Australia is about to experience its biggest intergenerational wealth transfer (estimated to be $3.5 trillion) in the next 20 years. By 2050, Baby Boomers (born between 1946 and 1964) in particular are estimated to leave $224 billion in inheritances to Millennials and Gen Z.

Current research suggests a large portion of Millennials and Gen Z can manage money (paying bills on time and have a budget) but may lack adequate financial management skills; they are more likely to be spenders rather than savers and take greater risks when it comes to investing.

National Australia Bank’s Wealth Transfer Research Paper shows that intergenerational wealth is often lost when it reaches the third generation. The under-preparedness of a younger generation to manage family wealth results in greater risk of it not making the distance for following generations.

Preparing for Intergenerational Wealth Transfer

Ensuring that future generations continue building intergenerational wealth necessitates passing on your financial wisdom and introducing your children to trusted financial advisers.

To assist in preparing recipients, look to the following:

• Commence the conversation around finances early
• Talk openly and often
• Share your financial knowledge
• Involve them in your retirement planning
• Introduce them to reputable financial sources and financial adviser (or seek an adviser you can talk to together)

Passing On The Family Business

This is particularly important for family businesses. A fair, frank and mutual approach is especially important when transferring a family business. 

The family business is generally the biggest asset and not easy to separate, and if only some of the families’ children wish to retain ownership in the business, achieving a fair balance amongst the other children can be difficult.

It becomes crucial that each family member has their say and understand what each member may bring to the table to help decide how best to move forward with everyone engaged.

What Role Can a Financial Adviser Play?

Financial advisers can assist you with the tools and strategies needed to impart financial literacy and a path forward for the next generation.

This includes:

• Enable open and productive dialogue. Discussions around money can be uncomfortable and sensitive. A trusted financial adviser can act as a mediator to provide unbiased advice.
• Illustrate the power of starting early. Starting early helps you grow your money through the power of compounding. A financial adviser can illustrate how the concept of compounding works to motivate the next generation to begin investing early.
• Projections modelling. Cashflow and asset modelling involves forecasting your how different strategies can impact your long-term wealth and work timeframes.
• Put strategies in place to meet the goals of both generations. Younger generations may not care much about retirement planning and are less risk averse than Baby Boomers. A financial adviser can help create strategies to reconcile the goals of both generations.
• Provide peace of mind that your children will be okay. Working with a financial adviser gives you the assurance that your kids can make sound financial decisions.
• Make accessing financial advice more affordable for your kids. Most younger generations fail to seek financial advice because they believe it will be too expensive. Involving a financial adviser as you prepare for intergenerational wealth transfer can offer your next generation affordable financial advice.

Remember, your legacy is not just about the wealth you accumulate; it’s about the impact you make on the lives of your loved ones, so don’t wait to secure your family’s financial future. Contact Altitude Advisers to schedule a consultation and take the first step toward creating a lasting legacy. Our team is ready to assist you in developing a comprehensive wealth transfer plan that empowers your children with the knowledge and resources they need to thrive financially.

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