With the biggest wealth transfer in history underway, the next high net worth generation need specialist support and guidance to leverage their new assets and thrive.
That’s the view of family-run property wealth guardians Maritime Capital, who have developed specialist wealth transfer propositions that go beyond traditional financial planning and investment solutions, as older generations prepare to hand over trillions in assets to millennial and Gen X heirs.
An estimated £7tn will pass between generations in the UK over the next 30 years, and Maritime believe it’s vital to instil sound fiscal habits early, establishing financial literacy among younger high net worth (HNW) and ultra high net worth (UHNW) individuals as part of the largest wealth transfer on record.
Today’s wealth is held disproportionately by older generations. The numbers involved are enormous, driven by shifting demographics and substantial asset appreciation.
As younger generations prepare to inherit potentially life-changing sums, the need for education, meticulous planning and responsible stewardship is growing ever more acute.
Defining a vision and creating a legacy.
Managing generational wealth can be challenging. Studies show that 70% of HNW and UHNW families lose their wealth by the second generation, and 90% by the third.
Some reductions can be predicted due to taxation and splitting inheritances, but poor communication, lack of preparation and misaligned financial goals can lead to unnecessary losses.
Success hinges on heirs engaging with experts and creating strategies that cater to their needs and preferences.
Encouraging discussions with children about inheritance expectations and business succession at the right time is crucial.
Maritime Capital director Max Hunter says that proactive planning and next-generation education are essential for preserving and growing family legacies. He said: “Generational wealth involves more than just leaving a lump sum or property for your children.
“It involves significant knowledge transfer to the next generation, enabling them to make informed financial decisions that build wealth in the future.
“We should help the next generation to focus on their long-term financial goals, understanding investing and budgeting to make informed inheritance decisions.
“Descendants can also be taught the technical aspects of wealth, receiving an introduction to the world of investing and getting insight into entrepreneurial and philanthropic opportunities.
“The sooner upcoming generations get involved, the greater the likelihood that you are going to achieve the continuity and success that families are looking for.”
The right support at the right time.
As wealth transfer begins, advisers must connect with the next generation effectively, and flexibility is essential.
To ensure that every aspect of modern HNW life is covered, it’s often necessary to enhance in-house advisory services with a network of trusted partners including legal, banking, accountancy and insurance experts.
HNW and UHNW families deal often with extra challenges, as assets and individuals can be scattered across a number of countries and regions.
This international dispersal can impact the legal and tax issues involved in transferring wealth, and specialists can help navigate these obstacles effectively, as well as offering bespoke, region-specific education and advice to the next generation.
“Beyond the obvious advantage of preserving and potentially growing family assets across generations, a thoughtfully constructed generational wealth management plan offers many advantages,” continued Max Hunter.
“The first benefit lies in establishing financial literacy and responsible money management within the family.
“Second, generational wealth management enables strategic long-term planning for all family members.
“By considering the needs and aspirations of various generations, we can create strategies that secure financial stability for the senior members of the family, support early life milestones for younger members and prepare for future opportunities like education or entrepreneurial ventures.
“This holistic approach fosters not just wealth preservation but also inter-generational well-being.
“Third, proactive planning facilitates tax-efficient wealth transfer. This not only preserves accumulated wealth but also allows future beneficiaries to utilise inherited resources to their full potential.”