What Determines Whether Family Wealth Survives Across Generations?

Editor’s Note: This article was originally published on July 1, 2013 as a brief book recommendation. It has been substantially rewritten to reflect the current state of the research on intergenerational wealth, including the scholarly critique of the widely cited 70% failure rate statistic, and to provide Northland’s practitioner perspective on what the evidence means for Canadian families.

If your family has built significant wealth, you have probably heard the proverb. In English, it is “shirtsleeves to shirtsleeves in three generations.” In Italian, dalle stalle alle stelle e ritorno. In Mandarin, “wealth does not survive three generations.” The saying exists in virtually every culture. And for decades, the wealth management industry has treated it as settled science, citing a specific statistic: 70% of wealth transfers fail by the second generation, 90% by the third.

When I founded Northland Wealth Management in 2011, that statistic shaped my thinking. One of the first books I read was Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values by Roy Williams and Vic Preisser, which built its framework around research into 3,250 wealthy families. The book influenced how Northland was designed from day one.

But the research has evolved. And intellectual honesty requires acknowledging that evolution, even when it complicates a narrative that has served the industry well.

What Did Preparing Heirs Contribute?

Williams and Preisser studied 3,250 families and concluded that the vast majority of failed wealth transitions were caused not by technical errors but by human failures. Their breakdown: 60% of failures resulted from a breakdown of trust and communication within the family, 25% from inadequately prepared heirs, and 15% from families that lacked a shared mission or purpose for their wealth. Fewer than 5% were attributed to professional or structural errors.

That last finding is the one that matters most, regardless of the debate over the headline number.

Before Williams and Preisser, the wealth management industry treated intergenerational planning as a purely technical exercise: better estate documents, better tax structures, better investment returns. Preparing Heirs made the case that the human dimensions of wealth, the communication, the governance, the preparation of the next generation, were not soft extras. They were the primary determinants of whether a family’s wealth would survive a transition. That insight changed how an entire generation of family advisors approached their work. It changed how Northland was built.

Why Has the 70% Figure Been Challenged?

In 2022, Dr. Jim Grubman, a consultant to families of wealth and a leader within the UHNW Institute, published a detailed critique in the International Family Offices Journal titled “There is no 70% rule.” Grubman traced every citation for the Williams and Preisser 70% assertion back to its original sources.

His finding was significant. The 70% figure traces primarily to a single 1987 study by John Ward called Keeping the Family Business Healthy, which analysed public records on 200 family businesses in one industry (manufacturing) in one region (Illinois). The 70% “failure rate” is simply the inverse of a 30% business continuity rate. Williams and Preisser adopted the figure and applied it to wealth transitions broadly, but the underlying data was never designed for that purpose.

Grubman also pointed to a 2011 study published in Family Business Review that found substantially different results. When researchers studied what happens to business families rather than individual businesses, they found significant longevity and success across generations as families pursued multiple entrepreneurial ventures. A family whose original business closes but whose members go on to build new enterprises has not “failed.” The Ward methodology counted them as failures.

The critique was endorsed by the Family Firm Institute, where Grubman published a companion piece calling for more rigorous research on family wealth longevity. It is worth noting that Grubman received the 2024 Family Wealth Report Lifetime Achievement Award, the same awards programme that has recognised Northland multiple times. His standing in the field is beyond question.

Grubman frames this as part of a broader shift from what he calls “Wealth 2.0,” characterised by fear-based messaging and pessimistic assumptions about wealthy families, to “Wealth 3.0,” a strengths-based, evidence-driven approach that asks what helps families thrive rather than assuming they will fail.

Where Has the Evidence Converged?

The debate over the 70% figure is a debate over a number, not a debate over the underlying principle. Every serious framework in the family wealth field has converged on the same conclusion, even if they arrived at it through different research.

The Three-Circle Model of the Family Business System (Tagiuri and Davis, Harvard Business School, 1978) demonstrates that families managing shared wealth face inherent structural tensions between the family system, the ownership system, and the management or business system. A passive family shareholder (Sector 4) has legitimately different priorities from the sibling who manages the operating company (Sector 7). These are structural tensions, not personality conflicts. Families that recognise and govern these tensions do better than families that ignore them.

The UHNW Institute’s Ten Domains of Family Wealth framework identifies ten distinct areas that determine whether a family thrives across generations: financial and investment management, estate planning, social impact, risk management, governance and decision-making, leadership and transition planning, rising generation development, family dynamics, health and wellbeing, and family-advisory relationships. Financial capital is one domain out of ten. The other nine are all dimensions of human capital.

James E. Hughes Jr., in Family: The Compact Among Generations, argues that families must steward their human, intellectual, and financial capital with equal discipline. His framework predates the Williams and Preisser research and reaches the same conclusion through a different path.

Williams and Preisser’s own contribution, the finding that fewer than 5% of failures are technical while the vast majority are human, aligns with all three frameworks even if the specific failure-rate percentage is contested. The field agrees on the direction, even where it disagrees on the magnitude.

