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Wealth transfer to the next generation

Posted on 18 Oct 2022

Generational wealth transfer is an important financial planning service that not only benefits your clients and their families, but also your business.

As a financial advisor, you accompany clients on their wealth accumulation journey, tailoring advice to meet their changing emotional and financial needs, hopes and dreams. As they get older, they also need a plan to leave their assets to their beneficiaries.

Generational wealth transfer refers to the assets families pass down to children or grandchildren. These may include cash, investments, stocks, bonds, properties and businesses. This wealth is passed on to beneficiaries so they have a foundation to live a comfortable, financially secure life.

Generational wealth transfer planning is also a value-add business strategy. It entails forming relationships with your clients’ families over the years and adapting your business and services to meet the needs of spouses and the next generations. In this way, they are likely to retain your services when your clients pass away. By retaining assets under management, you enhance the long-term sustainability of your business.

The transfer of generational wealth involves many considerations. For example, a structured wealth transfer plan comprises both a financial plan and a wealth transfer plan that aligns with the wishes of clients and their spouses.

In this newsletter, we discuss the need for a financial plan and how to address the emotional side of wealth transfer. We also provide questions to facilitate discussions about generational wealth transfer and gain the information needed to create a wealth transfer plan.

Intellect and emotions

Wealth transfer planning requires intellectual discussions with clients about money, and an understanding and acknowledgement of their emotions.

The intellectual side focuses on financial planning. You can review the numbers based on clients’ financial needs, assess their requirements and decide which steps to follow.

The emotional side arises when clients consider how to distribute their wealth. Questions may be asked, such as whether their children should inherit equally if one needs more financial support than another. If unequal amounts are left to children, would that trigger resentment between them? Does a child and/or their spouse have a history of poor financial decision making? What would the impact be of leaving the spouse out of the will? Would that strain the relationship between the spouses? Should the wealth transfer process start sooner rather than later? If so, why, when and how?

In these conversations, you can help clients identify their intentions and what they believe to be right and fair. As they become aware of their mortality, they may experience pride, joy, fear and concerns. Emotions are generally unspoken but are often the underlying elements in conversations.

Why focus on emotions

There are two main reasons to focus on clients’ emotions. Firstly, if their emotions are not addressed, some families could be stuck in inaction. Secondly, research shows that clients perceive significant value when financial advisors venture into the emotive side of wealth transfer planning.

A 2019 report from the Vanguard Center for Investor Research stated that emotional outcomes – namely clients’ sense of well-being when they measure the value of financial advisors’ work – account for 45% of the total perceived value. The remaining 55% is associated with the functional aspects of the relationships, for example portfolio management and financial planning.

How to initiate a wealth transfer plan

Your aging affluent clients would benefit from a conversation around wealth transfer planning. By assisting these clients to plan with intention, they can feel more confident and comfortable about the financial legacy they are creating.

A starting point is to explore their feelings about money, as well as their family dynamics. There are ten points that can help you do this. Your clients and their spouses might first want to reflect on the points alone before talking about them with family members, more than once. You could even facilitate the family conversations if help is needed. Open communication helps the next generations know what to expect and how to manage the family wealth responsibly and honourably.

  1. Core values What are your and your spouse’s personal core values? What core values have you intentionally or inadvertently established for your family? Have you articulated the family values in writing? Have you shared and discussed them with the next generations? Well-articulated values can serve as helpful guidelines when considering generational wealth transfers, and the writing process can lead to clarity.
  2. Communication – What are your family’s communication practices? Are you satisfied with them? If not, what must you and others do to allow more open and productive communication?
  3. Purpose of money – How do you value wealth in general? Within your family, have you used money mainly to dominate, incentivise, punish, impress, benefit, entertain or show affection? How has this impacted the next generation’s attitude towards money?
  4. Sharing information – What details about your wealth have you shared – and not shared – with your family? Why do you think you have not shared that information? Are there buried concerns that you should explore and resolve before contemplating a transfer plan?
  5. Relationships – How do you relate to and engage with family members in the next generation? How do they get along with each other? How have these relationship dynamics shifted over time? What shifts do you expect in future?
  6. Expectations – What are your expectations of the next generations of your family? Have you shared those expectations with them? What do you perceive their expectations to be of you and their inheritance? Have you confirmed these perceptions with them?
  7. Experience – What lessons did you learn about money as you grew up? What was your biggest financial purchase to date? How did that purchase make you feel? What has been your biggest financial regret? What did you learn from that experience? How do these experiences and lessons colour your thoughts now about making gifts?
  8. Your goals – What is the purpose of giving assets to the next generations? If you could look back from your grave and determine that you successfully transferred assets, what would that success look like?
  9. Their goals – What ambitions do individual family members have? How could you transfer wealth to help them fulfil their financial objectives? What would happen if you did not transfer wealth to the next generations? Who would be impacted? How would they be impacted?
  10. Preparedness – How have you prepared the next generations to receive wealth? Do they have the perspectives and skills to handle the assets you have in mind? What gaps exist, and how can you help close them?

Effective wealth transfer planning

US research company Cerulli Associates has found that meetings with clients’ families and regular communication (81%) are considered the most effective wealth transfer planning strategy. Educational support (59%) and organised succession planning (31%) rank next.

Cerulli therefore recommends making family events a regular part of the advice process. Involving the full range of stakeholders, rather than just the current controllers of wealth, evokes a greater sense of responsibility and inclusion among heirs. This also helps when future discussions arise about managing your clients’ wealth.

Cerulli also recommends that financial advisors evolve their business models to meet the needs of the younger demographic who will inherit wealth. By understanding the various generations’ likes, dislikes, needs and preferences, you can provide appropriate services.

Achieving a thoughtful generational wealth transfer plan that meets everyone’s needs provides clients with peace of mind. You are also well positioned to retain the business of your clients’ families into the future.


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A national supplier of risk management services to independent financial advisors and other licensed financial service providers (FSPs). Established in 2004, we help our clients overcome their risk management challenges so they can grow and thrive in an increasingly regulated industry. Providing professional guidance and practical support, our team of specialists is passionately committed to delivering tangible solutions.

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