“Family comes first” is a familiar sentiment, but how do families fit into the conversation about wealth management? Family dynamics play an important role in wealth building. We see how family relationships affect wealth building most directly in families like the Rockefellers, Waltons, and Mars, who have managed to keep their family ties strong, and their massive fortunes within their dynasty. How do they do it?
In this blog, we’ll explore why you should start considering your financial legacy regardless of your budget, how to start talking to your family about succession planning and how a Republic Bank financial advisor can help you navigate your financial family matters.
The first step to building your family’s wealth is asking, who is in your financial family circle? It seems like an obvious step but answering this question can help your family avoid shock and confusion should you suffer an untimely demise. Every family is unique and may take several different forms. Whether your family looks like a nuclear, blended, joint or chosen one, it’s up to you to determine who will be invited to the family table when financial discussions arise.
If you’ve ever held a family meeting or participated in one, you may have seen things get awkward or downright uncomfortable when tough subjects are brought up, like money. Broaching the topic of money becomes easier if family members have open and honest lines of communication. An easy way to encourage dialogue is to start early. In our blog, Raising Financially Responsible Children we discuss how talking to children about money helps them build financial confidence and sense of responsibility at an early age. Financially confident children are more empowered to participate in their financial security, so when they reach the age where you think it’s comfortable to discuss succession planning, they will be more than ready!
One of the other benefits of including the family in discussions about investment is succession planning. This ensures that assets such as investments or a business remain in peak operation after older heads have passed away or retired. A formal succession plan is crucial to ensuring that your legacy will live on for a long time. In terms of investing, asset allocation and diversification can help achieve your succession goals by generating sufficient cash streams to support the older generation while maintaining a portion of the portfolio in risker assets to generate a higher returns and growth of capital
However, we cannot talk about succession planning without looking at Succession – the popular HBO series centred on a powerful media mogul considering retirement and his three grown children fighting over their agendas to gain power and control of the family business. The series teaches us how dysfunctional family dynamics become magnified when there are high stakes attached. Sadly, this also translates off screen where according to Forbes, at least six of the 50 wealthiest clans in America have gone through very bitter—and very public—family feuds! You can prevent potential squabbles by understanding what your family values. Our financial advisors have found that older family members tend to be conservative when investing, whereas younger entrepreneurs have a propensity for risk. A brainstorm between generations can help make everyone feel valued and generate new ideas.
Think of your financial advisor as a wiser cousin who has seen it all and has lots of advice. The World Economic Forum puts it best, “Banks often have access – internally or externally – to a deep and diverse pool of knowledge and skills. To truly support clients in the future, banks will have to systematically tap into this broad source of knowledge for the maximum benefit of their clients.” When you build a relationship with your financial advisor, they can act as a neutral sounding board to help discuss your family dynamics and provide expert advice on what financial tools will help you preserve your wealth. Just as every family is different, so too should be your financial solutions.
It’s time to put the “we” in wealth and start looking at how your family and the Republic family can work together to manage and build your capital for generations to come.