Building generational wealth means transferring wisdom, not just assets

Most parents spend decades building wealth, but few spend the time preparing the next generation to manage it, and that is where things fall apart.

This is according to Henri le Grange, Certified Financial Planner® at Old Mutual Personal Finance, who adds that “we are very good at transferring assets, but we are not good at transferring judgement”.

Le Grange notes that, according to research popularised by Roy Williams and Vic Preisser of The Williams Group, an estimated 70% of wealthy families lose their wealth by the second generation, and around 90% by the third. The explanation often points to entitlement, poor discipline, or bad decision-making,” he says.

To build generational wealth, parents typically focus on portfolios, property, and estate structures. Yet, when the time comes, their children often inherit assets without context, without knowing why decisions were made, what risks were avoided, or how that wealth was intended to function.

“At the heart of generational wealth is not money but understanding. If that understanding is missing, the transfer is incomplete. If your children don’t understand your thinking, then you haven’t built the necessary bridge for a complete transfer, instead you’ve built a wall with money on the other side.”

This gap between assets and wisdom is where generational wealth begins to erode.

“The solution, however, is not complex financial structuring or more sophisticated products. It is far simpler, and far more demanding: consistent, intentional conversation over time,” le Grange says.

That process begins earlier than most parents think. It does not require overwhelming children with technical details, but it does require openness. Everyday moments, such as explaining the difference between needs and wants, or why certain financial decisions are made, begin to lay the foundation.

“As children grow older, that exposure should deepen. By early adulthood, they should understand how taxes work in principle. Later still, they should be included in financial planning discussions, not as passive observers, but as future decision-makers,” he adds.

According to le Grange, there are a few foundational principles that every potential heir should understand. These include how money works in practical, day-to-day terms, such as income, expenses, debt, and the distinction between needs and wants, as well as how wealth compounds over time and why discipline matters in preserving it.

Equally important is an understanding of risk, including diversification, insurance, and the ability to recognise opportunities that are simply too good to be true. There must also be clarity on how estates function: who to contact, where documents are kept, and what responsibilities arise when someone passes away. None of this requires complex structures or expensive advice, it just requires exposure and engagement.

Wealth building is also not done in isolation. It involves key relationships with financial planners, accountants, and attorneys. Yet many families fail to introduce the next generation to these trusted advisers early enough.

“As a result, the first interaction often happens at a time of emotional strain and urgency. The first time your children meet your financial adviser should not be at a funeral,” le Grange notes.

In the South African context, this challenge is particularly pronounced. “Many families are effective at building wealth but reluctant to speak openly about it. Money remains a private or even uncomfortable subject, and in shielding children from these conversations, parents unintentionally leave them unprepared. The result is that heirs are expected to manage complex financial structures at precisely the moment they are least equipped to do so,” he warns.

Ultimately, generational wealth is not secured through documents alone. A will or trust may transfer assets, but they cannot transfer judgement. The real bridge, as le Grange explains, is built through conversations, repeated, intentional, and evolving, until the next generation can think about money with the same clarity and discipline.

That process does not begin in a boardroom or an attorney’s office. It begins, quietly and consistently, at the kitchen table.