How to Build True Family Wealth

by | Apr 4, 2024 | Estate & Legacy Planning

In my 40 years working in the financial world, I’ve met many wealthy families. I spent 10 years at Russell Investments and another 10 years working more directly with the Russell family to design their legacy and charitable planning. I’ve also had the privilege of getting to know others in the industry, like Jill Gardner, Family President at Laird Norton Company, who has become a close friend of our family. We’ve noticed something distinct and consistent: there are many wealthy families, but few have found a path through their wealth to peace and contentment. Instead, wealth often brings conflict, challenge, and strife.

70% of wealthy families lose their wealth by the second generation and 90% lose it by the third generation. Why? I asked my friend, Jill, to join me in this discussion to explore this question.

Wealth = Money + Meaning

“Investment” and “wealth” are common financial words, but their original meanings have more to do with who you are than what you have. Invest originally means “to clothe” and is tied to a sense of identity. The roots of wealth mean “happiness and prosperity in abundance”. These definitions are more than money. They add a sense of meaning.

Jill commented that wealth, when divorced from meaning, is a common driver for unhappiness and dysfunction. Generational wealth is more likely to be lost if heirs don’t connect to the meaning in the same way the wealth creators in the family did.

Money is best understood as a tool that can fuel meaning, not something that has meaning on its own. Like any tool, there are helpful and unhelpful ways to use it. When families focus too much on having wealth, they tend to worry they won’t have enough to continue a lifestyle that is tied to their identity. They worry that future generations will squander what they’ve built, or worse…be ruined by it.

But I’ve also found hope that families can build true wealth that can unite their family rather than divide it. These families share two common traits:

  1. They focus first on being content, regardless of their financial situation.
  2. They start with meaning and purpose. They ask, “Who do we want to be and what kind of impact do we want to make on those around us?” Then, they use their money as a tool to as a tool to help them achieve those goals.

Thought of another way, truly wealthy families view themselves as investors, not consumers. They look to use their money as a tool to enhance the sense of meaning in life and promote true wealth. So, what do they invest in? Here are three categories to consider investing, or “clothing yourself,” in: Growth, Experience, and Giving.

Investment #1 to build true family wealth: Growth

Use your resources to grow, gain new skills, and become more valuable to the people around you and consider doing the same for your family. Jill shares this perspective from her experience in the Laird Norton Family, a family that has been in business together for 8 generations and currently has 550 family members:

“Within the Laird Norton Family, we try to think holistically about return on investment. The financial returns on investment are important to the Family, and we steward the Laird Norton Company accordingly. However, we have also developed a variety of Family Programs to invest in each other, promoting the “human capital” of family members. One example is our Associate Education Assistance Program. If a family member pursues post high school education or professional certification of some sort, we will reimburse up to $3,000 per year. This reimbursement comes with some expectations for involvement. The entire Family benefits by having informed, well-educated, and personally successful owners.”

When motivated to help future generations of family grow as humans, the need for a well-coordinated investment strategy makes even more sense. You’re not just growing a portfolio, you’re supporting real people and promoting real good.

Investment #2 to build true family wealth: Experience

Use your resources on high quality family and community bonding experiences. This shows that money is meant to serve people, not the other way around. It also demonstrates your priority of people over money.

In our family, annual vacations are one of our most meaningful family bonding experiences. To make this easier for our family, we simply ask them to make the time and we’ll provide the resources, travel costs and a great place to stay. We’ve seen how this has bonded our family together, even through difficult times. In the midst of a night filled with good food, games, and laughter, we can’t imagine a better investment.

Resources are more than just your money. Jill shares the following story about investing your time:

“I enjoy walking to the Burton Coffee Stand on Vashon Island for my morning Americano. This year, on the Sunday before the 4th of July, we stood in line and waited our turn to order for over 40 minutes. In that amount of time, I could have driven to Vashon town, purchased an Americano with cream from any of the three coffee shops there, driven back to our house, and sipped it on the porch. But instead, we stood in line.

