Baby boomers are expected to transfer an estimated $30 trillion to $41 trillion in wealth to their Generation X and millennial offspring between 2011 and 2048, presenting a major challenge to the advisors working with them.
Those advisors will not only be serving those boomer clients but also work to continue that relationship with their heirs, all with the goal of insuring the continuation and growth of their clients’ wealth.
“Nearly two-thirds of family wealth is lost by the third generation … not because of poor investment strategy, but because of failures in trust and communication between family members,” says Michael Cole, the founder and president of Ascent Private Capital Management, a subsidiary of U.S. Bancorp.
“The traditional providers of wealth management services such as banks, brokerage firms, registered investment advisors, insurance agents, accountants and attorneys focus primarily on traditional wealth and estate planning and neglect to address the strategic issues that account for 97% of the reasons families fail to sustain wealth,” writes Cole, in his new book, “More Than Money: A Guide to Sustaining Wealth and Preserving the Family.”
Those wealth managers are focused on the tactical management of money when also need to focus on strategic issues involving the family — issues beyond money, such as:
Family history and values. This is the creation story of the family’s wealth. It must be “preserved, revisited and kept alive … to inform successive generations.”
Family vision and mission planning. Cole recommends that wealthy families develop both a vision statement — how it wants to exist in the world — and mission statement — how it plans to realize that vision. He suggests the vision statement include four or five shared values that family members can agree on.