As the holidays approach, advisors sometimes suggest to their clients that family gatherings are a good opportunity to initiate conversations around money and wealth. This year, as multiple generations come together after being unable to do so during the pandemic, there may be more urgency to do so. If you find yourself wanting to make that suggestion, consider taking a step back so you can ensure you set families up for success.
Conversations around money can be difficult and uncomfortable for families, particularly those with more complex finances. But with a 1% compounding decline in financial literacy each year after 60 years of age, it is incredibly important for families to have these conversations before they become even more complex. Most advisors have been through real-life examples of what you see in the popular show Succession (although certainly not as high stakes or contentious!) where a head of household (HOH) has no plans to relinquish control of a business or investments, which puts their spouse and children in a tumultuous situation as the decision-maker’s faculties begin to decline and they don’t acknowledge it. That’s why it’s so important not to delay those conversations about topics ranging from who will become a successor, when, and how planning and a detailed strategy involved.
The question is, how can you support families in engaging with intention, ongoing support and the skills they need to have productive dialogue?
With more than 70 million baby boomers owning 54% of the nation’s wealth and controlling nearly 70% of affluent households’ investable assets, The Fidelity Center for Family Engagement has identified eight ways for wealth management firms to help ensure successful generational transitions. Based on research about what baby boomers and their families are currently experiencing, generational family conversations may include navigating change of control for the HOH, facilitating transparency around planning, engaging the modern family and complex planning considerations, and expanding the health conversations.
For example, if we look at conversations around transitioning control, when advisors concentrate on the traditional family hierarchy and stay focused on the primary decision-maker, it can set up a series of reactive scenarios within the family. The better relationship strategy is to proactively partner with clients and their families to prepare for the change-of-control scenarios that are a normal part of the aging boomer life stage. Facilitating a more strategic transition and wealth transfer adds to the long-term health and harmony of those clients and their families.
There is a range of questions you could ask your clients to help them think proactively about their family conversations, including:
• What are your fears about discussing future transitions in decision-making within your family?
• What are your family members’ perspectives on how the eventual change in control might be handled?
• What could you be doing now that would give your family a long runway to prepare for a future change in decision-making control?
• What are the potential intended and unintended consequences of the decisions you are considering?