they made in leading their lives was theirs and theirs alone. She countered with the question of "what if they were gay?" I responded that that was their choice and irrespective of my own gender bias, i would happily accept their choice so long as they were happy.

Today with my life experience, the best I hope for with my boys is that for all their choices I hope they are happy with themselves. I know life can sometimes deal a poor hand, but if I have done well by them, they are well capable of weathering any storms and picking themselves up afterwards.

Funny that most people are now electing to be "Child Free". So not surprising that in large parts of the world both upper and middle class people are deciding to not have kids, because they know that they're going to find it hard to maintain their life style well in to the retirement years.

It's more like they cannot afford too or by the time they have paid of student loan, tried saving a small deposit for house it's too late. And that's with 2 income biggie the planet's got enough.

Surely this would also mean that Governments are looking at the largest inheritance windfall in human history?

Most middle aged fractured families I know of are the result of squabbling over a significant inheritance. I have heard it said the best start you can give your kids in life is to be broke. I wonder if it might actually be true.

Just do what someone else doesn't want to do. Work your hands will be providing you with a good future.

some of the motivation of the grey nomad lifesyle is an escape strategy,to break free from family constraints and earn money from working if you choose.not for everybody but could be a lifesaver.

When Warren Buffet's son asked him for a loan, Warren told him to go and see the bank manager.

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