“Creating wealth is difficult. So is managing it effectively. Losing wealth is the easy part.”

So ends the preface of a new book Wise Wealth, by Joachim Schwass of the Swiss business school IMD and co-authored by Håkan Hillerström, Holger Kück and Colleen. The book is all about preserving family wealth beyond the third generation in which it is traditionally and anecdotally dissipated. WealthBriefing recently met up with one of the authors, Hillerström.

“You can plan for success and it is achievable if you manage the process,” said Hillerström, even though only some 8 -12 per cent of successful firms survive into the fourth generation. It is important to create the right balance between investing for the future of the company and paying dividends to family members, he said.

“If you keep all the money in the company you run two risks: one of investing in unrelated businesses for the sake of it: the other that family members will sell shares to raise cash that they are not receiving as income,” he said.

In order to preserve wealth, families need to take a long term view and have regular periodic discussions about the direction of the business. Disagreements can be productive so long as they do not descend into feuds. As private companies grow it is often useful to set up a family protocol which establishes how the family will deal with various situations. This protocol may change as the company and family changes but it is useful to have a mutually agreed starting point for discussions.

As the family grows it is often a good idea to establish a family office to look after the financial needs of the family for investment and income as everyone needs cash-flow. The book covers the issues that families face when doing this and the areas that this opens up, such as philanthropy. It poses a question that needs to be considered when thinking about inheritance – how much is too much to leave to your kids?

Older generations always worry that the younger generation will kill the goose that lays the golden egg. One suggestion in the book is to test the younger generation with a small amount of money, have them create an investment plan and carry it out to see who has the best returns over a pre-defined number of years. When the baton is handed to the new generation, however, the older generations need to set them free to run the business and to re-set the rules of the game as they see fit.

The book covers a variety of styles of individual entrepreneurs and various styles of handing over to the second generation - which is the most stressful of the generational changes. It has much useful advice for establishing procedures that will make wealth preservation more likely to succeed and would be a useful addition to the bookshelves of anyone dealing with entrepreneurial high net worth individuals.

There is one drawback to this first edition, however, and that is the poor quality of its written English. Vocabulary is used incorrectly and there are innumerable errors of grammar and syntax which will make the book difficult to read for some. Sentences such as “Responsible leadership is deeply personal” and “The two-pillared governance structure allows for the logical and effective separation and integration of the different systems” are meaningless management-speak. This is a pity. The book has a lot of good observations and ideas for wealth preservation but it would have benefited from a stronger edit.