Dad, mom, are we rich?

Dad, mom, are we rich?

Alain Roch

Alain E. Roch, MBA

President and CEO

Alain.Roch@bluebridge.ca

It’s estimated that over 4 trillion dollars will be bequeathed in the coming years to the next generation between Canada, the United States, and the United Kingdom.

This NextGen, these young heirs in the making, are often powerless in the face of this financial windfall. Despite usually being better trained and better educated than their parents, they lack sufficient specific knowledge to grasp, manage, and use their fortune. Certainly, social media and professional networks promote easy access to information and knowledge, but in the financial sector, as in many others, it’s only an illusion of knowledge.

The adage that claims that “The first generation makes it, the second generation spends it, and the third generation blows it” illustrates this phenomenon well. Can we really plan for success over several generations by offering more than structuring the estate around the constitution of a trust, for example? Is it possible to pass on the knowledge that made the first generation successful? Supporting wealthy families meets a clear need in terms of the transmission of estates, the preservation of wealth, the education of future heirs, and family governance that goes beyond financial advice.

If the heirs of these 4 trillion dollars aren’t equipped to receive this legacy and invest it in philanthropic causes or to generate added value, for example, the social and economic consequences can be negative. Imagine a family business inherited by a family member who isn’t ready or equipped to receive such a legacy. Conversely, the proper management of a received inheritance could make a positive contribution to the community.

One of the reasons that explains why people are generally ill-prepared to receive inheritances is the fact that this is rarely a topic of family discussion. Indeed, parents often don’t dare to discuss the scale of the inheritance openly to motivate their children to make their own efforts to enrich themselves.

Our experience shows us that the preservation of financial capital is never a given and—without a real family strategy of governance and education—the decline of the fortune is likely.

Today, family governance and education rest primarily on the shoulders of financial institutions, particularly family offices. The great strength of the family office lies in the qualities evoked by the name of such a structure: “an office in the service of a family”—that is, a personalized, human-sized structure that manages the specific needs of a family. To meet the increasingly complex needs of families, family offices exist at the intersection of many disciplines: wealth management, international law and taxation, finance, economics, insurance, psychology, sociology, political science, and…education.

These multiple concerns go beyond simple asset management. It’s perfectly legitimate to question oneself and to worry about the management of the estate and to plan its transmission. To introduce the NextGen to these different key subjects, we’ve established the Blue Bridge Academy:

 

Introduction to philanthropy

First of all, we approach the issue of wealth through the philanthropic possibilities that it offers. The young heirs participate in the philanthropic activities of the Blue Bridge Foundation for Children. We explain to them why we’re committed to this or that cause, and they can get involved.

Investment Training

The heirs have the opportunity to take an internship in our investment department. They will participate in macroeconomic discussions, develop investment strategies, and participate in manager selection processes, and they will have to write a research project.

Education in wealth engineering

The NextGens will be able to discover how a family office can help a client who wants to invest in a forest, finance a start-up, start an art collection, sell their classic car at auction, etc.

Data protection and cybersecurity

The children of wealthy families are also a prime target for hackers, whether it’s identity theft or attempted extortion. It’s about making them aware of the risks for them and for the family.

The transfer of an estate undoubtedly includes the transfer of values from one generation to the next. It’s high time to stop avoiding  important conversations about your estate and its value.

On Monday, June 3 at 7:30 p.m., Blue Bridge is hosting a discussion about this subject with Robin Taub, the author of the book A Parent’s Guide to Raising Money-Smart Kids. Don’t hesitate to RSVP at legacy@bluebridge.ca.

 

Bibliography:

Accueillir et fidéliser le client fortuné : La relation client dans la gestion de fortune, Rémi Chadel, Presses polytechniques et universitaires romandes, 2013.

“Comment les familles riches parlent d’argent avec leurs enfants?,” Marjorie Théry, Bilan, December 2018.

“Être nommé héritier peut susciter certaines inquiétudes,” Carmela Guerriero, Les Affaires, July 2017.