Multigenerational Financial Planning is Important

Moving forward into the new year, breaking the underlying rule that money is too forbidden to discuss between family members is crucial. Inevitably, family members will need to find common ground regarding financial strategy.

What if financial planning involved more than just talking to an advisor? Could it also serve as a springboard for a meaningful dialogue on the family unit’s future as a whole, including grandparents, children, and partners?

Financial advisors have been moving away from “transactional,” product-centered encounters, where an agent sits across from you and tries to sell you an insurance policy or the current investing fad, for the better three decades. Instead, the sector has been placing a greater emphasis on customers’ wants and needs in terms of a long-term strategy.

The most significant wealth transfer in U.S. history is expected to occur during the next two decades. It is estimated that the Baby Boomer generation will transfer $30 trillion in wealth, most of which will go to loved ones.

Inheritance, however, is not infinite wealth. Seventy percent of wealthy families’ wealth is gone by the second generation. About 70% of businesses started by a family either fail or are sold to someone else by the third generation. To add insult to injury, just 20% of modern millionaires have inherited their fortune; the remaining 80% have worked hard to build it. Many families are taking a second look at the legacy they plan to leave in light of these figures.

To a large extent, younger generations need to be aware of the complexity of their elders’ financial strategies. A lack of understanding like this can add unnecessary layers of complication and uncertainty when a significant life event occurs. No one wants to have to quickly assess their loved one’s financial condition and available options in the wake of a traumatic event like an unforeseen accident or illness.

It’s powerful when a family gets together to talk about the ideal and realistic future because it increases everyone’s chances of success.

These gatherings are opportunities to reconnect with one another and with one’s children on the values, hopes, and expectations that will serve them well in the future and the financial insight to help them achieve those goals.

Small business owners from the same family may find these discussions incredibly insightful. It’s a time to have a candid conversation about the attitudes and behaviors that can help them achieve their full potential. It’s a chance for the next generation to make its desires and rejections of the future crystal plain.

As we meet with our financial planners again in the coming year, let us make it a priority to include younger and older family members in these discussions. We should break the taboo of not talking about money with our closest loved ones sooner or later, and we’ll need to be on the same page.