Governance feels overbearing when everything’s good. Families are busy building businesses, making investments, and chasing growth.
Until one day, someone disagrees. And suddenly, the absence of a Family Constitution or an Investment Policy becomes the most expensive gap in the room.
Building wealth demands ambition. Preserving it demands alignment. Without the second, the first eventually undoes itself.
Behind every enduring fortune is a foundation of strong governance — simple structures that keep intent clear, decision-making smooth, and relationships resilient as wealth and complexity grow.—
In this week’s blog, I’ll walk you through the tools that India’s wealthiest families use to protect, preserve, and pass on their wealth —and how you can adapt the same frameworks, no matter where you are in your journey.
In this edition, we’ll cover-
1. Why money needs rules
2. The governance toolbox of the ultra-rich
3. A start guide for HNIs for family constitutions
4. Common pitfalls and how to dodge them-
Let’s dive in.
Why money needs rules
At the start, families run on trust, sentiment, and shared ambition. But as the stakes rise — more wealth, larger businesses, more decisions — intent alone isn’t enough. Without clear systems, even the strongest families risk drifting into conflict.
India’s corporate landscape is filled with reminders — the Ambanis (Reliance split), the Tatas and Mistrys (boardroom coup), the Kirloskars (shareholder disputes), the Modis (Godfrey Phillips inheritance fight), the Singhanias (JK Group split), the Kalyani family (Bharat Forge succession disputes), the Lodha family (Macrotech Developers succession battle), and the Oberois (EIH Hotels family disagreements). Each case highlights a simple truth: when governance breaks down, ambition alone isn’t enough to hold a family — or a fortune — together.
Over time, two forces quietly chip away at stability:
- Market factors — external shocks like recessions, policy shifts, and global events.
- Behavioural factors — internal cracks unclear roles, unspoken expectations, competing visions.
And over the long run, behavioral factors are the bigger threat. Markets eventually recover. Broken trust usually doesn’t.
The governance toolbox of the ultra-rich
Successful families build frameworks early — so the problems never get a chance to take over.
Here’s the toolbox they rely on — and a blueprint to start building yours.
1. Family Constitution: the foundation
What it is:
Think of it as the family’s operating manual — a simple document that defines how decisions are made, disputes are resolved, and what the family stands for.
Why it matters:
There’s an old saying: the first generation builds wealth, the second maintains it, and the third loses it.
Data backs it up — Research by the Family Firm Institute shows that only 30% of family businesses survive into the second generation, 12% into the third, and just 3% into the fourth.
According to EY’s 2024 Global Wealth Management Report, an estimated US$18 trillion in assets, roughly equating China’s GDP, will be transferred globally by 2030 — marking the largest intergenerational wealth shift in history.
India is one of the biggest theatres for this generational wealth transfer — yet governance frameworks remain worryingly absent in most families. Without alignment on leadership, values, and conflict resolution, even the strongest families risk fragmentation, legal battles, and the erosion of wealth.
When it matters:
When family assets span multiple branches or when two or more generations are involved in wealth management.
Case in point: Godrej’s governance structure gave the family space to grow — and the maturity to separate after 127 years without public fallout. It’s a rare example of what strong internal alignment can achieve in a legacy Indian business.
What you can do – first steps:
- Gather your family.
- Ask: “What unspoken rules already guide how we work together?”
- Turn them into written principles — that’s the first thread of your Constitution.
2. Investment Policy Statement (IPS): The guardrail
What it is:
The IPS is your family’s playbook — setting out its investment objectives, asset allocation strategies, liquidity requirements, risk limits, and decision-making rules for managing family capital.
Why it matters:
In the absence of a clear investment mandate, emotions drive decisions — and emotions are expensive.
Without an IPS, investments often become reactive, short-term, and impulsive — leading to panic selling, poor diversification, and generational underperformance. An IPS forces clarity: on risk, on returns, and on the non-negotiable guardrails that protect wealth over time.
When it matters:
Once serious capital is at stake — typically when investible assets cross ₹5–10 crore or when multiple family members begin influencing investment decisions — an IPS moves from optional to essential.
What you can do: first steps
Draft a two-page IPS that answers four critical questions:
- What returns are we aiming for?
- How much liquidity do we need for the next 3–5 years?
- What’s the maximum portfolio loss we are willing to tolerate? (e.g., 20%)
- What are our asset class limits? (e.g., no more than 40% in real estate)
You don’t need it to be perfect.
You need it to exist before assumptions become expensive mistakes.
3. Statement of wealth transfer Intent: The north star
What it is:
A personal, non-binding document that captures the values, purpose, and philosophy guiding the transfer of family wealth across generations.
