Generational Wealth: How families can prepare for the future

Family Day, observed in many provinces across Canada, gives Canadians an opportunity to come together with loved ones and revel in together time. It may also be a time to think about something that’s especially meaningful—the future of your family’s financial legacy and wealth.

According to a recent report from global investment firm, UBS Global, “over the next 20 years, the world will experience the greatest transfer of wealth in history with $84 trillion expected to pass down to younger generations in the US alone.” What’s even more noteworthy is that most people are unprepared for this major life event.

Wealth: A tough discussion

It’s not just the parents or grandparents who are struggling. The younger generation and beneficiaries of generational wealth find discussions around the topic of wealth difficult. More specifically:

• A third of those polled admit to having unresolved issues and conflicts with other siblings
• Nearly half said one of the biggest barriers to open communication was the fear of appearing selfish
• Among investors who have received an inheritance, four in 10 wish they had been more open with their parents beforehand

Business owners were called out in the report as well, with almost half saying that, while they want to leave their business to family, most don’t have a plan in place, and haven’t discussed the potential business transition with their children.

Read the full report here: UBS Investor Watch: Investors are unprepared for the largest transfer of wealth in history

NextWave: Protecting and preserving wealth

“Protecting their hard-earned wealth and preserving it for the next generation are two things that are always top of mind for our clients,” says Caitlin Chapman, Portfolio Manager, Newport Private Wealth. “They don’t take their financial success for granted and want to be sure that wealth is secure from one generation to the next. They also want to see their children build something that is purposeful to them. But getting that conversation started is often put off.”

It’s why Newport created NextWave, a program designed to educate and empower the children and grandchildren of clients on financial matters. The program was the brainchild of Chapman, who saw firsthand how clients struggled to start the dialogue and the education process itself.

Now in its 10th year, NextWave helps young adults to make sound financial decisions with planning that is relevant to them now (purchasing houses, setting up education plans when they have babies), and prepares them for future responsibilities. That’s especially important as managing wealth isn’t taught formally or consistently. This can include recommending resources and third-party experts (such as estate and tax lawyers), as well as the periodic get-togethers that Newport hosts.

NextWave is focused on ensuring both long term financial success and helping young adults with practical advice, such as:

• The differences between accounts (i.e. TFSA RRSP, non-registered) and guidance on where to deposit funds to optimize savings;
• What to consider when purchasing a first home, and
• Strategies to employ when a young adult receives a large gift or inheritance, to ensure proper tax planning is employed.

Newport recognizes that each family is unique, and Portfolio Managers work with clients to create the appropriate structure around family wealth management and a tailored financial plan. Perhaps most significantly, the whole family benefits from access to a sound investment platform…many families want their young adult children to have access to the same resources they do but designed around their needs and objectives.

“We want these young adults to feel in control over their wealth, and to have the confidence to ask questions and be involved in the process,” Chapman says. “One of our clients motivated his kids with a dollar-for-dollar match, up to $50k, for money deposited to their Newport accounts. Three of his kids have successfully received their match.”

While each family situation is different in some way, talking openly and transparently about family wealth ultimately leads to better outcomes. Parents can not only be assured that their wealth is transferred appropriately—they can involve their children in the process and provide emotional support and direction for the wealth.

As you celebrate Family Day this year, remember that it’s never too early to start having these discussions with your family, or to guide your children toward better wealth stewardship.

Get in touch to learn more.

Happy Family Day!