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Wealth transfer can ‘unite families’, help reset personal and financial goals
The intergenerational wealth transfer that is estimated to be $3.5 trillion by 2050 can provide families with a rare opportunity to reassess and reform their personal and financial goals – and the benefits work both ways.
For the receiving generation, financial security, opportunity and legacy building are on offer. For the transferring generation, it’s legacy planning, potential tax benefits and personal satisfaction.
Craig Keary (pictured), chief executive officer of the publicly listed trading platform Selfwealth (ASX: SWF), takes the optimistic view that this wealth is a chance to unite the generations – not divide them.
“For those receiving the benefits, inherited wealth can provide a financial cushion, reducing stress and enabling individuals to focus on education, career or family. It can also fund entrepreneurial ventures, higher education or property purchases, as well as allowing them to build on their family’s legacy and create their own,” Keary tells The Golden Times.
“For those transferring benefits, it provides an opportunity to ensure assets are distributed according to their wishes. In specific circumstances, there can be tax advantages to transferring wealth during one’s lifetime and the satisfaction that comes providing for their loved ones’ future.”
Keary says this wealth transfer can give families the time to sit down and discuss the various personal and financial goals it could unleash for the different generations.
“Can we identify what these goals are and whether they’re compatible? How will it allow the older generations to have activities that will improve their well-being, while, at the same time, allowing them to help improve the lives of the younger generations.
“It’s all about open and honest communication so that each generation appreciates what they are all seeking from this wealth transfer.”
Keary cites as an example a recent Selfwealth event where clients were invited to bring along a guest. “You would be surprised how many brought along one of their children or a younger relative So, we can see that they are starting to get their children involved in their finances and teach them how to do things”
“I think this is happening also in blended families – it’s a term, incidentally, he dislikes, thinking modern is far more apt – as much as it’s happing with a traditional family structure.”
Keary argues that for families to unite in such a manner would be a first, with previous generations having neither the wealth not the longevity to do so.
But he adds that it’s much more than just having a conversation, and that all the generations are going to need help to ensure they have the right legal structures in place.
For an increasing number of families, Keary says a self-managed super fund (SMSF) will prove the right structure.
“The decision to increase the size of an SMSF from four to six members, was, in my opinion, inspired when you consider how it can help facilitate this enormous wealth transfer.
“These superannuation structures won’t be for everyone. Many won’t want to take on that responsibility. But for those that do, an SMSF has many advantages of which estate planning is one.”
He says that one issue that will have to be addressed by the different generations is their approach to investing.
“It should come as no surprise that from baby boomers to Gen X, millennials and Gen Z that they have different interests and approaches to investing. Baby boomers using our platform prefer ASX shares, especially of the blue-chip variety.
“But Gen X are far more comfortable investing in US equities with their trading volumes in this market about three times those of baby boomers, and even slightly more than the combined trade of millennials and Gen Z. Millennials are different again, with this cohort trading the biggest number of individual unique holdings at 4,985 in the 2023-24 financial year.”
He adds that the younger generation wants greater transparency in their investments, shying away from the traditional managed funds that baby boomers were happy to embrace.
“There’s no doubt the data from out platform tells us that the different generations invest differently. And this will require some families to seek guidance. Certainly, it’s not something that can be worked out over a Sunday dinner – although it could be used to start the conversation.
“Once family members are talking, are understanding the aspirations, the goals, of each family member, then they can put in place an investment strategy that can accommodate the different outcomes. Of course, there will have to be compromises, some give and take, but provided families are prepared to do, then this $3.5 trillion can prove transformative for all generations.”
