Family Wealth Planning: A Perspective on Perspectives

As is the case for many advisors, I enjoy partnering with multiple generations of our clients’ families. Not only does it allow me to further build upon strong relationships and expand into new ones, but it also gives me constant exposure to fresh challenges and perspectives that previous generations might not have shared. Advisors typically appreciate this broad exposure because it forces us to continue thinking creatively when discussing financial planning strategies. 

In a conversation with one of my colleagues, we addressed one area where we often see opposing views among different generations: taking on debt. We concluded that there may be a “right” answer from a quantitative perspective, but the intangible “sleep-at-night” factor plays just as big a role in financial decision-making. 

Allow me to use an example to explain. My parents’ generation grew up in an era when mortgage rates were consistently 10% or higher. They were always told that debt was “bad” and paying it off was the best thing you could do. In reality, taking out a mortgage or completing a cash-out refinance today may be beneficial for some people in their situation. Those proceeds could be reinvested in the market with the expectation that you may earn a higher return than the interest you’re paying on the loan. This strategy could potentially leave you with more assets at the end of the term. It may seem simple, but the environment in which my parents’ generation was raised has convinced them otherwise. Of course, you could also end up with less money if your investments decline in value, but history has shown that markets generally tend to rise over the long term.

Fast forward to pre-pandemic times, when first-time home buyers had the chance to enter the real estate market during an extended period of low interest rates. Not only did it benefit them at the initial purchase, but it also allowed for the opportunity to conduct those refinances that I mentioned above. In contrast to previous generations, this likely younger demographic has not been forced to carry debt at those 10%-plus interest rates, which could be one reason they’re not averse to it. Another reason could be that they’re used to carrying some form of debt, given the multitude of student loans out there.

This is a simple illustration, but sometimes, different perspectives can cause tension within family dynamics, especially when wealth is involved. Think about conversations you may have had at Thanksgiving dinner, for instance. Conflicting views likely came up on an array of topics, from politics to music to the use of social media. At the end of the day, it’s important for each generation to understand that they did not lead the same lives as their parents, nor will their children live the same way that they have. Each generation is molded by the prevailing circumstances and attitudes of the era in which they grew up. It’s all about perspective.

How can we best handle intergenerational tensions? In my opinion, the first step in addressing this challenge is to have frank conversations about each individual’s values and the drivers behind those values. Understanding why each generation thinks and acts the way they do is important, rather than chalking up contrasting views to the well-worn dynamic of “rebellious teenager” versus “old-school thinker.” Consider making these conversations regular in terms of both frequency and attendees. Start with topics that may be less sensitive or controversial—such as music—to build confidence and comfort for all participants. Eventually, you can work your way up to more complex subject matter like finances, but it may still be a difficult area to navigate. 

After all, it’s common for people to resist holding family meetings about money since it can be a highly emotional topic. However, family wealth discussions are useful for sharing information, expressing wishes (e.g., related to estate planning, business succession, wealth transfer, philanthropy) and correcting potential misconceptions—all within a supportive and transparent environment. Such meetings are also conducive to soliciting input from others in the family and getting everyone aligned in order to help avoid future disagreements, conflict and possibly ill-advised financial decisions.

Most families can benefit from holding financially focused meetings, and it’s worth noting that wealthy families are often regular participants because they recognize the importance. In addition to averting misunderstandings and gaining alignment on financial issues, a family meeting may help prepare the younger members to receive intergenerational wealth and use it wisely.

When the time comes for your family to discuss your different perspectives on finances, a Corient Wealth Advisor can help you develop a customized agenda and facilitate your family wealth planning meeting. Not only can an advisor assist with determining which topics to explore, but they can also share best practices and help keep the meeting on track to improve the likelihood that the group’s objectives are met.

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