The Real Question in Financial Legacy: Does Size Really Matter?

Why the Majority of Financial Legacies Fail

Based on my experiences with numerous clients, most believe that the size of a financial legacy is a direct determinant of its success. However, statistical data tells a different story. 

Irrespective of their size, the majority of financial legacies fail. The wealth tends to disappear within three generations, forcing descendants to start from scratch.

The relationship between people and money is incredibly complex, often defying logic. This complexity reveals itself in wealth building and development. We tend to create narratives that compel us to grow our wealth to a certain size to create the desired impact, but this may not always be true.

A Surgeon’s Unnecessary Quest For Bigger Legacy

To illustrate this point, let’s look at the case of a surgeon I worked with several years ago. 

Despite having a net worth exceeding $12 million – far beyond the immediate financial needs of his family, he was still driven to keep increasing it, which led to immense stress and potential burnout. 

But is this quest for size necessary? 

This experience is all too common, and it demonstrates how we often fall into the trap of equating significant financial resources with a successful legacy.

While asking whether size matters is important, it may overshadow an even more pertinent question: What do you want your financial legacy to mean?  

Not everyone is interested in creating an enduring financial legacy, and that’s perfectly fine. 

But, if you aim for your wealth to have a long-lasting impact, it becomes crucial to be more mindful of the beneficiaries of your wealth.

How to Preserve Your Wealth Beyond Generations

One fundamental paradigm shift to consider is redefining beneficiaries as stewards of your wealth. 

Stewardship is “the careful and responsible management of something entrusted to one’s care”. Embracing this definition allows you to guide the future stewards of your wealth, be they your children, nieces, nephews or others, to manage the wealth responsibly, ensuring its longevity.  

Let’s consider the story of two brothers, both raised in the same household but with different life outcomes.  

One became a successful entrepreneur and left $10 million to his children, who, lacking financial skills and mindset, spent it all within 15 years.  

The other brother, a school teacher, left a modest $30,000 annuity to his sons, who had been taught the value of money and how to manage it. These sons turned their small inheritance into a fortune.  

This story underlines that the size of what you leave behind matters far less than the skills and mindset you impart to your beneficiaries about managing that wealth.

A Better Way to Think of Your Legacy Aspirations 

We must dispel the idea that a substantial net worth is necessary for a successful legacy.  

Even if your wealth is sizable, it could dissipate quickly if the next generation lacks stewardship. Therefore, the level of legacy you aim to achieve is worth contemplating.  

Are you looking to support just your immediate family, or do you aspire to have a broader impact? 

Statistically, if your legacy ambitions are limited only to your immediate family, the odds of endurance are not high. Hence, you must revisit the idea of stewardship.  

If you foster a sense of stewardship in your wealth recipients, you significantly increase the chances of enduring a financial legacy. This principle is commonly observed in high-net-worth families whose wealth has persisted across multiple generations.

Size vs Stewardship: Final Thoughts 

Financial legacy is an undeniably complex topic; the ideas presented here are simply the tip of the iceberg.  

But this post aims to illuminate the often-debated question: Does size matter in financial legacy?

Through our exploration, we’ve found that the size of your net worth doesn’t hold as much weight as one might think.  

Instead, the stewardship mindset you instil in your beneficiaries, their skills, and their mindset towards managing wealth play a far more pivotal role. The size of the legacy matters less than what is done with it. 

So, next time you consider your financial legacy, remember: it’s not just about how much you leave behind but also how it’s managed. 

Your real legacy may well be the skills, values, and sense of stewardship you pass on rather than the monetary value itself.