The Last Time You Have Wealth

£7 trillion is going. That’s the sum experts predict Baby Boomers will pass on to Generation X and Millennials over the coming years. This is one of a pair of articles we’ve penned on the topic… below we suggest what you could think about if you’re passing your money on.

Lies, Damned Lies and Statistics

Statistics rarely tally with our own experience.

The data say Baby Boomers are the luckiest generation in history. They’ve had advantages that those before could only dream of.

Data also say youngsters are more likely to splurge and, who knows, might they squander their inheritance?

The truth? Well, it’s almost always somewhere in between, isn’t it?

They may be financially more comfortable than others, with 11% of them holding assets worth over £1 million, but wealth always comes with worries. And one is what will happen to the money they pass on.

Such inheritance aggregates to £7 trillion. This is the UK alone – the global number is considerably higher. Experts like us dub it the great wealth transfer. It’s what happens when relative peace, long-term economic prosperity and compound interest collide… and as we explain here, flow to Generation X and Millennials (born 1965-80 and 1981-96 respectively).

Wealth is hard to accumulate, easy to dissipate. Evidence suggests 70% of wealthy families lose their wealth by the second generation – 90% will by the third. Some Baby Boomers are certainly worried about such effects. One is martial arts movie legend Jackie Chan who has disinherited his son from a $400 million fortune.

The Worst Inheritor in History

The sad truth is, we’ve all seen friends, acquaintances or those in the public eye make big mistakes with money. But few of them might hold a candle to Barbara Hutton.

In the early 1930s she inherited the Woolworths fortune – some $50 million, or $3.1 billion today – and spent the lot. She bought art, clothes, furs, houses and presents for friends and her seven husbands. The media dubbed her the original, ‘poor little rich girl’.

But, as you know, there’s a more profitable path, where your descendants can not only benefit from the money you accumulated but also build on it for generations to come.

If You Do Just One Thing

Talk.

Start the conversation with your family as early as possible. Get them comfortable with what they can expect to receive. They are likely to feel anxious about what will happen and they, like you, will crave peace of mind.

Talking openly and often can address this anxiety and foster more intelligent and sensible long-term decision making.

Younger generations will likely look to you to initiate all this – and the worst thing you can do is foster silence.

You can either keep these meetings in the family or you can bring in an expert adviser. Or you hold both kinds – which is what most of our clients do.

Having the expert in the room not only provides objectivity and accountability – they can also take the heat out of arguments. Money isn’t an emotional thing, it’s cold. It’s best to treat it as such.

And this brings us to the second thing.

If You Do Just Two Things

Listen.

If you’re paying for high quality advice, do please remember this is tailored to you. It’s based on empirical assessment of your specific circumstances. It’s not the chap at the club, or that woman on the golf course… or anyone else who conflates personal experience with objectivity.

If you don’t already have a detailed plan, aligned to your goals, your adviser will create one for you.

They will also keep your mind open and remind you that the characteristics and behaviours you observe in your descendants may only show part of the picture. After all, Millennials and Generation X are often much better at talking and listening than you might think – and the evidence suggests they are very motivated to improve their finances and seek financial advice.

There is every possibility your portion of the £7 trillion will change hands smoothly. How smoothly is mostly in your gift. If you’d like to know more about anything we mention above please get in touch, we’re available at hello@firstwealth.co.uk on 020 7467 2700.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.