For over two decades, I’ve been working with families to help them envision their goals and dreams and how to achieve them. Since wealth doesn’t occur in a vacuum, one area we focus on is the idea of generational wealth. In this first post in my generational wealth series, I’m covering what generational wealth is and the associated challenges parents face. 

Generational wealth, or family wealth, is wealth that is passed on from one generation (the wealth creators) to the next generation (the wealth beneficiaries). While that sounds simple enough, as we all know, when it comes to families, nothing is as straightforward as it seems. 

Viewing Wealth Through a Wider Lens

When high-net-worth individuals or couples initially reach out to me, they’re usually concerned with their most immediate need. This is often defined as they’re not happy with their investments or their investment professional. This is based on their own experience with advisors who were only interested in getting their money and investing it as soon as possible. Of course, I’m aware of each client’s immediate need, however, it can’t be addressed in isolation. People are more than their money. 

Wealth has to be looked at with a wider lens. Questions need to be asked, such as: What is the money for? What is the meaning of money for you? Do you want to help your children and grandchildren with the wealth you have created? Are you concerned about the impact of your money on your kids? How do you want to see your children, grandchildren and society benefit from your wealth? How do you want to see your legacy play out? 

Once these deep and, sometimes, difficult questions are answered, then, together, we can start the generational wealth discussion. When I understand your values, ideas and dreams, I can begin with the strategies, the education and the stewardship necessary for intergenerational wealth transfer. Ultimately, I want to avoid shirtsleeves to shirtsleeves in three generations, which is, unfortunately, all too common. This is where one generation earns the money through hard work and sacrifice, the second generation spends it and then, by the third generation, there’s nothing left. It’s estimated that 70% of wealthy families lose their fortune by the second generation and 90% lose it by the third. I help you avoid this cycle and create a plan for passing on wealth in a way that fits your values and goals.

High-Net-Worth Parents Face Unique Challenges 

High-net-worth parents face a number of challenges and there are some common mistakes people make that can lead to the aforementioned shirtsleeves to shirtsleeves in three generations scenario. First, the biggest challenge is that parents don’t know where to turn to get the help they need. They may have been thinking of a wealth transition but don’t know where to start. Other challenges can include:

  • Having different ideas of what helping children and grandchildren will look like. 
  • Navigating blended families.
  • Worrying that children will develop a sense of entitlement.
  • Feeling as if children will squander the wealth.
  • Having concerns about children’s lack of education and experience with managing money.
  • Having children with different needs.
  • Feelings of embarrassment about wealth or wanting to keep it a secret from the children.
  • Being generous with children and grandchildren to the point of endangering your own financial independence. 

Many times, parents don’t have the language or guidance to address the multiple situations they can face when it comes to passing on wealth to the next generation. 

Successful Intergenerational Wealth Transfer Requires a Holistic Approach

At my Calgary wealth management firm, I believe in taking a holistic approach that accounts for all aspects of your financial life, including, and especially, your family. I look at all of these challenges and problems and turn them into opportunities for discussion to fully develop strategies that will work for the family and create family harmony. This is what we call creating “good will.”

Often, when clients are considering the logistics of intergenerational wealth transfer in Canada, they focus on just the details. However, it’s not about the lawyers you hire to prepare your estate documents and it’s not about the tax attorney or accountants who may have brilliant strategies. Instead, successful intergenerational wealth transfer is defined as preparing the heirs to receive the wealth in a responsible manner and to be good stewards of the wealth so that it will last for generations to come. From estate planning to teaching children and grandchildren how to manage money, the process always involves preserving or enhancing family good will. 

At the Susan O’Brien Group, I’ve been very successful at helping families and because I’ve had the pleasure and opportunity to serve so many families over the years, I know what works. I think in the 22 years I’ve been doing this, I’ve seen every kind of problem and I never judge. Every family is unique and every family can work towards a successful wealth transition. 

Stay tuned for the next post in my generational wealth series where I’ll be covering how to pass down money values to your children and grandchildren. Or, to learn more about how I can help you build a plan for a successful intergenerational wealth transfer in Canada, contact the Susan O’Brien Group