Family dynamics are shifting. In many cases, for the first time, fathers are no longer the primary breadwinners and the sole decision-makers for their families. This means the way families—and the financial industry at large—manage wealth should also change.
We see now in many households that the overall dynamic and objective is one of mutual balance. Fathers balance working hard with being around to invest time in their children—not just financially, but also by instilling their values and sharing their legacy. Mothers balance out childcare responsibilities with their career paths, including roles that were once the domain of men.
If there’s anyone holding onto the old way, where the “primary breadwinner” exclusively made all the decisions and didn’t share the information until it was too late, all I can ask is, Why?
THE RISK OF THE OLD APPROACH
There are different risks depending on each family, but we believe there are a few risks that are a constant:
- Lack of Coordination. Without a coordinated approach, important estate planning ideas might not be discussed, meaning a lack of tax optimization between generations. This, in the end, means less going to the next generation or more going to the wrong places and less that can be used towards your philanthropic wishes.
- Poor Communication. When one spouse passes, and there is no communication on wishes or the why on certain decisions, it leaves the surviving spouse unnecessary burdens. There might be a need to amend and correct documents, which means extra costs.
- Not Preparing the Next Generation. The more prepared all parties are, the more likely it is that the family’s wealth and values will pass to the next generation. Newfound wealth can be intimidating; the better prepared your beneficiaries are, the smoother the wealth transition will be.
TAKING ACTION: THREE TOOLS TO HELP PREVENT FAMILY VALUE RISK
In the spirit of simplicity, we’ll run through the action steps that merit your attention right away.
- Pre-Family Meetings. Sit with your partner and talk about goals and plans together.
- Family Meetings. Decide what you would like to share with your family about your overall wealth plan. This can start off small with just sharing the goals and not the dollar amounts until you are ready.
- Coordination. Between generations not only the next generation but also the previous generation.
A family value focused advisory firm helps families look beyond their investment return to focus on the overall wealth return. The priority should be on the family’s ability to transfer assets, estate, and legacy so that the value can flow from one generation to the next. By taking this long-term approach, families can avoid the risk of wealth diminishing as it transitions to future generations.
EMPOWERING OUR CLIENTS TO DEVELOP FINANCIAL LITERACY
To do more for our clients, we make sure to educate them on an ongoing basis. We must all be informed of our options to make the best decision possible for our families and ourselves. When educating families, we start by sharing our definition of wealth and the ways incorporating your spouse to the conversation adds the value that your family wealth was missing.
We typically think about financial education towards the next generation, so they don’t have to struggle as we did to learn what we know today. It is important to not only continue learning for ourselves and sharing our knowledge with the next generation, but in some cases, it can even mean sharing with the generation that preceded yours. Whether it’s the planning with the next generation or that one that came before, including anyone who might influence your family value is critical if you wish to avoid losing family wealth.
Redefining wealth within a broader context is the foremost message we share. Why? Because once clients understand our more inclusive, family-oriented approach, we can make better decisions together. This family-oriented approach not only adds inclusivity on the family side but also on the advisors.