Five Active Wealth Practices
Sustain family wealth by coordinating five financial disciplines
- Difficulty
- Advanced
- Time to result
- ~ongoing to results
- Steps
- 5
- Confidence
- 99%
The Five Active Wealth Practices framework treats sustainable family wealth as the combined output of investing, spending, borrowing, managing, and protecting. Investing establishes an appropriate asset allocation and requires discipline during difficult markets. Spending converts lifestyle choices into an explicit policy with measurable effects on compounding. Borrowing is considered strategically, especially when low rates make debt useful for liquidity, purchases, or estate planning. Managing focuses on after-tax returns, including the deliberate use of passive or active vehicles according to market efficiency and tax consequences. Protecting covers cybersecurity, trusts, estate structures, and the nonfinancial values a family wants to transmit. The disciplines operate as one system: improving investment returns cannot compensate indefinitely for unmanaged spending, inefficient taxes, careless leverage, or preventable loss.
Origin
BNY Mellon’s wealth-management team distilled the framework from its long experience with successful families, asking which recurring practices allowed them to sustain success across generations.
Core principles
- 01Sustainable wealth requires more than investment performance
- 02Spending policy shapes long-term compounding
- 03Borrowing is a capital-allocation decision
- 04After-tax return matters more than headline return
- 05Protection includes both financial and family assets
How to run it
- 1
Invest deliberately
Choose an asset allocation aligned with long-term objectives, liquidity needs, and risk capacity. Maintain and rebalance it through difficult markets.
Pro tip Use a written investment policy to make discipline easier when sentiment deteriorates.
Watch out Investment selection without a defined goal can optimize the wrong outcome.
- 2
Control spending
Establish a spending rate and test its effect on the family’s long-term capital. Revisit it when needs change rather than allowing withdrawals to drift upward unnoticed.
Pro tip Model several spending rates to show their cumulative effect across generations.
Watch out Even strong returns can be overwhelmed by an unsustainable withdrawal rate.
- 3
Allocate borrowing strategically
Evaluate debt as part of the family balance sheet rather than assuming it is always harmful or unnecessary. Compare borrowing costs with liquidity, investment, purchase, and estate-planning benefits.
Pro tip Review existing debt when rates or tax conditions materially change.
Watch out Low interest rates do not make an unnecessary or poorly structured loan prudent.
- 4
Manage after-tax returns
Select active, passive, and customized strategies based on market efficiency, costs, and tax consequences. Measure what the family retains rather than focusing only on pretax performance.
Pro tip Look for tax alpha in efficient markets where repeatable investment alpha may be difficult to obtain.
Watch out A high pretax return can underperform a tax-efficient alternative after liabilities are paid.
- 5
Protect the whole estate
Use cybersecurity, trusts, estate planning, insurance, and governance to protect financial assets. Identify the values, behaviors, and capabilities the family also wants to transfer.
Pro tip Include younger generations in protection and continuity discussions before a transition is imminent.
Watch out Legal structures alone cannot preserve family cohesion or financial judgment.
In the wild
A founder preparing for retirement could diversify part of a concentrated stock position, adopt a sustainable spending rate, borrow selectively for liquidity rather than selling at an unfavorable time, harvest losses to improve after-tax results, and establish trusts plus cybersecurity controls for the next generation.
→ Five coordinated decisions reduce concentration, liquidity, tax, and succession risks without treating the portfolio as the family’s only concern.
Keating notes that the highly efficient US large-cap market may offer more consistent tax alpha than investment alpha. A family can therefore combine low-cost exposure with tax management while reserving active risk for less efficient asset classes.
→ The family seeks excess value where it is most repeatable while improving retained after-tax wealth.
Common mistakes
Focusing only on returns
Portfolio performance is only one contributor to success and can be undermined by spending, taxes, leverage, or preventable losses.
Rejecting all borrowing
Families that automatically avoid debt may miss useful capital-allocation, liquidity, or estate-planning opportunities.
Protecting only financial assets
Trusts and cybersecurity matter, but sustainable success also depends on transferring sound family qualities and disciplines.
Is it for you?
Best for
Affluent families, founders, and family offices coordinating portfolios, spending, debt, taxes, and generational protection.
Not ideal for
People who need only a narrow investment-product comparison or a short-term trading strategy.
From the transcript
“It turns out it's five that we see allow families to sustain their success every time.”
“So it's it's invest, send, borrow, manage, protect, as you said, mhm, quite quite intriguing.”
“success is about a lot more than beating the market.”
From the episode
Catherine Keating on Wealth Management (Podcast)
Catherine Keating