During the first week of November 2023, I had the opportunity of attending the wedding of one of my daughters’ friends, in the subregion.

The wedding turned out to be a rendezvous, of what seemed like the united nations, as several nationalities around the globe, descended at the game farm that was the wedding venue.

During the three-day extravaganza, I had the opportunity to chat with a venture capitalist whose offices are in New York city.

On enquiring how he had funded the business, he advised that he had several institutional investors, but had to sell a large piece of family real estate, a mini landmass, that realized several ten thousand millions of dollars as seed capital for the business.

He further advised that his family owned large chunks of land in strategic locations across the globe. This was common amongst their close-knit social capital network, whom I gathered from my own deductive thinking represented ‘old money’.

He shared the fact that in this network of close family and friends, it was common to take speculative positions on land acquisitions and hold the land for periods of up to 500 years! These kinds of investments were meant to benefit future unborn generations, just like his generation is currently benefitting from ancestors whom he is familiar with only through photos and obviously connected to via DNA.

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He emphasized that it was a conscious teaching in these social groupings that, whilst enjoying wealth bequeathed to you from the forefathers, each generation was encouraged to not only preserve family wealth, but grow it as well, using current wealth, as seed capital.

I sat there quietly thinking to myself how this kind of generosity to future unborn generations is rare amongst our communities in the subregion.

Never mind wealth that us under threat from the 2nd or  3rd generation, in Zimbabwe there is anecdotal evidence of wealth built by the 1st generation, being squandered and lost by the 1st generation during their lifetime. This a subject for the next instalment.

Never mind the familial whatsapp groups we belong to, most of which are focused on discussing family troubles, not fortunes, who is suspected of bewitching whom and silly jokes or political chatter doing the rounds.

The moment a family member raises the issue of pooling resources together to start projects that will benefit the current family and beyond, everyone on the group suddenly becomes, deaf, dumb and mute.

Members of these groups are often highly educated, well-travelled and exposed and themselves successful entrepreneurs or corporate executives. But the idea of pooling resources for a common good is beyond them.

The level of toxicity and mistrust amongst family members is at staggering proportions meaning, it will take a dedicated change management intervention at family level, to change these kinds of mindsets.

In the previous edition, we discussed the 3rd generational curse and how it generally manifests and observed that in Zimbabwe and many parts of the subregion, the curse manifests earlier at the 2nd generation.

The 3rd generation, ordinarily known as the squanderers or plunderers, tend to be the ones blamed for the demise and downfall of wealthy families. This generation is born into wealth and during their upbringing, there is neglect into equipping them with adequate financial literacy and education skills.

As a result, because no-one in the family told them about what it took their forefathers to create that wealth, they squander it until there is nothing left.

A story is told of a son whose father owned a fleet of buses in Harare. When the father got ill and was unable to oversee the management of the business, the son would go to the bus depot and harass the workers for brand new bus tyres that were in stock, which he would dispose of for cheap, in order to finance his penchant for expensive whisky.

It is this lack of any form of work ethic, never mind the sensibility to be financially responsible for the preservation of the family wealth that has led many previously wealthy families down the path of poverty.

This kind of behavior has been observed on a global scale, with societies across the globe displaying this trend, where many people end up with nothing after their ancestors had achieved success before.

So how do we beat the 3rd generation curse?

Success in guarding against the 3rd generation curse is a demanding and arduous task, often requiring a purposeful and deliberate multi-pronged approach to intergenerational wealth preservation and wealth creation by each generation.

For familial wealth to be sustainable, subsequent generations ought to be equipped with the skills of family wealth preservation in addition to growing the current pool of wealth.

Pre-empting the curse and then planning intergenerationally, is a sure way in ensuring that families do not find themselves in a graveyard littered with carcases of victims of the 3rd generation curse.

There are several strategies to beat the 3rd generation curse the most important of which are listed below:

Recognition that the curse is real

Fear can be a trigger for swift action. Fear of having the family become a victim of the 3rd generation curse can galvanize the founders of the wealth, to intentionally mobilise the younger generations so that they have an acute understanding of the 3rd generation curse. When you constantly fear something, it keeps you awake at night and becomes top of mind for you.

In a trailblazing research conducted over a period of 20 years, by Oklahoma based wealth consultants, The Williams Group, involving over 3,200 families, it was discovered that: 

70% of families tend to lose their fortune by the 2nd  generation.

