Multigenerational Wealth Management

Here’s a shocking statistic: Approximately 70% of transferred wealth is lost by the second generation and 90% by the third generation [1].

Some of the reasons why these current trends exist include: 1) the rising generation doesn’t currently have an existing relationship with an advisory firm, 2) the wealth management industry has primarily focused on preparing the assets for the family and neglected to prepare the family for the assets, and 3) a breakdown in communication between family members.

Conversations within families about managing wealth can be complicated and nuanced. Think about how many different personalities, capabilities, interests, motivations that can exist within an immediate family unit, let alone in the multi-generational structure.

Just as parents might recognize they need to nurture their children differently because of their personalities, perspectives and tendencies, family leaders may need to approach conversations about long-term family wealth management differently.

At Regent Peak Wealth Advisors, we believe that there is a short-list of considerations that should be made about how family leaders would like to establish as guidelines for how the family manages wealth over time, and then there are also strategies to employ for communicating those guidelines to different members of a family.

The considerations include:

  1. Do we want to pursue a common purpose, and if so, how prescriptive do we want to be about that? For example, do we want to include a charitable component to our wealth management plan? If so, do you want to direct donations to a broad topic, such as finding a cure for cancer, or be less prescriptive regarding the beneficiary? Alternatively, do you want to develop a Mission Statement collaboratively to drive deeper buy-in among younger members, and future family leaders? The basic decision revolves around the driving nature of the wealth management plan.

  2. What level of involvement does each stakeholder in the family ascertain and how? In other words, how do you evaluate allocation of decision-making power vis-à-vis wealth creation?

  3. What level of expectation do today's family leaders want to set up for the future? To what extent is the family committed to embracing and cultivating the family culture and associated purpose?

Subsequently, a communications plan can be developed to appropriately bring in family members, obtain their input, and develop alignment among individuals. This process may involve multiple rounds of conversations or phases, particularly if there is a large number of family members or a wide range of ages involved. Importantly, you want to dedicate a good amount of time towards the process to reflect the importance of it to you and your family.

These, and other, important considerations are the starting point for developing a multi-generational family wealth management plan. As with all financial planning, there should be an iterative process to reviewing, validating and revising over time. That said, establishing a common ground and starting point for your family’s future generations can be incredibly rewarding both financially and emotionally.

We hope to have the opportunity to have initial conversations about how multi-generational wealth planning could positively impact your family. Allow us to be your co-pilot on this journey. We make it happen.