What if financial planning wasn’t just a conversation between the client and the advisor? What if it could be an enlightening conversation between parents, grandparents, children and partners about their shared future?
Over the past decade, the financial advisory industry has moved away from the business, product-oriented meeting where an agent sits across the table to sell an insurance plan or final investment. In its place, the industry has prioritized the need for people planning over product considerations.
At Northwestern Mutual, we’re on the cutting edge of this movement – offering clients comprehensive financial planning to help them protect what they’ve already built and create future prosperity.
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As this industry continues to evolve, the question I keep asking myself is: “What’s next?”
An Amazing Wealth Transfer Is Coming
I believe that one of the next areas in financial services is intergenerational wealth planning.
In the next two decades, we will see the largest transfer of wealth in American history. It is estimated that Baby Boomers will transfer $30 trillion in wealth, mostly to their families.
But inherited wealth is not unlimited wealth. About 70 percent of wealthy families lose their accumulated wealth in the second generation. Similarly, about 70% of family-run businesses fail or are sold by the second generation. Moreover, only 20% of today’s millionaires inherited their wealth; A full 80% got it on their own. These statistics are leading many families to reconsider what kind of estate they will leave to their loved ones.
In my role as head of Northwestern Mutual’s wealth management business, I see the family’s passion for building the next generation of success. It is clear, however, that financial management alone is not enough to ensure financial security from generation to generation.
This is why I believe intergenerational wealth planning can be a game changer.
Often times, the younger generation has little idea of how financial planning for seniors works. This lack of awareness can lead to complications and confusion, especially in the face of life events. In an emotional time like an accident or an unexpected illness – the last thing anyone wants to quickly learn about is a loved one’s financial situation and options.
Engaging in discussions about perfect and imperfect futures can be powerful – providing greater clarity, certainty and opportunity for all involved.
Conversations Beyond Financial Planning Strategies
In addition to discussing financial planning strategies and tactics, these conversations are an opportunity to reconnect with children about the values, hopes, expectations, and financial skills they need to succeed in life. the future.
These conversations can have special implications for families with small businesses. It’s an opportunity to talk about what attitudes and behaviors will help them live productive and prosperous lives. And it’s an opportunity for the younger generation to clarify what they like – or don’t like – in life.
My parents always taught me that the importance of money is not to get rich but to be safe. “Wealth,” they told me, “is a tool we can use to create a path to freedom and independence.” I will always be grateful for what they taught me, and I have begun to pass those lessons on to my son. But more importantly, I’m excited to hear what kind of future he wants to create for himself.
When we reconnect with our financial advisors next year, let’s resolve to add a seat at the table for the next generation and the generations before us. Let’s rebel against the unspoken rule that money is too taboo a topic to talk about with our loved ones – because at some point we all need to come together.
Let’s unite our families around shared financial beliefs and values – and ensure that the largest wealth transfer in history is not only defined by size – but also by positive impact. our family.
This article was written by and represents the opinion of our contributing advisors, not the Kiplinger editorial staff. You can see the SEC rate in the chart if you are close to the selected date (opens in a new tab) or with FINRA (opens in a new tab).
