A fortune is said to rise and fall. However, its eventual ruin may come along faster than expected, particularly if its demise happens within the lifetime of the person whose hard work, ingenuity, and perseverance created that wealth.

Surprisingly, the majority of the families who destroy their fortunes haven’t done so through poor investment strategies, flagging economies or turbulent financial markets.

The oft-repeated phrase, “silence is golden” is anything but when the subject is one’s inheritance. Parents who don’t disclose the extent of their fortune may hope to preserve their children’s motivation and not inhibit their professional, creative, or scholastic development. While this is well-intentioned, “protecting” children from potentially shocking information could cause them to feel deceived by their parents, isolated from friends, and like a fish out of water in their own lives. That is not the goal. And being unprepared to steward their birth right is a recipe for wealth destruction.

Imagine an unmoving car. Its tyres are encased in heavy mud on the side of a dirt road. Every turn of the wheel feels futile as the tyres spin, going nowhere. Frustrated, yet resigned to the situation, you manoeuvre the wheel, hit the gas lightly, turn the wheel in the other direction, and try again. Finally, you free the front wheels. No amount of backseat driving, no matter how well-intentioned, will move this car. It is only when the driver discovers the sweet spot—the combination of turning the wheel ever so slightly in one direction and hitting the gas pedal just so— that moves the car out of the mud.

The oft-repeated phrase, “silence is golden,” is anything but true when the subject is one’s inheritance. Parents who don’t disclose the extent of their fortune may hope to preserve their children’s motivation and not inhibit their professional, creative, or scholastic development.

While this is well-intentioned, “protecting” children from potentially shocking information could cause them to feel deceived by their parents and isolated from friends.

Imagine an unmoving car.  Its tires are encased in heavy mud on the side of a dirt road.  Every turn of the wheel feels futile as the tires spin, going nowhere.  Frustrated, yet resigned to the situation, you maneuver the wheel, hit the gas lightly, turn the wheel in the other direction, and try again.  Finally you free the front wheels.  No amount of backseat driving, no matter how well-intentioned, will move this car.

When wealth is passed down through generations in a family, the long-term prognosis generally isn’t very good. Research shows that in most families, 70% of inherited wealth is lost by the second generation and 90% by the third.

A new approach to wealth preservation called heritage design aims to fix that. It focuses on helping families communicate better about their values and traditions, and how they want an inheritance to be managed.

“There are a lot of very fine financial advisors out there, but there are also financial advisors who receive backdoor payments or hidden fees for steering people into bad retirement investments that have high fees and low returns. So what happens is these payments, these inducements incentivize the broker to make recommendations that generate the best returns for them, but not necessarily the best returns for you. . . the truth is most people don’t even realize that’s happening.” —President Barack Obama.

The President’s recent address to the Save Our Retirement Coalition at the AARP headquarters in Washington, D.C., underscored points we have shared with our clients and readers for years: financial advisors who don’t put their clients’ needs first may not act in their best interests 100% of the time.

In our culture, the phenomenon is called “from shirtsleeves to shirtsleeves in three generations.” In China, it is called “from peasant shoes to peasant shoes in three generations.” In Italy, the saying is “from the stable to the stars and back again,” and the Scottish expression is “the father buys, the son builds, the grandchild sells and his son begs.”

Research studies have found that about 70 percent of a high net worth family’s wealth is often gone by the end of the second generation, and 90 percent is gone by the end of the third generation. Contrary to standard belief, investment mistakes and changes in the economy are not at the root of these losses.

There is no shortage of books, TV programs, websites, companies, and songs expressing shared sentiments about money.  Ironically discussing how we actually invest our own is considered a taboo subject.

Marvin H. McIntyre wrote, “Money is the last taboo.  People will talk about their sex lives before they discuss their finances.”  According to one recent survey from Wells Fargo, nearly half of Americans say the most challenging topic to discuss with others is personal finances (44%).  But if no one is talking about it, how do we know what beliefs and behaviors divide those who get rich and manage to stay rich from those who do not?

Research has shown that in most families, 90% of inherited wealth is lost by the third generation.

When wealth is passed down through generations in a family, the long-term prognosis generally isn’t very good. Research has shown that in most families, 70% of inherited wealth is lost by the second generation, and 90% by the third. So it’s clear that the model for preserving wealth across generations is broken.