Most high net-worth clients I work with have a legacy to preserve. They have taken the initiative to plan their finances but their children may not have any idea about the work they’ve put in to build their legacy. I believe it’s important to prepare the next generation to protect the family fortune so I encourage my clients to do this as part of their estate planning process.
Parents need to transfer their knowledge, as well as good financial practices and behaviours, to their adult children. This also encourages their children – who may be in their twenties, thirties or even their fifties – to come and meet with their advisors. We see the fallout when people in large, wealthy families don’t understand what they’re inheriting or the role we play in protecting it.
People work very hard to either build their wealth – or if they’ve inherited it, to maintain it. So it’s important that their descendants get the benefit of their hard work, but often their children don’t see it that way. They might be in their forties, and are focused on their house and getting their children through private school and that’s their whole world. This process of education helps them understand what they will be inheriting.
Family meetings bring everyone together
I encourage my clients to call a family meeting and bring their children in. I like to run structured family meetings because there’s so much to talk about and I want to make sure that we hit all the points. Often we’ll also have an accountant at the meeting as they can talk through family trusts, testamentary trusts and superannuation funds, while I talk about their financial planning needs.
A family meeting always includes a discussion about estate planning structures so that the children can understand how it works. The main purpose of this is to make sure the children are educated in the process and understand their legacy moving forward. The objective is to ensure that this legacy is protected for the whole family.
We don’t usually talk about the balance sheet at this point, but we make sure the children know the entire team so that they build a level of comfort in dealing with us and understand the structures that are in place.
It’s very interesting to see how families work in a family meeting. In my experience, they’re always very engaged and want to learn more. I’ve also seen it open up conversations that haven’t been had before and bring families closer together.
Estate planning can seem quite scary to start with – but as people work through it, they actually educate themselves. It also becomes much easier for them to have conversations with the next generation – they might decide to raise something while having a casual catch up over coffee rather than as part of formal process. So the earlier both the client and their families have the talk about finances and meet their advisors the better.
The time frame for these types of discussions varies. There are many changes that happen in people’s lives and to their financial circumstances. On average we would have a meeting about every five years, but if something crucial happens we will have one earlier.
Family meetings ensure that everyone is on board, and that the next generation are educated to understand the whole financial structure that has been built up. Our clients need to encourage these behaviours within their family unit to protect their legacy – but the children need to want to participate as well. And the earlier they can become involved, the better off they’ll be.
Virginnia Hottes is an Executive Advisor at Viridian Advisory
This post and some supporting materials may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we may have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.
The material in this post is correct and complete as of the data it was posted. Viridian is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within this site.