Family Leadership Key to Wealth Transfer

“When we spoke to clients, they would explain to us that the instruments of wealth transfer exist – they have wills, trusts and estate plans – but what they lack was that family dynamic.”

Wealth advisers could play a critical role in helping clients to work out an effective transfer of wealth to their adult children beyond the technicalities of wills and estate planning, according to Koda Capital.

Speaking to financialobserver, Koda chief executive Paul Heath said the transfer of 80 per cent of the world’s wealth from baby boomers to their millennial children over the next two decades was a key trend the group had taken note of when setting up a specialist family leadership advice division.

When we spoke to clients, they would explain to us that the instruments of wealth transfer exist – they have wills, trusts and estate plans – but what they lack was that family dynamic,” Heath said.

This transfer of wealth is going to happen and we can engage in the technical and money side, but how do you engage on the emotive side?”

Koda family leadership specialist Tiffany Jones agreed Australian high net worth clients often did not know where to start when talking to their children about money as they were usually the first generation in their families to have amassed significant wealth.

You have families that have come into wealth and therefore this notion of wealth hasn’t existed, so they have brought their children up to have a good work ethic, get an education and go make something of themselves,” Jones said.

I’ve watched people with the means to do great things not necessarily pass on that knowledge, so you end up with people with a lot of financial resources who only get access to them when they’ve lost the people that are most important to them, and they are floundering and looking for good advice.”

Jones, who is also a director of family leadership consultancy Momentum Advisory Group, said advisers needed to help bridge the generational gap between baby boomer clients and their millennial children when it came to ensuring a smooth transfer of wealth.

Historically the children of wealthy families may have gone into the family business or picked up that legacy, but really the new generation don’t want to do that at all,” she said.

So you often have a principal asset like a business or property that has been sold and that wealth is sitting there just locked up, which is a great opportunity to bring the next generation into the decision-making and allow them to do something with that money that carves out their own space and finds their own purpose.

Heath added that by formalising the wealth transfer process into regular meetings and often family constitutions or governance structures, parents could get their children comfortable with the idea of wealth and help them to make the right decisions about how it was used.