While a staggering 90% lose it by the 3rd  generation.

We discussed this phenomenon, in the last instalment and highlighted it again, here above. Unless, younger generations from the 2nd and subsequent generations are not onboarded at a young age about the fact that the founding generation risked almost everything and toiled day and night in building familial intergenerational wealth, that current generations are benefitting from, everything will eventually count for nothing, when that wealth is depleting by uncaring generations.

Ordinarily the 2nd  generation is one that benefited from the financial foundation built by the 1st generation.

The wealth was built in their presence and having witnessed their parents’ struggles, some of them will appreciate the value of hard work and sacrifice but others will not.

For those who model their lives around those of their high achieving parents, they too can make informed decisions regarding financial literacy and education, enabling them to build upon their parents’ accomplishments. As this awareness takes place, present generations ought to be mindful of their positioning and check their mindset around intergenerational wealth.

Often growing up in relative comfort, the 3rd generation tends to lack eye-witness experience of the difficulties and hardships faced by their predecessors in building up the wealth they are now enjoying.

This lack of understanding of the first-hand experience of the ancestors, coupled with inadequate financial education, has often led to poor decision-making and the eventual depletion of family wealth.

Recognising the factors that contribute to the 3rd generation curse is the first step toward overcoming it. These conversations do not have to be formal. They can be discussed casually at dinner tables, during barbeques/braais, or on long-distance family drives. 

What is important is the mentors sharing this knowledge, ought to be committed to the mentoring process, which can be laborious and long drawn out. People of Indian and Jewish descent are well known at being successful in having a smooth transition of family wealth management from one generation to the other.

Frank  discussions with family

The second and more detailed batch of family conversations can be initiated by the head of the family and facilitated formally by seasoned wealth advisors. These should be aimed at discussing amongst other things:

The importance of intergenerational wealth preservation

Unpacking the distrust in families that prohibits alignment, stalls progress and puts family wealth and families at risk.

Creating an enabling environment to allow the inheriting generation space to create additional family wealth, under the tutelage of the founders.

Instilling confidence that the family estate planning will be implemented as intended.

Preparing heirs to be contributors to the family and the family business, without sucking dry the coffers of the family wealth. It is well documented in intergenerational wealth creation literature that “the entrepreneurial spirit that creates great wealth is often woven into the DNA of rising generations.”

The intriguing story of the entrepreneurial 1st generation father, Dhirubhai Ambani of Mumbai, India and his 2nd generation sons Mukesh and Anil, is a case in point. The verified Ambani story, is a clear case of when there is hand-holding, coaching and mentoring of the 2nd generation, that generation together with the 3rd generation can take the family fortunes to greater heights.

Today, the Ambani owned Reliance Industries, started by the father in 1957/8 is now an established diversified conglomerate, owning a vast array of businesses including telecommunications, infrastructure development, petrochemicals, petroleum refining, polyester fibres, gas and oil production. As of December 2023, Reliance has a market capitalization of a staggering $210.72 billion, employing 383 414 people, with a turnover of an astounding $120 billion.

Developing a new mindset

Empirical evidence has demonstrated that entrepreneurs who possess a high level of financial literacy have a higher propensity to preserve familial wealth, in addition to contributing to the success of the family business, in term of financial and non-financial success. Therefore financial education needs to be top-of-mind for families building intergenerational wealth.

But in order to level the playing field, financial education needs to start at a young age, preferably at primary school level.

Curriculum development departments of education ministries, continue to fail nations by not developing financial education curriculum and insisting that it be taught first at teacher training colleges and then at primary school, all the way to tertiary level.

With a solid understanding of investment vehicles, risk management and asset allocation, equipped individuals can make informed investment decisions to grow their wealth over time, starting at a very young age. When intergenerational wealth is bequeathed to them, it would then be easier to assume the role family wealth manager.

Ndoro-Mkombachoto is a former academic and banker. She has consulted widely in strategy,entrepreneurship and private sector development for organisations that include Seed Co Africa, Hwange Colliery, RBZ/CGC, Standard Bank of South Africa, Home Loans, IFC/World Bank, UNDP, USAid, Danida, Cida, Kellogg Foundation, among others, as a writer, property investor, developer and manager. — @HeartfeltwithGloria, WhatsApp +263 772 236 341.
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