Sometimes we make choices that are not oriented toward optimization or efficiency. Sometimes we make choices based on what is good for us as humans. Standing in line and chatting with neighbors and friends and my grown kids, ordering coffee from Kathy, the longtime owner of the Coffee Stand, when it’s finally our turn, catching up with her on life, laughing about how busy she is on this weekend before the holiday: something about this investment of time, energy, and emotion is good for me. I never walk away thinking “I can’t believe I just wasted all of that time.” No, I walk away with my Americano in hand, glance back at the long line that persists, to know that I’d happily wait again.”

Investment #3 to build true family wealth: Giving

Use your resources to make an impact on those in need. Giving brings families together around impact and service. Doing this as a family is a vital part of sharing meaning and purpose together. In Connecting Generations with Generosity, I share ways to do this with kids or grandkids at any age. For example, I recently gave our 4 and 5-year-old grandkids $20 at Thanksgiving and asked them to do something kind. They went to a coffee shop with their mom (our daughter) and bought four $5 coffee cards and put them on a “Pay it Forward” board with categories they chose, like “for a pastor” or “for someone with a hat”. People continued to pay it forward for almost two hours! Our grandkids experienced the joy of giving, bonding them to our family and to their new friends at the coffee shop.

At Laird Norton Company, Jill shares about their “Sapling Fund,” intended to invest in the growth and understanding of the family’s teenagers:

“We also invest in our kids through a variety of educational programs, but our Sapling Fund is unique. Family members between the ages of 14 and 20 can direct money from this fund to youth-serving nonprofit organizations. They join with their cousins to make philanthropic decisions every year, developing expertise that is rare among their peers. They understand how to be a member of a board, they know what a foundation is and does, they learn leadership and negotiation skills, and they develop compassion as they learn about the real needs of underserved youth. Many let us know that the skills they develop from Sapling Fund experience translate into college essays and resume builders. Some of these young people are then equipped to serve on the Laird Norton Family Foundation Board as adults.”

How do you measure return on true family wealth?

If true wealth involves both money and meaning, how do you measure return? How can you tell if your investment is paying off? It’s important to measure both financial and family return.

  • Financial return is measured on paper. Your team of advisors and wealth managers can show you how your investments are growing and if any changes are needed. A team like ours also works to tie each investment to your goal, showing how it’s serving you over the appropriate time frame. We want to make sure your money is working for you and is available when you need it.
  • Family return is measured in stories. When you gather, tell stories. Teach and train your family in what you’ve found meaning and purpose in. Write your stories down and pass them on. Then, watch. Is your family becoming a family of storytellers? Do you hear of ways they are finding meaning and purpose in their lives apart from money?

As we’ve discussed, this all comes down to how you define wealth. When viewed as having as much money as possible, true wealth will be elusive. But when viewed as money plus meaning, we can learn to see family vacations, gifts to friends, and hours talking in a coffee line as worthy investments, and perhaps build true wealth that can last generations.

We love helping families build true wealth! Reach out for a conversation to find out if we’re a fit for your family.

Alterra Advisors - Josh Whelan

Craig Hamilton

Strategic Advisor

About the Author

With over 30 years of experience as a Certified Financial Planner, Craig Hamilton joins Alterra as a sort of paternal figure and has a position of respected “special counsel” to the firm. This role is likely familiar to Craig as one of his four children is also a financial advisor. Mr. Hamilton is also a Certified Public Accountant with a degree in Business from Pacific Lutheran University in Tacoma, where he graduated magna cum laude.

Craig was born and raised in the Pacific NW and built a family here that now includes seven grandchildren. In Craig’s words, “coaching, counseling, and mentoring are in my DNA.” This approach also characterized Craig’s financial career for 20-plus years as an Investment Officer for Russell Investment Services and their later incarnation as The Threshold Group. Throughout that time, Craig approached financial planning as “a critical tool to manage financial priorities and achieve a client’s dreams,” a philosophy perfectly aligned with the Alterra approach.

Craig took an early interest in all things financial — purchasing his first security while still in elementary school. Given his history, it’s not surprising multi-generation investing and legacy planning are his special interest. Listening to the stories of his clients and then helping them along the path to their goals brings Craig personal joy. So, it will likely come as no surprise that Craig was also a college tennis coach for over 20 years. To repeat Craig’s catchphrase, “coaching, counseling, and mentoring are assets” that he will invest in Alterra Advisors.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

Ready to meet with
our team?

We’d love to have a discussion with you to find out if we’re a fit!

Share This