Family Wealth Management: How to Overcome Generational Biases

Over the past few decades, social and technological changes have had a notable impact on family wealth management.

“Not so long ago, a parent’s bias may have been that a daughter couldn’t be the trustee of your estate,” says Allison Gregory, Wealth Advisor with Wells Fargo Private Bank. “Now, a son may choose to stay at home, and his wife or partner may be the family breadwinner.”

Here, Gregory and Kent Caldwell-Meeks, Senior Director of Investment and Fiduciary Services at Wells Fargo Private Bank, share advice for families on helping bridge generational gaps in decisions about family wealth management.

Take a moment to reflect before taking action

Gregory has seen that conflicting social values from generation to generation may lead to some very candid conversations. She encourages families to understand both sides before making any decisions. “More often than not, with time and understanding, I’ve found that preconceived notions change,” she says. “As a result, it’s important for decision-makers to reflect before making an irreversible planning decision.”

Prepare younger generations for rapid wealth creation

The potential for rapid wealth growth creates a unique set of planning challenges. “We’re seeing significant wealth being generated by younger generations, especially those in the technology field,” Gregory says. “Their net worth can move from negative to millions in a very short time frame versus their parents, who often built their wealth over a lifetime or even over several generations.”

The best response? For those young entrepreneurs to recognize the crucial role wealth planning plays—even at the launch of their businesses.

“For someone who has recently been more worried about paying the internet bill than looking ahead, it may seem strange to spend time creating a wealth management plan that includes gift and estate tax elements for themselves and their family,” Gregory says. “Having a plan in place also allows them to move on to the next project following a liquidity event.”

Share knowledge, not just wealth

A recent survey of children of millionaires conducted by The Private Bank found that most parents had discussed the importance of education, hard work, and saving money.

A financial education gap emerged, however, with those in the 22 to 26 age group giving themselves a B grade for overall financial literacy but only a C when they rated themselves on their investing knowledge.

Gregory impresses on her clients the importance of having these discussions, and when it makes sense, she and her colleagues even take on the role of chief communicator.

Use today’s holistic wealth planning and explore expanding investing choices

The methods available to manage wealth and the choices for how to invest have also changed in recent decades.

“Wealth planning techniques have evolved from simple cash flow analysis to incorporate strategies that address retirement planning, tax-efficient strategies, asset transfer strategies, business owner planning, risk management, and asset protection strategies,” Caldwell-Meeks says.

In addition, technology offers an abundance of readily available information and tools that can help people invest faster and with more transparency.

“There is no one right answer,” he says. “So it’s important to ask yourself where you are likely to get the most value and access to the types of investments that make the most sense for your specific needs. It may be through one or a mix of channels.”

Communicate openly about legacy wishes

Wealthy couples or individuals who want to leave a legacy to the next generation should realize that while the younger generation likely wants to become more involved, they may need more preparation.

“The one constant across all of my clients, regardless of generation, is the worry that their children will not be productive members of society,” Gregory says. “They struggle with how to engage the youngest family members, especially as technology seems to take the place of conversation and families are often geographically dispersed.”

A constructive response? Focus on evolving with change, rather than fearing it, to steward your wealth. New tools, new communication channels, and tailored investment and planning options have resulted in a lot more choices and have made the wealth-planning process more complex. But this set of changes has also increased the likelihood of positive long-term outcomes.