Why it matters:
Assets can be divided by documents. Meaning has to be passed down by design. A Statement of Wealth Transfer Intent ensures the next generation inherits more than resources — they inherit identity, purpose, and responsibility. Business leaders like Kumar Mangalam Birla, Ratan Tata, Nandan Nilekani, Rahul Bajaj, and Ajay Piramal have shown that transferring values is just as critical as transferring assets. Across India’s leading family enterprises, principles like philanthropy, governance, and stewardship are core to what
When it matters:
Ideally, 5–7 years before any formal wealth transfer or leadership transition begins.
What you can do: first steps
Draft a 500–800 word “Letter of Intent” that covers three essentials:
- The story of how your family built its wealth
- The values you believe must anchor the next generation
- Your vision for how future generations should use and grow the wealth — not just inherit it
4. Family Council: The decision-making engine
What it is:
A structured forum — distinct from business boards — where the family aligns on matters of wealth, succession, education, philanthropy, and long-term strategy.
Why it matters:
If there’s no place for the family to talk, everything ends up in the boardroom — where it doesn’t belong. Family Councils give the next generation a seat, create clarity on who decides what, and surface conflict before it turns into a legacy risk.
They don’t fix problems overnight — but they stop the slow buildup of silence.
When it matters:
When family assets, decisions, or ambitions cross generational or branch lines.
What you can do: first steps
Run a Family Council pilot:
- Meet quarterly
- Follow a standing agenda (wealth review, liquidity, next-gen roles)
- Rotate leadership to build trust and shared accountability
5. Liquidity and succession playbook: The emergency kit
What it is:
This is the document that answers the hard questions no one wants to ask — what if someone exits, passes away, or leadership needs to change tomorrow?
Why it matters:
As per a report by Grant Thorton, just 21% of Indian family businesses have a formal succession plan in place.That means nearly four out of five are operating without a clear roadmap for leadership or ownership transition.
That gap creates operational risk — not just for families, but for stakeholders, employees, and investors. Succession is inevitable. The only question is whether it’s managed or imposed by circumstance.
When it matters:
The moment you’re not the only decision-maker at the table.
What you can do: first steps
With your advisor, draft two simple clauses:
- A buy-sell agreement for family exits
- A temporary leadership mandate in case of incapacity or unexpected events
| Here’s a consolidated view of the governance tools the ultra-rich are using to preserve wealth, prevent conflict, and ensure smooth succession. |
Common pitfalls and how to dodge them
You don’t need to get everything right on Day 1.
but here are a few missteps we’ve seen smart families regret later — and what to do instead.
- “We’ll put a structure in place once things get bigger”
Many families treat governance as a late-stage problem. But that thinking usually backfires. The need for alignment starts much earlier, usually when decisions stop being solo.
And the earlier you build structure, the cheaper and simpler it is to maintain.
What helps: Put simple frameworks in place now. Adjust as scale builds.
- “We have a will — we’re covered.”
A will answers who gets what, but never why, how, or under what conditions.
It settles the legal side, but not the human side of wealth transfer.
Heirs inherit assets — and often, a lot of silent confusion.
What helps: Pair legal paperwork with softer tools — like a Statement of Intent or Family Constitution draft.
- “We’ll talk about succession or exits when we have to”
Avoiding the topic feels like keeping the peace — but it rarely works out that way.
Unspoken concerns quietly compound into resentment or surprise.
By the time you’re forced to address it, the room is tense.
What helps: Block time now. Keep it light at first — a check-in, not a confrontation.
- “Our advisors are already handling this”
They’ll give you frameworks and documents.
But your family’s story, expectations, and values don’t come from outside.
What helps: Build a rough internal draft first. Bring in experts once you’ve defined the core.
- “The next-gen isn’t ready yet”
Most aren’t. But that’s exactly why early involvement matters.
The earlier they’re exposed, the more likely they’ll be ready when it counts.
What helps: Let them listen in. Give them context early, even if they’re not making decisions yet.
| Here’s a quick recap of the common pitfalls families fall into, covered above — for your easy reference or to share with someone who might find it useful. |
In summary
We talk a lot about wealth in financial terms.
But in families, wealth is as much cultural as it is capital. It’s the stories that hold, the roles people play, the trust that builds over time—or quietly erodes.
Structure doesn’t just protect money. It protects the way a family works, speaks, and stays connected as things grow more complex. Because once that fabric starts to fray, no amount of capital can stitch it back the same way.
Governance won’t solve everything. But it gives you a way to keep what matters intact, even as the stakes rise. And sometimes, that’s the difference between families who stay together—and those who just stay rich.
Governance won’t solve everything. But it gives you a way to keep what matters intact, even as the stakes rise. And sometimes, that’s the difference between families who stay together and those who just stay rich.
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