Wealthy families hire advisors to prepare their children for the pressures and responsibilities they will face as wealthy young adults, and start preparing from an early age to ensure their wealth is protected for future generations. There is.
Asset managers say this is an effective approach. Many say that parents who talk to their children about the privileges and dangers of wealth when they are young are most likely to succeed.
Enji Lorimer, senior wealth planner at SG Kleinwort Hambros, said: “It takes three generations to make a clog” is an old adage that many wealth management advisors will be familiar with. speak This conveys the proven risk that first-generation entrepreneurs see their hard-earned capital wasted once it passes to their grandchildren. It wasn’t due to lack of investment, it was due to lack of planning.
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“The second generation of a family sees the struggles and sacrifices of their parents and protects and cherishes that wealth,” Lorimer explains. “However, the third generation, who have only ever known abundance and prosperity, do not have the same perspective and, without proper guidance, can fall into the same proverbial ‘geta’ as their grandparents.” . . Once the wealth is completely exhausted. ”
Lorimer believes the answer to breaking this cycle is early guidance on how to protect, grow, and use wealth responsibly. “Educating the next generation how to navigate the world with wealth is the job of everyone involved, from the wealth creators in the family, such as parents and grandparents, to the advisors who advise and guide them. ” she says.
While day-to-day education is primarily the responsibility of immediate family members, wealthy families are turning to banks and asset managers to support more formal financial education in the form of “next generation academies.”
These programs educate young people about the responsibility that comes with money and what it means to protect family wealth. Activities may include games, role-playing exercises, and discussions, but also include practical training on the job. It also provides opportunities for children to network and develop relationships with their peers in a safe environment. The bank believes that the principles passed on can have lifelong benefits for younger generations.
For example, UBS Global Wealth Management runs a number of educational programs designed to bring together the next generation of investors of varying ages and experience and put investment theories to the test. These shared learning experiences provide an opportunity to try and learn outside of the family environment.
Viola Werner, head of global next-generation solutions at UBS Global Wealth Management, said: “Next-generation clients are more likely to be able to engage in important conversations with their parents and other elderly family members about asset transitions and legacy expectations. We need to get involved quickly.”
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She says ‘NextGen’ is experiencing increased financial confidence, driven in part by their willingness to learn from each other. “This is often done by sharing experiences such as first investments, first mistakes, and common pitfalls,” Warner explains.
But financial education experts say it’s important to create a two-way dialogue. This allows older generations to reevaluate their existing investment strategies, while younger generations learn about their family’s vision and approach to wealth.
Anna Jones, a certified financial planner with Progeny, said the company hosts a week-long summer school each year for the children of its clients. This program provides an opportunity to learn about the value of financial planning and gain insight into other areas of professional services such as investment management.
The key, Jones says, is to give children some autonomy over the family’s assets. “I have set up many trusts for clients to pass money to their children and reduce their inheritance tax burden,” she says. “Then we look at allocating segments to children at the most tax-efficient time, often using this money to pay for college or get kids on the property ladder. Putting gifts into trust for children requires careful planning and can be a good way to involve children in investment decisions when the money goes to them. There is.”
Annick Crisford, a client advisor at Rothschild & Company Wealth Management, said philanthropy teaches children “the value of money,” a sense of how lucky they are, and a culture of “giving back.” We believe that this is an effective educational method for teaching children.
“Clients often worry that their children will lack motivation and direction because of their wealth, especially if they themselves are ‘self-made’ and have struggled to get to where they are. Yes, if you do,” Crisford explains. “It’s beneficial to give children the opportunity to make mistakes in a controlled manner early on, and to make them aware of the importance of care.”
