As people embrace more and more topics that were once taboo, one subject stands out: talking about money.
Many wealthy families simply avoid the topic. That’s often particularly true among older generations who were raised to believe money was a “private” matter.
That belief can hinder the communication that is crucial for both the preservation of wealth and its successful transition between generations.
The need to bridge the communication gap will only increase as the ranks of ultra-high net worth individuals continues to grow, according to the most recent world ultra-wealth report by Wealth-X.
In 2016, the ultra-high net worth population rose 3.5 per cent to 226,350, and is expected to swell to almost 300,000 by 2021.
Their amassed wealth increased 1.5 per cent to $27trn, boosted by an improving global economy and strong investment returns.
These gains, however, were distributed by region unevenly, as North America and Asia reported the most significant dollar-denominated wealth creation.
Treating family as a resource
Overall, that means more households must navigate the challenges of preserving and transitioning — as opposed to just transferring — wealth between generations.
While wealth transfer involves structured estate and business planning with an experienced adviser, wealth transition also engages the family deeply in the process.
A transition plan is flexible and continuous, letting life’s vicissitudes affect end goals, and further cultivates a sustainable family community that helps its members thrive together.
Most people know examples of families who have fractured over issues relating to money and inheritances.
At the heart of many of these cases is a lack of communication, between spouses, between parents and children, and among siblings.
The inability of wealthy families to discuss values, fears, responsibilities, priorities and goals can lead to acrimony and mistrust, and can complicate efforts to successfully pass wealth down to the rising generations.
While the keystone to preserving wealth involves mastering communication beyond just the family balance sheet — the nuts and bolts about income, investments and other holding s— the reality is that many wealthy families avoid talking about money altogether.
One way to start breaking the taboo is by treating the family as a resource, rather than a hindrance.
Family members can act as a valuable sounding board, reduce anxiety about wealth-transition plans and lessen the sense of isolation some individuals feel when making financial decisions, which itself can be divisive and alienating.
More engagement and transparency tends to lead to fewer conflicts and better outcomes.
Teach your children well: Fail, work, wait
When it comes to children, it’s important to develop a way to introduce the concept of preserving wealth early, and build strong foundational financial values at a young age.
Most children receive little formal or experiential education in managing money or household finances until they become adults. These lessons could begin earlier under a 'fail, work, wait' approach.