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Multi-Generational Financial Planning – The Why’s and How’s

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By Darren Reinig

Families with considerable wealth possess multi-generational planning needs. In many cases, the senior generation built up enough assets, be it from businesses, real estate and other means to such a degree that the probability of them outliving their money is practically impossible. In other words, someone else will be using their assets.

As such, many who acquire significant wealth want their legacy to thrive well after they pass on. More than half of our clients will include their children, grandchildren and, in some cases, great grandchildren in the planning. Almost always, they come with the most prominent need of understanding how those cross-generational needs fit together, and how to build an investment strategy that optimizes wealth and ensures the assets last many decades, if not more than a century.

Complexities — and pitfalls — abound. Statistics show that transferred wealth rarely lasts three generations. Executing a strategy that bucks this trend must take into account the family’s current as well as future professional, personal, philanthropic and education needs. These unique circumstances present their own sets of problems that, while nice to have, must be addressed with a particular set of processes. Here are just a few steps.

Get all your advisors to communicate with each other

Investment strategies can’t operate in a vacuum, especially for high and ultra-high net worth families. Integrating such initiatives with the appropriate tax, legal and other advisors is critical to meeting all goals. Designate one of the advisory groups or qualified family member as the central coordinator to ensure everyone possesses the information needed to manage the assets.

Think about the long-term goal

Prudent tax planning and asset allocation may mean identifying what wealth will ultimately, if not immediately, be spent or go to heirs. As necessary, an effective multi-generational wealth management strategy must outline how to steward those assets to give all generations the best likelihood to experience a similar positive outcome with the family wealth.

Educate future generations

Heads of families should leverage their trusted investment advisors to educate their heirs and follow-on generations on the complexities of the estate, how it works together and what the role of their assets are in meeting the objectives.

Conduct family meetings

Hold regular gatherings, be it yearly, semi-annually or quarterly, with the stakeholders and trustees to outline the status of the estate, adherence to goals, and ensure everyone understands the roles and responsibilities. Discuss all aspects of the estate; including tax, legal, financial, philanthropic, and the like. Review this comprehensive inventory of the family’s fiscal landscape and identify what is and isn’t working.

One word of caution. When planning the investment of a family’s assets, don’t bet on the past. It carries a great deal of risk and angst, particularly when markets turn sour. Panic sets in when family members start to realize that their portfolios, based on plans rooted in the past, no longer meet their expectations. The anxiety that accompanies this realization may often lead to poor decision-making. The estate is not a commodity. What happens to it matters, and it’s important to understand why. Highly strategic, thoughtful implementation can mean the difference between a portfolio that misses its financial objectives and one that is there to support a family for generations to come.

About the author: Darren Reinig is a Founding Partner with Delphi Private Advisors, ranked as one of the 50 fastest-growing Registered Investment Advisor firms by Financial Advisor Magazine five of the last seven years. The firm offers institutional wealth management in a boutique, personalized service model for high-net-worth individuals and family foundations. He can be reached at darren@delphiprivate.com.