This article was first published in NZ Herald on 18 Jan, 2023
Thought about your family’s future? There’s much to think about.
By Philip Morgan Rees, Milford Head of Wealth Management
The ‘Sage of Omaha’, renowned US investor Warren Buffet, once said: “Someone’s sitting in the shade today, because someone planted a tree a long time ago”.
The quote speaks to Buffet’s long-term vision for investing, and is particularly poignant when it comes to intergenerational wealth planning.
While there’s certainly never a bad time to sit down and start planning for your future, there is an age old saying that if you didn’t do it yesterday, today is just as good a time to take some time to map out a strategy for the long-term financial security of you and your family.
Intergenerational wealth transfer is the movement of wealth between generations. Intergenerational wealth planning, therefore, is the strategy which ensures that process unfolds smoothly and in line with you and your family’s wishes.
Today, we’re also hearing another term – ‘The Great Wealth Transfer’. This applies specifically to the transfer of wealth from the Baby Boomer generation – a process which Forbes magazine described as the ‘greatest wealth transfer in history’.
The Baby Boomer generation has experienced one financial boom after another over the last few decades, with rising property values and investment growth dramatically increasing their net worth. Of course, we’re also living longer than previous generations, giving Baby Boomers more time to accumulate their wealth.
The numbers are staggering, with the wealth transfer in our little corner of the world alone expected to involve well over $1 trillion of assets. Transactions of this scale obviously have many implications.
Let’s step through our top three:
Families can be complicated
Establishing a road map is really important. By having a plan around what will happen to your money, and who will be involved, you’ll be in a much stronger position to control your finances. This is the best way to avoid surprises and ensure your goals for your family are managed and met.
Involve them
Lots of people find it difficult to talk about money with their family, especially when planning for a time when they’re no longer around. But, when it comes to successfully passing on your wealth, it’s vital to involve them in the process. This includes introducing them to your financial adviser.
The first transfer of wealth is usually between spouses. Often the next generation will step up to help, taking over the management of the family’s finances from their parents. This is done through their involvement in a family trust, or via the use of Enduring Powers of Attorney.
This transition takes time, so it’s important to start early and ensure there’s plenty of time for all family members to get to know your adviser.
The joy of giving
With intergenerational wealth planning, sooner is always better. Working with a financial adviser, you’ll start by identifying your own needs. This process is about enhancing your retirement through sound planning which ensures you’re not left short.
A good adviser can help you identify your goals, model your needs and recommend sound strategies. Forecasting will help you develop a clearer picture of what you could do – the last thing you want to be is the person that says, ‘If I’d have known, I would have done more!’
Finally, remember you don’t have to be confined to strategies which unfold after you’ve gone. There’s nothing quite like the joy of giving, and many of our clients get great satisfaction from transferring money and making gifts while they’re alive. These can be large or small – from a grandchild’s first investment fund to a helping hand getting the next generation started on the investment ladder.
Who says you can’t enjoy watching them in the shade of that tree you planted?!
Want more investment insights? Check out Milford’s The Investing Place for exclusive masterclass content, news and opinion pieces.
Disclaimer: This article is intended to provide you with general information only. It does not take into account your objectives, financial situation or needs. Milford Funds Limited is the issuer of the Milford Investment Funds. Please read the Milford Investment Funds Product Disclosure Statement at milfordasset.com. Before investing you may wish to seek financial advice. For more information about Milford’s financial advice services, visit milfordasset.com/getting-advice. Financial Advice Disclosure Statements for all Milford Financial Advisers are available on request free of charge. Past performance is not a reliable indicator of future performance.
