Family Wealth Conversations

By Gary K. Liska, MS, CFP®, AIF, CRPC, AAMS
Founding Partner, CFO

Guidance and ground rules for more present and productive talks

Many of us were raised with an outdated notion that wealth is a private matter between spouses—not a topic to be discussed in any detail with children, extended family, or friends. As a result, family conversations about ‘money’ are often awkward and uncomfortable. Sitting down and talking about our wealth values, inheritance plans, charitable giving, and fiscal responsibility forces us to contemplate our own mortality. It’s a subject nobody relishes discussing.

But these conversations can make a tremendous difference in preparing the next generation to make smarter financial decisions; to avoid the pitfalls and mistakes you made in your own journey; and to be responsible stewards of the legacy you eventually leave them.

It’s especially important considering a recent research study which determined only 16% of millennials qualify as ‘financially literate.’^[1] This fact, coupled with the knowledge that 9 in 10 students indicate that whatever financial knowledge they accumulated came from their parents more than their professors highlights the critical importance of family wealth conversations.^[2]

So where do you begin? The following six steps are a great place to start in making these essential discussions more impactful, educational, and productive:

1. Plan the conversation in advance. Financial conversations can easily drift from the intended topic, so to help keep things focused make sure you write down a few key points you want to cover. Think about the questions you expect to be asked and how you want to handle them. But also be open to listening to thoughts and concerns from family members and exploring solutions to new challenges together.
2. Many and focused beats few and comprehensive. For most of us, time is a precious commodity. Also, family members may be geographically dispersed. But finding the time to have a handful of shorter, focused conversations on specific topics (e.g., core values, philanthropy, managing debt, investing, etc.) will generally be more advantageous than trying to cover your entire financial life in a single gathering.
3. Share your personal values. Money may not buy happiness. But what you do with your wealth can still be a source of great fulfillment. Explaining the values that are important to you and how you use your wealth to further those values is a terrific lesson to impart. Encourage family members to similarly share their own values, and talk about ways to align their own wealth with those values in the future. If you’re motivated, you can even create a family mission statement based on shared values.
4. Talk about your own experiences—good and bad. What financial practices have made a big difference in your life? What strategies and tricks have you learned from others? What things do you know now that you desperately wish you knew when you were younger? Rather than focusing solely on your successes, let your family see that financial mistakes are normal and natural. If you’re married, you’ll first want to have this conversation with your spouse so you’re both on the same page when it comes to the important lessons you want to share with your heirs.
5. Listen attentively! Your goal is to engage in a family wealth conversation—not a lecture. While imparting your wisdom, plans, intentions, and wishes is important, so too is listening to the spoken and unspoken concerns of your family. Clearly express your desire to hear everyone’s thoughts and feelings. This can be an especially important step when a family business adds an extra layer of complexity to the picture. And carefully look to uncover any possible misunderstandings or animosity that needs to be resolved?
6. Be transparent and unbiased. While you certainly don’t need to pull back the curtain and share every aspect of your financial life, try to err on the side of a little too much rather than too little. The more your future heirs are prepared for the future, the better they’ll be able to prepare themselves. You also may want to consider inviting your financial advisor to the meeting to act as a facilitator. It can be beneficial to have someone outside the family to provide unbiased advice and information.

Wealth transfer can be an uncomfortable and awkward topic of conversation. But the sooner you begin talking with family members about your wealth transfer plans, the less likely the chance of a disappointments or disputes happening somewhere down the road. The more the next generation knows and the more they’re involved in decisions, the greater your chances for a successful intergenerational transfer.

Gary K. Liska may be reached at 310 712-2323 or www.seia.com

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[1] “Millennials and Money,” TIAA Institute, February 2020
[2] “Survey of Financial Literacy Among Students,” Jump$tart Coalition, 2018

Securities offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Investment advisory services offered through SEIA, LLC, 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc

Article written by John Casey and is used with his permission.

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