Generations of farming families in Hawke's Bay have maintained their wealth through careful stewardship of land and supporting businesses, writes Nick Stewart.
Nick Stewart is a financial adviser and CEO at Stewart Group.
From Walmart to Toyota, some of the world’s most successful businesses share a common thread – they’re family-owned enterprises that have stood the test of time.
Here in New Zealand, family businesses such as Gallagher Group, Talley’s and Whittaker’s demonstrate how multigenerational success is possible with the right approach.
Nowhere is this more evident than in Hawke’s Bay, where generations of farming families have maintained and grown their wealth through careful stewardship of land and supporting businesses.
Yet despite these local success stories, a persistent myth continues to cast a shadow over family businesses… the notorious “70% rule” suggesting most family enterprises don’t survive to the third generation. You may have heard of this 70% rule being referred to as “shirtsleeves to shirtsleeves in three generations”, “clogs to clogs” or “rice paddy to rice paddy”.
This statistic, which has caused considerable anxiety among business owners, stems from John Ward’s 1987 book Keeping the Family Business Healthy. His study tracked 200 manufacturing companies in Illinois, United States, between 1924 and 1984. The findings concluded that only 30% survived to the second generation, 13% to the third and a mere 3% to the fourth.
Many business owners have lost sleep over this supposed curse, fearing their life’s work will crumble in their children’s or grandchildren’s hands. It’s a fear that has, in some cases, become a self-fulfilling prophecy.
However, internationally recognised family business consultant Dr James Grubman has thoroughly challenged Ward’s findings.
He points out crucial limitations in the study – small sample size, single industry focus and geographical restriction. More to the point, Grubman argues the research suffered from methodology flaws that led to overly negative results. The 70% “rule” was essentially a wild oversimplification.
Most importantly, Grubman’s work shifts the focus from the business itself to the family behind it, which is the important part of generational success.
Success isn’t about maintaining the same business indefinitely, as Ward’s book proposes. It’s about preserving and growing family wealth across generations, whether through the original business or new opportunities.
Consider how many Kiwi family enterprises have successfully pivoted over time. In Hawke’s Bay, particularly, family businesses have shown remarkable resilience and adaptability.
Many began with traditional sheep and beef operations, expanding into horticulture, forestry, viticulture and value-added processing. Others have diversified into supporting industries such as cool storage, packaging and logistics.
The Bay’s multi-generational farming families often show longer holding periods than their urban counterparts, with some properties remaining in the same family for over a century. This has created deep roots in the community and fostered sustainable business practices that benefit the land and future generations.
Alongside these established farming operations, supporting sectors – such as agricultural services or processing facilities – have grown, creating a robust ecosystem of family-owned businesses.
Fortunately for today’s business families there’s unprecedented support available for managing intergenerational wealth. Professional advisers, family office services and wealth management experts can help navigate the complexities of modern business and investment landscapes. This expertise, combined with family experience and values, creates a sturdy framework for preserving and growing family wealth.
With proper planning, professional guidance and a focus on overall family wealth rather than just the original business, today’s family enterprises are well-positioned to create lasting legacies.
For business families, this means looking beyond traditional notions of succession to embrace a more dynamic approach to wealth preservation. Whether through business diversification, professional management structures, or strategic investments, the path to multigenerational success is more accessible than ever before.
The key to sustaining family wealth lies in comprehensive financial planning that begins well before succession becomes imminent.
Your approach to family wealth and succession should address:
• Tax-efficient wealth transfer strategies, including the strategic use of trusts and other legal structures.
• Clear governance systems that define roles, responsibilities, and decision-making processes.
• Regular family meetings and open communication about wealth management.
• Education and preparation of the next generation for their future responsibilities.
• Investment diversification – beyond the core family business.
• Regular review and updating of succession plans.
• Risk management strategies that protect family wealth across generations.
Working with trusted, qualified professionals who understand family business dynamics and NZ’s specific regulatory environment is crucial. When selecting an adviser, be sure to look for a fiduciary (i.e. someone legally bound to put your interests first) rather than just an investment manager.
For land-based family businesses, this expertise should extend to rural financing, environmental regulations and the challenges of transitioning agricultural operations between generations.
Think of it this way: business families are the teams that get boots on the ground every day. A fiduciary financial adviser is the team’s coach, helping develop winning strategies that protect family wealth while ensuring smooth transitions between generations. They can also assist in creating emergency succession plans, identifying potential risks before they become critical issues and facilitating difficult conversations about wealth transition.
In regions like Hawke’s Bay, where land holdings often represent significant capital value and deep emotional connections, these conversations require particular sensitivity and understanding of local market dynamics. Advisers can guide families through the complexities of modern financial planning while respecting traditional family values and business principles.
Remember, successful wealth preservation isn’t just about maintaining financial assets a la Ward’s study – it’s about creating a legacy that reflects your family’s values and aspirations for future generations. For many, this legacy is intimately tied to the land and the businesses that support it.
The right professional guidance helps ensure this legacy endures by providing objective, comprehensive support that aligns with your family’s long-term objectives, whether those involve expanding existing operations, diversifying into new areas, or preserving and enhancing what previous generations have built.
Securing your family’s future isn’t as scary as the now-debunked “70% rule” makes it sound. Families already have enough hard work on their plates – working with a financial adviser to get family wealth planning on track means one less thing (or several less things) to worry about down the track.