Intergenerational Wealth: The Next Financial Frontier
It is no secret that Australia has an aging population. With an aging population comes a set of risks and challenges, ranging from healthcare strains to labour shortages. Unsurprisingly, an aging population also presents a range of financial management challenges – and opportunities.
Intergenerational wealth refers to the financial and non-financial assets that are expected to be passed down from one generation to the next – in the current case, the wealth that Baby Boomers are expected to pass down to their heirs. In recent studies, it has been identified that Baby Boomer’s own over 50% of the private wealth in Australia, with over $1 trillion expected to be transferred between generations over the coming years. Understandably, the transfer and management of over $1 trillion worth of assets will provide key challenges.
Unique challenges mean that a unique wealth management plan is needed. So the MW Lomax team has provided the following 5 elements for a successful intergenerational wealth plan:
Firstly, the family must decide on a collective purpose for their intergenerational wealth management plan. This means have a clearly defined vision for the goals and objectives for investments, and exactly what the wealth and assets will be used for.
The family should establish a set of trusted advisors – both financial and otherwise – that know the family well and can understand the vision of the wealth objectives. Having a personal relationship with your advisors will allow for greater alignment of goals.
Rules & Governance
This is a critical element that, in many cases of individual wealth management, is not comprehensively covered. Rules and governance mechanisms must be established to facilitate effective wealth management strategies, and where applicable, should be solidified through associated documents.
A business or investment strategy should be in place that seeks to protect and grow estate wealth, in a way that is agreed upon by all members. Whilst your investment strategy may change or be tweaked over time, it is fundamental to agree upon a level of risk and diversification that all members are comfortable with.
Whilst this should be a critical component of any wealth management plan, the essence of intergenerational wealth further extrapolates its importance. There should be an associated communication plan, whereby in a formalised setting members can discuss any strategies, concerns or topics regarding the wealth management plan and performance.
Intergenerational wealth is a topic that we here at MW Lomax will be paying added attention to in upcoming times, with more advice, tips and insights to be communicated regarding how to best handle the challenges intergenerational wealth provides.