“Any fool can make a fortune; it takes a man of brains to hold onto it.” -Cornelius Vanderbilt.
Unfortunately, Cornelius Vanderbilt did not pass his brains for making fortunes onto his offspring. If he had passed his knowledge onto his heirs or even implemented stop gap measures into his will or trust to prevent his heirs from wasting his fortune, his financial legacy would have endured. Instead, by 1973, at a gathering of 120 Vanderbilt descendants, not a single millionaire could be found among them.
If Vanderbilt had only taught his children better, his descendants would have been more like John D. Rockefeller’s descendants, whose heirs had an estimated net worth of $8.4 billion in 2020. As of 2020, the Rockefeller family was ranked #43 by Forbes among the richest families in the United States.
While the Vanderbilt descendants amble in obscurity, the Rockefellers still make headlines for their charitable giving.
Here are some distinctions of the Rockefeller family:
- The Rockefeller fortune began with oil tycoon John D. Rockefeller, America’s first billionaire, founded Standard Oil in 1870.
- He and his son John Jr. dedicated themselves to philanthropy, giving away more than $1 billion and establishing the University of Chicago.
- In 2016 the Rockefeller Family Fund, a family philanthropic entity, made waves when it announced it would divest from all fossil fuel investments.
- John’s grandson David was the oldest living billionaire at age 101 before his death in 2017; his will designated most of his wealth for charity.
- Today, the Rockefeller fortune is spread out among more than 70 heirs.
What was the difference between the Vanderbilts and Rockefellers?
The Vanderbilts spent their money on toys while the Rockefellers put their money to work. While the Vanderbilts squandered their inheritances on lavish parties and non-productive assets, the Rockefeller allocated their capital to cash-flowing assets that would provide for the needs of current generations of heirs and charities as well as future ones.
What was their preferred asset? Commercial real estate – as evidenced by the family trust’s considerable real estate holdings, which included the World Trade Center and Rockefeller Center at one point.
The Vanderbilt clan took a far different path. Vanderbilt’s wealth – estimated at $100 million ($200 billion in today’s dollars) at his death – was gone in 50 years. Vanderbilt had built substantial wealth during his lifetime. Still, he did nothing to preserve that wealth through assets like commercial real estate or taught his children the necessary financial lessons needed to ensure the lasting legacy of that wealth.
Rockefeller left nothing to chance by taking investment decisions out of the hands of his children and into the hands of responsible trust administrators who allocated cash-flowing commercial real estate that would stand the test of time.
CRE has long been leveraged by the ultra-wealthy and even large university endowments like the Yale Endowment to provide for the needs of present generations and preserve future wealth. Portions of cash flow can be used to meet living expenses, while the rest can be reinvested to grow wealth for future generations of heirs and charities. This is exactly what Rockefeller did and his heirs continue to do.
Building generational wealth takes a generational wealth mindset, and it’s not going to be accomplished through traditional retirement accounts, which are designed to provide for the needs of the account holder during their lifetime and not for many others. Leaning on traditional retirement plans has left many potential retirees unprepared for retirement. Many don’t even have savings. In fact, 45% of Baby Boomers have zero savings, with many planning to work well into their retirement years.
Vanderbilt failed in two ways:
- Failing to educate his children properly in the ways of finances and investing.
- Failing to implement stop-gap measures such as family trusts to put investment decisions in the hands of competent trust administrators.
Vanderbilt’s failings are pervasive among Baby Boomers. They have even trickled down to the next generation as boomerang kids (adults who move back in with their parents) are now the biggest threat to Baby Boomers’ retirements.
To avoid Vanderbilt’s fate will require adopting a generational wealth mindset and allocating the assets that the Rockefellers and other families who have successfully created generational wealth allocate to. Instead of spending money on things that drain pocketbooks, consider spending money on assets that grow your pocketbooks.
Consider productive assets like CRE that build wealth and for accelerating wealth, consider investing passively to generate multiple streams of income.
Through the multiple benefits of income, growth, tax benefits, and insulation from market downturns – all backed by a tangible asset – CRE is ideal for building generational wealth that can grow in perpetuity.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.