Fisher Investments UK: Four tips to help your family’s wealth last

view original post

Follow Fisher Investments UK’s checklist to help wealthy individuals learn how to build generational wealth and protect the family fortune

Did you know that approximately 70pc of ultra-high net worth families will lose their wealth by the second generation? The numbers get worse from there – approximately 90pc of family wealth is lost by the third generation¹.

It often takes decades of hard work, overcoming obstacles and life experience for individuals to build their wealth to levels that can ensure financial stability for future generations. And while the individuals who earn the family’s initial wealth may assume the next generation will carry on the financial prudence of their forebears, unfortunately that typically isn’t the case.

There are a myriad of resources available to help investors learn how to build generational wealth, but far fewer on how to ensure generational wealth lasts. Here are four tips from Fisher Investments UK to help your family’s wealth survive for the long haul.

Start the conversation about wealth

Family discussions about money can be difficult. But avoiding the topic can seriously hamper the probability of successful wealth transfer to the next generation. Money can mean very different things to different people – status, security, influence, control – which makes financial conversations even more difficult.

Many wealthy individuals simply don’t know how to discuss wealth with their children and grandchildren. They often fret about how their heirs’ behaviour could change once they are more aware of the family’s wealth, or what may happen to the family fortune when they no longer have financial control. It can be challenging, but learning how to educate future generations can go a long way. While individuals in younger generations may not have the same financial knowledge and skill, it doesn’t mean they aren’t interested in learning how to be responsible stewards of wealth.

Start the process slowly and intentionally build up the understanding within your family. Important topics to consider include the value of money, generational wealth goals, family principles, and budgeting and investment planning. It is imperative that conversations about money aren’t one-time occurrences. Instead, talk with your family about money regularly.

Get everyone involved with family meetings

One of the best ways to help facilitate conversations about wealth planning is to hold a family meeting. A well-thought-out family meeting creates an opportunity for everyone to participate in the process.

To prepare for your family meetings, tailor the agenda to address your family’s objectives and needs. Below are several best practises for a successful family meeting:

  • Set an agenda: Seek input and questions from the entire family when setting the agenda. You may want to include topics such as family values, educational goals, investment goals and philanthropic objectives. Family members can have varying interest levels when it comes to discussing finances. Try to incorporate social activities following the meeting to keep everybody engaged.
  • Choose a meeting location: Consider a neutral meeting location not affiliated with the family, if possible. Family wealth should absorb travel costs to eliminate any concerns over the financial burden of attending. Virtual meetings may also be a viable option, depending on logistical constraints.
  • Create a consistent schedule: Holding family meetings consistently helps ensure members recognise their importance. Set an initial meeting schedule over the next 12 to 24 months.
  • Set engagement rules: Engagement from everyone encourages ownership in the ultimate objective – planning for the financial well-being of the family. Additionally, varied perspectives can offer valuable and unique insights. Encourage active, respectful listening and participation among all attendees.
  • Take notes: Documenting meetings enhances accountability for members. After a meeting, circulate a copy of the notes to family members.
  • Develop an action plan: Outline project timelines, individual responsibilities, tasks and plans to follow up on with the family. Always plan for contingencies, provide updates on topics discussed and consider post-meeting evaluations of where improvements may exist.

Promote ongoing financial education

Financial literacy – a competency that is not always embraced by all family members – is important to a successful family wealth transfer strategy. It comes as no surprise that the wealth-inheriting generation is more likely to spend the family money freely versus the one that earned it. Wealth comes with great responsibility. Educating your family on best financial practises can help ensure your family wealth lasts.

It is not necessary to send the entire family to business school to achieve competency in financial matters. More importantly, the focus needs to be on straightforward education that is impactful. Provide materials, such as financial education books, videos and online courses, for your family’s use and arrange for skills-based courses and workshops families can attend together.

Organising meetings with financial advisers and family accountants can help everyone get a clear picture of the family’s current financial status, plans and potential strategies for the future. Fisher Investments UK encourages coordinating financial education discussions with a financial professional. Having professional support can also help alleviate concerns and answer questions.

Fund future growth for prosperity that lasts

Encouraging family members to take an active role in the management and growth of their wealth helps to convey the value of money. This could mean engaging in ongoing family ventures, funding a new business opportunity or investing in financial markets.

Many who inherit significant wealth don’t know how to properly invest it. It’s common for individuals to approach their investments too conservatively. This often means large chunks of wealth in cash or ‘safer’ securities such as bonds. After all, what they inherit is often significantly more money than they have had before, so they don’t want to take on too much risk. Fisher Investments UK believes consulting with a reputable financial professional could benefit inheritors with little investing experience, and may help set them on a path to strategically build on their wealth.

Generational wealth can be life-changing for a family, but the lasting impact of that wealth shouldn’t be taken for granted. Thoughtful conversation, education and strategic planning will help to ensure that your family’s wealth will last for generations to come.

Interested in other topics by Fisher Investments UK? Get our ongoing insights, starting with a copy of 7 Secrets of High Net Worth Investors.

Sources

1  David Kleinhandler. “Generational Wealth: Why Do 70pc of Families Lose Their Wealth in the 2nd Generation?” Nasdaq.com. 19 October 2018.

Follow the latest market news and updates from Fisher Investments UK:

• Facebook
• Twitter
• LinkedIn

Fisher Investments Europe Limited, trading as Fisher Investments UK, is authorised and regulated by the UK Financial Conduct Authority (FCA Number 191609) and is registered in England (Company Number 3850593). Fisher Investments Europe Limited has its registered office at: Level 18, One Canada Square, Canary Wharf, London, E14 5AX, United Kingdom.
Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission. Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.
 

Related Posts