I always say to my clients in our first meeting: “I want to be your first phone call when you have a question.” The reason is simple: The onus is on advisors to take a holistic approach for the entire family.
We don’t just deal with investments – sometimes we act as psychologists (when markets get volatile), sometimes marriage counsellors (when the tough questions haven’t been asked), sometimes family planners (when the tough questions haven’t been answered), and most of all as sounding boards for kids, parents and grandparents. We listen, speak candidly and form a plan to ensure the entire family is treated equally and fairly.
It’s becoming more and more important to be able to talk candidly to the entire family about estate planning, wealth transfer, tax planning, spending habits and overall financial health. I’ve been seeing more and more family clients (grandparents, parents and kids) and have noticed a lack of financial education for the next generation.
These young adults (18 to 25 years old) are either not informed, or don’t care be informed, about the family wealth transfer. But this generation is going to see a massive amount of wealth transferred down to them, and they will need to know how to deal with it.
Probably one of the most pertinent topics to this cohort is education and postsecondary schooling. In my experience, rarely does the family have a cost/benefit discussion about what happens after college or university. Parents seem to completely miss the fact that there needs to be a return on your postsecondary investment, and the choice of degree or diploma needs to be one of the very first financial decisions a young adult makes. This choice will shape their future probably more than anything else.
When involving the kids, I try to ensure that they become as engaged as possible. In my experience, making this generation feel comfortable is of the utmost importance. Having candid discussions about spending, career, housing, etc. is essential when dealing with young adults.
For example, I’ve found that there’s little to no education among this group of adults on how and where to look for a mortgage. Very rarely do they even have a basic understanding of how a mortgage works or how a borrower would qualify.
Then there’s the matter of evolving domestic arrangements. I’ve always taken a very candid approach, asking direct questions about marriage, children and what their wishes are. There’s no easy way of asking these questions of either the kids or the parents, so being direct and to the point is crucial. I have had adult children in to discuss the importance of marriage contracts and why they are helpful in estate planning. These can be extraordinarily uncomfortable questions, but once it is fully explained, the ‘pre-nup’ isn’t so demonized.
At the other end of the spectrum is the ongoing wealth transfer between baby boomers and their parents. These parents were often savers who lived through the war or perhaps even the Depression. More and more, I’m seeing that when a client or parent of a client passes away, their family has no idea how much money they had socked away.
In some cases, it’s truly astounding. Recently, I had a client in his 70s whose parents had just passed away. The client was under the impression that his parents were poor; indeed, the client was paying some of their expenses. Once the estate was settled and cleaned up, there were more than $2 million in assets at different banks, credit unions and investment firms. (Probably the most important point in family wealth transfers is ensuring that assets are held at the same institution.)
Whenever I deal with a family, it’s essential they are all on the same page when entrusting one individual to manage their finances. Stressing the importance of being the ‘first call’ amid life-changing events is imperative.
Jamie Suprun is a senior investment advisor and executive director of the private client group at HollisWealth. He was named by WPC as a Top 50 Advisor earlier this year and was also a finalist for Best Advisor (Alternative Investments) at the 2018 Wealth Professional Awards.