Preparing the Next Generation for Wealth
Talking finances with family is not something that comes naturally for everyone. In fact, if we were to take a poll of the most difficult conversations to have with family members, I would predict that financial matters would be right up there with having “The Talk” with your adolescent children. And although financial conversations are easy ones to avoid, in our experience, they are the single biggest factor in the successful transfer of wealth across generations.
Why are these discussions so difficult and uncomfortable? From what I can tell as both a father and financial professional, the issue seems to center on the fear of instilling a sense of entitlement. Parents may hesitate to share the details of their financial situation with their children in an effort to protect a child’s drive to be self-sufficient and financially motivated. On the other side of the equation, children don’t ask about family wealth for a similar reason—they don’t want to appear as though they feel entitled.
Many people are uncomfortable disclosing their net worth to their children at any age. The thing is, it isn’t necessary to immediately disclose the balances of your investment accounts. Initial conversations are really about opening the line of communication and building understanding and responsibility over time. Here’s how to get started:
Have basic, age-appropriate conversations about money and financial topics with your children or grandchildren.
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Families that have regular conversations [about] wealth are the most successful at maintaining that wealth across generations.
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Young children learn through experience. Let them hear you talking about financial matters, and involve them in these conversations as appropriate. Talk with your teenagers about how credit cards work. Involve adult children in discussions around estate planning. The earlier you can begin having these conversations, the easier it is to continue to develop their understanding, and the more prepared they will be to handle future conversations as the topics become more complicated.
Introduce the family to your advisors.
These meetings can range from simply involving family members in a periodic review, to designing a family limited partnership where family members take on roles, ownership, and responsibility.
Make it a habit.
A popular format for this type of discussion is the annual family meeting, where the family meets with the help of an advisor to discuss financial topics. These meetings can go a long way towards educating the participants, opening the necessary lines of communication, and building a sense of responsibility around finances. For many families, these discussions evolve into larger conversations related to family values and philanthropy, which have an amazing ability to span age groups and foster a strong sense of responsibility not only around money, but to the family mission.
We have experienced every type of outcome watching families transfer wealth from one generation to the next; we have seen seamless transitions, and witnessed fortunes disappear. From what we have learned, there is one constant: families that have regular conversations and work on developing a foundational understanding of topics around wealth are the most successful at maintaining that wealth across generations.
We are always interested in getting to know your family better, and we would love to help in any way that we can. We meet with family members of all ages, from young children to adults, on all topics, simply to help educate and facilitate family discussions around wealth.
Please feel free to send us an email, or bring up this topic in our next review if you would like to learn more.
This material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
