Financial advisors often have the opportunity to take part in important lifestyle conversations with clients. Whether discussing a vacation home or a child’s wedding, there are plenty of positive experiences in which to share. There are also critical and potentially anxious moments, and few are more important than the conversation about the transition of assets from one generation to the next.

Having “the talk” about wealth distribution with the next generation can be daunting, especially when parents are unsure of how their children will react. Anxiety often provokes uncertainty and procrastination, but deferring the exchange usually compounds the difficulties.

Financial advisors who have close relationships with clients should be a part of this sensitive process. It is an opportunity to act as a true partner by preparing, guiding and following through on themes covered. It is not an event to be taken lightly, and advisors should be ready to demonstrate the considerable value they can bring to the family.

Parental concerns about the wealth- transfer talk are understandable, given the many risks associated with inherited wealth. Most common is the notion that access to money will steer their children in the wrong direction, focusing them on material pleasures at the expense of their happiness.

Superstar musician Sting famously demonstrated the commitment to values over an inherited fortune, announcing in 2014 that he would not leave any of his $300 million estate to his children. “I certainly don’t want to leave them trust funds that are albatrosses round their necks,” he said at the time. “They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate.”

The singer is by no means alone. According to a recent survey by UBS, 27% of benefactors do not want children to feel entitled to wealth, and 32% of benefactors do not want kids to count on an inheritance.

The power of the wealth-transfer talk, however, is underrated when it comes to ensuring that strong ethics stay central, even when wealth is handed down.
In this respect, advisors have the opportunity to play a pivotal role in the preservation of values, relationships and wealth—the real difference between a transactional practice and ongoing counsel. The latter is part of the ideal relationship, and it goes beyond financial order-taking and limited estate planning. Family members should know they can look to their advisor for support on both financial and emotional levels.

Focus On Family Values
In considering when parents and children should start talking about the family inheritance, advisors should note that children have the worldly context they need to relate to the issues at hand when they are nearing independence and hope to understand how their financial situation will affect their future. Events such as college graduations or a marriage proposal often trigger the conversation, especially if a prenuptial agreement is under discussion.  

Regardless of when the talk happens, a family’s value proposition should be the primary focus. The family’s philosophy, lifestyle and ethics are the most important parts of any talk about family wealth. In a nutshell, the proposition is usually that money can’t buy happiness, and that living a good life of service in one form or another is the road to contentment.

In this sense, the talk is part of a sustained period of formation to instill values by example—particularly during the child’s adolescence. Indeed, a survey by consultant Russ Alan Prince of ultra-wealthy inheritors showed that “90% of respondents point to their families and the environments they grew up in as being the source of their core values.”

As parents consider how to guide such a talk, it is helpful for them to consider what they would want their child to say to them in the decades that follow. A common goal is to strive for children who appreciate that they were given the backbone, the sense of responsibility and accountability and the prudence to succeed regardless of the wealth at hand.

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