Generational Wealth Planning: Investment & Asset Review



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In 1992 President Clinton won the US presidential elections on back of the slogan “It’s the economy stupid!”.  In that election nothing else really mattered but the state of the US economy.

Likewise, with Generational Wealth Planning, the “assets and investments” really matter. When determining key success factors that will enhance or inhibit the quantum of wealth passing from the current generation to the next, it all starts with a review of a family’s investment and asset base.

One can have the most efficient estate planning strategies in place, but if the quality of the underlying assets and their growth over time are poor, generational wealth planning will be of little significance. It is akin to a new generation inheriting a horse drawn stagecoach, as opposed to an electric car.

There are basically three types of assets:

Assets that Generate Wealth

Assets that Produce Income

Lifestyle Assets

In certain circumstances, certain assets may have a dual purpose. For example, a family business may provide income to the family, but its underlying inherent value also grows over time. Likewise, home will provide a good lifestyle for the family, and its value will also appreciate ahead of the broader housing market. Similarly, a holiday home in the mountains or on the coast, will really only be held for sentimental reasons and satisfy our need for social interaction, which we all crave.

What is dangerous, from an investment perspective, is when the bulk of the family’s wealth are held in assets to which any of the following labels below can be applied:

Poor Performing Investments

Business’s that are making Losses and Draining Capital

High Cost Sentimental Assets

Old Generation, High Cost Investment Structures and Poorly Constructed Share Portfolios

Property Investments in Low Growth Areas

High Asset Class are Asset Category Concentration

It’ s crucial that a family reviews it’s complete asset and investment portfolio on a regular basis. The family should engage a suitably qualified person, who is independent to the family to conduct the review process, and most importantly the family should take heed of the outcomes.

The common causes resulting in a family’s wealth being eroded are:

  • Patriach’s holding onto the reins and decision making for too long. Older generations are often unwilling to bring younger generations into decision making positions until its too late, or the older generations do not retire soon enough
  • Ignoring sound advice. Younger generations often view the family’s business or investments through a new light and fresh perspective. Their advice and recommendations are often ignored – “We have always done it this way!”
  • Holding on to material assets for sentimental reasons. Especially when these assets are draining family wealth and can no longer be afforded.
  • Not being transparent. Discussing Generational Wealth Planning is an admission that we are all passing through life. These discussions bring our own mortality into perspective and because the conversations are sometimes difficult, they are often avoided or postponed indefinitely
  • Not getting professional independent advice, often because of costs. The devaluation of assets more often than not costs more than a good advisor

At Activ8 we regularly engage with our client families and undertake a thorough and comprehensive review of their asset base.

Contact us if you and your family would like to benefit from this experience.

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