A California wealth research firm followed more than 3,000 wealthy families over the 20-year period between 1975 and 1995. They found that 70 percent of the heirs were unable to pass their wealth on to the third generation.¹ Such evidence has nurtured the adage that keeps many members awake at night: “Shirtsleeves to shirtsleeves in three generations.” This saying appears to be well known in many languages across the globe. In Japan the expression is “Rice paddies to rice paddies in three generations.” A Scottish variant is “The father buys, the son builds, the grandchild sells, and his son begs.” An Italian variation is apparently “from stables to stars to stables.” There are many others, but the oldest reference I could find was from Lancashire, which is “clogs to clogs in three generations.”²

It should be no surprise that in a period of time where unprecedented first-generation wealth has been created, where many holders of such wealth have no family experience maintaining it, that the entrepreneurs who have created such vast wealth in the upper reaches of the 1 percent do not have deeply imbedded thoughts about wealth preservation (and if they do, they are often unproven). In a society where so many peers are also first-generation wealth creators, it is hard to be fully confident of the likely multigenerational outcomes of policies and behavior that other similar first-generation wealth creators exhibit.

The main reason for this is not bad investment advice or high taxes. Rather, 60 percent of the families studied experienced “a breakdown in trust and communication” among family members—in other words, squabbling over money. In a quarter of those cases, families failed to prepare their kids for the wealth they would inherit.³

Two decades later, the Americans who have moved into the upper reaches of the 1 percent are generally no better at talking about money with their families. Often, they don’t realize that their children’s expectation of inherited wealth can alter their behavior and motivation. A 2012 study by U.S. Trust found that more than 50 percent of wealthy baby boomer parents had not fully disclosed their financial situation to their kids.⁴ In 13 percent of the cases, the heirs didn’t have a clue about how much the family was worth. In Strangers in Paradise: How Wealthy Families Adapt to Wealth Across Generations, which I recommend wholeheartedly, James Grubman discusses cases in which clients deliberately kept their kids in the dark about how much the family was worth.

No matter what career stage you have reached, I believe the evidence supports talking to your family about your business and financial condition. That said, I know a lot of very successful people who have refused to do so for any number of reasons. As frank and forthcoming as our members are about their businesses, investment, and even family concerns during meetings, in too many cases those communication skills seem to disappear around the family dinner table. “The number one problem I’ve found among Tiger 21 members is a failure to communicate with their families about their businesses and wealth,” confirms Patricia Saputo,⁵ who grew up in one of Canada’s most successful entrepreneurial families and has spent the past 15 years meeting the challenges of preserving and creating wealth for multiple generations.

In the early 1950s, her grandparents, father, three uncles, and four aunts emigrated from Sicily to the Montreal area. They started a cheesemaking company, grew it successfully over the next three decades, and finally took the company public in 1997. Thanks to a series of strategic acquisitions, Saputo Inc. is now one of the world’s top 10 dairy processors, the largest in Canada, and among America’s top three cheesemakers. With operations also in Argentina and Australia, Saputo has some 12,500 employees and annual revenues of almost $11 billion.⁶ In 1999, the company asked Patricia, a trained CPA and tax specialist working for a major accounting firm in Montreal, to join the board. That same year her father asked her to manage the investments for their immediate family, including her four sisters and later their families. She set up a family office with a clear mission: “I may not be an entrepreneur,” she explains, “but my job is still to create wealth as well as preserve it.”

Central to that process is making sure each generation is well informed about the family’s financial situation and how it relates to their own dreams and ambitions. Since not every family member can (or wants to) be in the business, Patricia seeks to inspire young family members with a broader definition of creating wealth or capital. Her pitch can be summed up with the acronym FISH, which stands for financial capital, intellectual capital, social capital, and human capital. A Saputo who chooses to become a schoolteacher, for example, might not make much money, but they would have the pleasure of creating a great deal of intellectual, social, and human capital.

Running a family office requires communication. “The problem is that when you tell an entrepreneur to communicate, you typically have a type A decision maker who will take home his dictatorial style and deliver a lecture to his family,” warns Tom Rogerson, a senior managing director and family wealth strategist at Wilmington Trust and a recognized pioneer in methods for assisting wealthy families meet the challenges of family governance.⁷ “It’s not just telling your wife and children how much money you have,” he says, “it’s about making sure that whatever the numbers are, they have the capacity to understand and handle them.”

Rogerson speaks with authority. He is a fourth-generation scion of a legendary Boston banking fortune and also had to roll up his sleeves. “My great-grandfather made all the financial and investment decisions for the family, and everyone was happy with that because he did a good job. But when he died, the next generation, already in their late forties and into their fifties, had grown apart and didn’t trust each other, mainly because they had never made any consequential decisions about money together.”

The way to earn the trust of family members is through “interpersonal communication,” the kind of serious and mission-driven give-and-take that, ironically, as Rogerson notes, talented entrepreneurs employ at the office every day to get the most out of their teams of diverse managers. While family vacations are great, you’re not likely to discuss issues of consequence with your spouse and kids at the beach. According to Rogerson, “The research shows that families that succeed generation after generation institutionalize interpersonal communications between family members—in the form of family meetings.” He advises clients to plan meetings around a series of educational components, beginning with testing for styles of communication and leadership. Then they can learn about how the family business operates and succeeds, becoming financially literate enough to understand the basics of the family’s investments and the advantages (and disadvantages) of financial advisors and money managers. Finally, they must discuss the importance of tax and estate planning and philanthropy.

“There are no courses on this in college,” notes Rogerson, adding that such purposeful meetings are also an opportunity for everyone to have the kind of “meaningful family experiences that reveal the values that you all care about most.” This is a crucial point. In my experience, if you tell a business leader that he should share his core values with his family, he is likely to nod and begin jotting down a list to pass along to them. This list is likely to be quite different from the values that emerge from spending time discussing issues that affect the lives and futures of every member of the family, which can provide a reliable ethical benchmark for their entire lives. “The opposite of control is participation,” notes Rogerson, “and allowing your children a voice in the family’s future increases their buy-in.”

I have yet to meet a family that has not benefited from the discipline of regular issue-driven meetings. One other tip from veterans of family meetings: If your kids go silent or surly every time you offer advice, maybe you’re the problem and not them. We all have our own styles of communication, and some have been known to deafen the listener to even the wisest message. There are a lot of tests out there to gauge communication styles; make sure you choose one that will test how good you are at communicating interpersonally.

A related and final tip: You may want to launch your first family meeting with the help of a trained advisor or facilitator. If you kick off the meeting, everyone in the room may flash back to one of your deadly lectures and stop listening. So let a pro do the talking and sit back and enjoy participating in what is likely to be a transformative experience for you and your family. It will be worth it. Maybe not the first time, or the second, maybe only after years of investing the requisite time; but in the long run, your family will thank you for giving them the opportunity to learn how to deal with the wealth you have worked so hard to create.