How do you groom heirs to lead, and what mistakes do families make with the next gen?

How I Groom Heirs to Lead - and the Mistakes Families Make With the Next Generation

1. I start with responsibility, not entitlement

When I think about next-generation planning, I always come back to one idea: wealth should create opportunity, not remove the need for growth.

The goal is not to make the next generation struggle unnecessarily. The goal is to help them build confidence, judgment, discipline, and an understanding of how wealth was created.

A child who grows up around significant wealth needs exposure to:

The mistake many families make is giving access to capital before giving access to experience.

"Lots of families like to get their children involved in the business. Some want to have them get experience outside the business and outside their portfolio or have them manage one single family residential rental to begin with or something relatively small to begin with to get experience."

2. Give the next generation small businesses and real responsibility early

I have always liked the idea of giving children opportunities to learn entrepreneurship in a controlled environment.

For example, with my own daughters, I did not want to simply buy something because they asked for it. I wanted them to understand effort, value creation, and earning.

"When my girls asked to buy a Tesla car, like a little toy Tesla, they can drive around the neighborhood, made for kids, I didn't want to spend $400 on it just because they asked for it. I told them we should do a lemonade stand, and we did a lemonade stand down by the Starbucks in town."

"And we brought in $55 per day. Recently we did one that brought in $250 per day."

The lesson was not about the lemonade stand itself. The lesson was learning:

Those lessons compound over decades.

3. Do not assume your children should automatically run the family business

One of the biggest mistakes I see wealthy families make is confusing love with qualification.

You can love your children deeply and still require them to earn leadership positions.

The family business has employees, customers, investors, and partners who deserve competent leadership.

"One rule may be that family members must earn a 4-year degree first and/or work at least 2 or X number of years at another company before joining the family business. Some families require 7 or 10 years elsewhere before joining the family business, this way by the time they join they have legitimate experience and they aren't seen by the team as being put into place just because of their last name and they bring fresh ideas and perspectives to the table."

I like this approach because it protects both sides:

4. Create governance rules before emotions take over

Families often wait until there is conflict before creating rules.

That is backwards.

The best families create the rules while everyone is still aligned.

They decide:

"Without proper planning, structure, and governance rules many families get broken apart by wealth, feelings get hurt, children feel left out, or some apparently get favored with more attention or larger inheritances or substantial incomes by becoming part of the family business."

5. Teach heirs stewardship, not just ownership

A second-generation family member should understand:

"I am not just inheriting assets. I am inheriting responsibility."

A family office structure can help create that mindset through:

"Most families that have moved past the first generation of wealth creators try to hold annual or quarterly meetings whereas many family members as possible get together to discuss the family business, family investments, priorities, and the latest challenges."

"Through these meetings, the next generation becomes aware of the responsibilities and hard work that are required of families maintaining significant wealth."

6. One of the biggest mistakes: putting someone in charge without preparation

One of the most important lessons I have seen is that family members need training before they are given major responsibility.

A family member managing wealth because they are the oldest child, the favorite child, or the available child is not a succession plan.

It is a risk.

"One family I know in Australia put the son in charge of running the family money. He had full discretion and was not paid for this full-time job but was handed money without question. The entire family's financial future relied upon this individual's role of managing the family money, and he had never managed money before in his career professionally."

"This family that was worth $134M after the family business was sold three decades ago, yet they are now, as a family, worth less than $73M, and the family size has grown considerably. The worst part of the story is that the family no longer speaks with each other."

The lesson is not that the son was a bad person.

The lesson is that the system failed.

The family needed:

7. Be careful with inheritance without purpose

I believe many families should think about inheritance differently.

Instead of simply transferring money, ask:

"How do we transfer capability?"

Some families create a family bank where younger generations can apply for capital for business opportunities.

"Many wealthy families have capital available to help family members launch new business divisions or entirely new businesses. Some restrict these to a specific industry, require approval of older generations, or require the plans to be signed off on by at least three senior family members to ensure that advice is being sought and careful planning has been made before investing the capital in the new venture."

My Framework for Grooming the Next Generation

If I were sitting with a founder today, I would encourage them to build this:

The greatest legacy is not the amount of money transferred.

The greatest legacy is creating human beings who can responsibly handle opportunity, make wise decisions, treat people well, and continue improving for decades.

The playbook for this

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