Why Does This Matter for Canadian Families?

Your current advisors may be competent and well-intentioned. The question is not whether they do good technical work. The question is whether their institutional model allows them to address the human dimensions that every framework identifies as critical.

Canada’s wealth management landscape is dominated by bank-affiliated advisors whose expertise concentrates on the technical side of wealth: investment selection, tax-loss harvesting, RRSP contributions, and estate document preparation. These are necessary services. But if the research consensus is correct, and our fourteen years of serving UHNW families across Canada is consistent with it, then technical competence alone is not sufficient to help a family sustain its wealth across generations.

Canadian families also face structural complexities that amplify the human challenges. Consider a family with an operating company held inside a holding corporation, a prescribed-rate loan structured around the CRA’s quarterly prescribed rate, an estate freeze implemented through a family trust, and a cottage held jointly between siblings in a province where Estate Administration Tax runs at 1.5% on assets exceeding $50,000. That is a technically sophisticated structure. The more entities in play, the more important it becomes that every family member understands why each one exists, what role they play in it, and what decisions they will need to make when the current generation steps back.

The 21-year deemed disposition rule on Canadian family trusts under ITA s.104(4) creates a hard planning deadline. Prescribed-rate loan structures need review each quarter when the CRA resets the rate. Estate freezes may need to be refrozen if the underlying business has grown materially. These are technical events. But each one is also a conversation that either strengthens the family’s preparedness or exposes gaps in communication and governance.

How Does Northland Apply This Evidence?

The convergence of the research, not any single statistic, is what shaped how Northland operates. When we onboard a new client family, we do not begin with an investment policy statement. We begin with the family. Who are the members? What generation are they? What is the wealth creator’s vision for the family’s future? Is there a governance structure in place? Have the children been introduced to the concept of stewardship?

This is not a one-time exercise. Family dynamics change. Children grow up, marry, have children of their own. Business-owning families face succession decisions. Each of these transitions is a moment where the human capital work either pays off or reveals gaps that the technical work cannot fill.

We also work with families on the specific question of when and how to talk to children about wealth. This is one of the most anxiety-producing topics for wealthy parents. Every framework in the field points to the same answer: earlier than you think, more gradually than you fear, and always in the context of values and purpose rather than dollar figures.

What Should Families Read?

The research on intergenerational wealth has matured considerably since 2003. We recommend families read across the evolution of the field:

Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values by Roy Williams and Vic Preisser (2003) remains the starting point. Its framework for family communication, heir preparation, and family mission is practical and actionable, and its finding that technical failures account for fewer than 5% of wealth transfer problems has not been contested. Read it for the framework. Understand that the headline statistic has been challenged.

Family: The Compact Among Generations by James E. Hughes Jr. offers a governance framework that treats human, intellectual, and financial capital as equally important. Hughes, a sixth-generation counsellor-at-law, provides the philosophical foundation for why families should invest in their non-financial capital.

Strangers in Paradise by Dr. Jim Grubman provides the psychological lens. Grubman’s work on the experience of acquiring wealth, moving from one “country” of wealth to another, is essential reading for first-generation wealth creators and their families. His critique of the 70% figure should be read alongside Preparing Heirs as a corrective.

Willing Wisdom by Tom Deans focuses on the specific mechanics of wealth-transfer conversations. His seven-question framework has helped many Northland families start the conversations that every framework identifies as critical.

Titan: The Life of John D. Rockefeller, Sr. by Ron Chernow tells the story of the man who created the world’s first family office. The Rockefeller family is one of the most enduring examples of multigenerational wealth governance. It provides a case study that illustrates every principle in the books above.

Where to Start

If you have read this far, you are already doing something that many wealthy families put off: thinking critically about whether your family is prepared, not just whether your portfolio is structured. That distinction matters more than any single investment decision you will make this year.

The families who sustain wealth across generations are not luckier or smarter. They start earlier, communicate more openly, and work with advisors who treat the human dimensions of wealth as seriously as the financial ones.

If you are not sure where your family stands, a conversation is the right first step. Not a sales pitch. A conversation about the questions that the research, all of it, identifies as critical: Does your family have a shared understanding of the purpose of its wealth? Do your heirs understand the structures you have built? Are you talking about wealth in the context of values, or avoiding the topic?

Start with the books. Then, if you want to talk about what they mean for your family, we are here.

Frequently Asked Questions

About the Author

Arthur Salzer, CFA, CIM is the Founder and CEO of Northland Wealth Management Inc., an independent multi-family office serving ultra-high-net-worth Canadian families. He wrote the Curve Appeal column in Financial Post Magazine from 2016 to 2022 and has appeared on Bloomberg, Reuters, BNN, and CBC. Arthur is a member of the CFA Society, the Family Firm Institute, and Family Enterprise Canada.