One of the criticisms of fiat currency and manipulation of the money supply, is

One of the criticisms of fiat currency and manipulation of the money supply, is that it damages the ability to form aristocratic families by means of saving, and drives all great families out of saving and production into financialization.

——- via Nick Zito ———

Dan Kanivas, admirer of the millionaire next door

Written Nov 10, 2015

A recent article written by advisors to wealthy families discusses some of the common ways that family wealth is destroyed over multiple generations, as well as techniques to help prevent the destruction of family wealth over time:

Wealth management usually comes in two parts: financial planning to increase and manage your wealth, and estate planning to protect and pass the wealth along to heirs with as few taxes as possible. Unfortunately, 70% of family wealth is destroyed by the second generation, and family unity is destroyed right along with the wealth. After three generations, the loss of wealth exceeds 90%.

Some families, however, thwart lost fortunes and family dysfunction by adding a third component to their wealth management strategy: They prepare their heirs to receive an intellectual inheritance as well as a financial inheritance. When heirs are brought into a family’s stories, traditions, and values, they can better relate to their past and become better stewards of the family’s capital.

The “shirtsleeves to shirtsleeves in three generations” saying is so true that nearly every culture on the planet has some version of it, including a 2,000-year-old Chinese proverb. It says the first generation works hard to create a fortune; the second generation enjoys the spoils of that fortune, substituting entertainment for hard work; and the third generation, with no role model to follow, squanders what remains of the fortune. Their children have to start all over again.

What is to blame for the destruction of wealth, and why do so many families experience it? The culprit is not poor investment strategy, nor should people be quick to blame economic downturns or bad markets.

Roy Williams and Vic Preisser, authors of Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, collected data from 3,250 families who had lost their wealth. Less than 3% said poor planning and investments caused their reversal of fortune. Instead, 25% said heirs were unprepared, and 60% fingered lack of communication and trust in the family.

The consequences of neglecting intellectual legacy can be seen in the families who ignored it, such as William Henry Vanderbilt’s heirs. Their fortunes could be worth over $300 billion in today’s dollars. However, by 1973, in just two generations, not a single heir was even a millionaire.