From crisis to stewardship: how governance protects families and wealth

Good governance starts early. In my work as Head of Family Advisory at LGT Wealth Management Australia, we generally see families at two very different stages. The first are first generation founders of wealth, often experiencing or anticipating a significant liquidity event. The second are multi-generational families with the very normal complexities that come with different perspectives on a range of assets, structures and expectations.

First generation founders experience various stages of life and business in a relatively short period of time. A very typical Australian story is the successful tech entrepreneur. They have gone from coding in the garage of their rented unit to being the founder of a tech business with a unicorn valuation. Throughout this journey they gain a spouse, perhaps have young children, and amass a significant amount of wealth. When the question of exit arises, they start to think about what to do with this wealth, and how to stop it from eroding.

For those families, early governance work is about basic architecture. This includes optimising the entity structure to maximise protection, thinking through a potential exit, and reframing their identity from being a founder or executive to being an investor and, in many cases, a fiduciary. 

It is an opportunity to design a decision-making framework before the distractions of sudden wealth, competing priorities and external pressures arrive.

By contrast, multi-generational families often come to us when complexity has already arrived, both within the family and across its assets. Adult siblings and cousins, divorces, partial sales of long held businesses, and suddenly a governance vacuum is exposed. If the family has prepared for friction and everyone understands the rules of engagement, those moments can be effectively managed with little distraction. If not, that is when you see breakdowns in relationships, substantial value erosion and, not infrequently, headlines.

The critical difference between those who plan early and those who react late is the degree of distraction, reputational damage and financial loss the family is forced to endure. Ultimately, family harmony is disrupted, sometimes beyond repair.

Making implicit rules explicit

Good intentions on their own do not travel well across generations. Governance does.

A large part of my work is helping families to articulate and document their own rules. Every family has unspoken assumptions. One child thinks they know what mum or dad wants. Siblings are sure they are aligned about what is fair and who will do what. Those assumptions tend to hold, at least on the surface, while the founding generation is still alive and in control. They are tested to breaking point when something changes.

Through structured engagement, we take those assumptions and turn them into something more durable. The family’s own guiding principles, in language everyone understands, that reflects the contributions of all relevant family members, not just the loudest or the most senior. That might include positions on employment in the family business, dividend policies, conflict resolution, communication and the role of in-laws or independent advisers.

This is rarely a comfortable process. Numbers are black and white. Families are not. It is much harder to talk about conflict, expectations, differing values and roles within a family than it is to talk about share prices or tax. Many of the founders I work with say some version of “I know how to run my business, I do not know how to talk to my family”.

Yet the families who persist through those difficult conversations tend to have the same reflection at the end. They say they should have started this sooner. They should have involved the next generation earlier.

From entitlement to stewardship

The other crucial shift I try to support is a change in mindset, especially among rising generations, from entitlement to stewardship.

Inheritance can promote an entitlement mindset, while succession promotes stewardship. 

Entitlement is about one person within their own lifetime. Stewardship is about the responsibility of managing an asset on behalf of future generations and the broader family, and perhaps also for the community.

That shift matters in everyday decisions, but it becomes absolutely critical in what I sometimes call the “doomsday scenarios”. A first-generation wealth creator dies unexpectedly. A son or daughter in their twenties suddenly finds themselves responsible for substantial assets, often with little preparation. Yes, there may be professional advisers around them, but the distraction, the shock and the lack of governance is how wealth is lost. Not in one dramatic moment, but in a thousand small, poorly informed decisions.

Across cultures there are proverbs for this erosion, from “shirtsleeves to shirtsleeves in three generations” in the United States to “from rice paddy to rice paddy” in Japan. The underlying pattern is the same. As families grow and branch out, as values change and as communication gets harder, wealth fragments and focus is lost.

At LGT Wealth Management, we believe that with the right governance, and the right kind of conversations, Australian families do not need to be part of that pattern. When families grow and become more complex, the focus has to shift. It becomes less about how to split things fairly today and more about how to make sure there is something to grow for tomorrow.

That, to me, is what legacy by design really means. It is not an accident. It is a set of choices, structures and habits that start now, long before the will is read, and that equip the next generation not simply to receive wealth, but to protect and grow it for those who follow.