The views presented here do not necessarily represent those of Advisor Perspectives.
Advisors managing family wealth will often need to bridge communication gaps caused by generational differences in lifestyle goals and perceptions of wealth.
A recent report from J.P. Morgan Family Wealth Institute found that seven out of 10 family members have difficulties discussing financial and legacy matters with each other. Upon surveying families with more than $10 million in assets, the Institute found that “all generations genuinely want to ‘do right’ by their wealth, yet they often avoid the topic, highlighting a need for clear and consistent family conversations,” the January report said.
“Topics such as fairness, responsibility, and collective decision-making are often avoided, and in some cases, the original wealth creator may hesitate to share information or involve others,” the research report said. “These patterns can jeopardize a family’s ability to sustain its success over time. Today’s families face new complexities — geographic distance, blended family structures, and rapid technological change all make communication both more critical and more complicated.”
Joshua Brooks, a financial advisor and founder of Exponential Advisors in Weatherford, Texas, has noticed differences in spending and saving habits between generations.
While millennials may be generally “more intentional and purpose minded” with their money, and less attached to large assets, like homes, Baby Boomers and Gen X individuals “may be more conservative” in their spending and debt accumulation, Brooks shared.
When trying to bridge the communication gap between family members, he’s found that studying the latest approaches in behavioral finance can help advisors. But also, simple steps, like using budgeting tools are useful so everyone can see where and how they spend.
“You could [see] the narrative patterns, for instance, where you were raised or how your family managed money, and [realize] wow, I’m kind of doing similar things. Even that self-awareness helps,” Brooks said, noting that budgeting tools allow families to look at the data, rather than solely relying on their feelings about money.
Family Wealth Defined
The report by J.P. Morgan found that family wealth was an elusive concept to high-net-worth respondents (the firm conducted 300 online surveys of U.S. consumers with more than $10 million in assets).
“The meaning shifts across generations and is hard to pin down,” the report said. “Each individual has thoughts and beliefs about the family’s wealth, what it provides and how it should be used. Based on conversations with families, we saw that each generation’s view of wealth is shaped by its own perspective. While the concept of wealth is not universal and reflects personal priorities and perspectives, we discovered common themes.”
J.P. Morgan found that Baby Boomers associated wealth with security, while Millennials and Gen Z viewed family wealth as a source of freedom. The middle generation, Gen X, tended to view family wealth as both — specifically, “family wealth as security for their aging parents and a source of freedom for their children,” the report said.
J.P. Morgan ultimately identified five actionable steps that could help families in their conversations around wealth, detailed as follows: Define and align on what family wealth means (including financial readiness); seek family mentorship opportunities; prioritize connecting conversations around wealth over transactional milestones; embrace generational differences within the family; and introduce a trusted third-party (whether an advisor, coach or other individual) who can help bridge communication gaps.
Patience and Persistence
Brooks emphasized that coaching families through a transition of wealth or doing family wealth planning generally requires patience.
“I think patience is super helpful in my case. When you think about talking with a 70-year-old about finances, it will be different than talking to a 40- or 30-year-old,” he said.
The needs of an elderly client may require special considerations as well, such as helping individuals with visual, hearing or cognitive impairments.
“It can be difficult for them to even reset a password,” Brooks said, adding that it’s key to have “patience, humility, and persistence.”
You may also be working with clients who are set in their ways and want their family dynamics to be honored, he shared. For instance, in many families, you may have that one person who handles “a lot of the financial operations. They have the passwords and the insurance documents and will. Or they have a digital backup,” he explained.
“And then there may be the other person who doesn’t have a clue where things are. When someone passes away, they may have their head in the sand,” Brooks said.
According to J.P. Morgan’s report, respondents in the Baby Boomer generation (aged 60 to 75-plus) perceived wealth as providing a shield against instability and uncertainty. They also feel wealth is earned “through discipline, sacrifice and hardship.”
“We found that Gen Xers or Boomers who are first-generation wealth holders feel pressure to uphold the values that created the wealth and second-guess or avoid decisions that could diminish it,” the report said. “Meanwhile, younger generations often feel a duty to prove they can uphold what was built, especially when they didn’t create it. Their sense of responsibility fuels motivation and care, and sometimes fear of failing.”
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Read more articles by Danielle Walker
The views presented here do not necessarily represent those of Advisor Perspectives.
