Jaime Ramirez Highlighted in Broker World Magazine
Growing wealth is one thing. Maintaining it and having confidence knowing that there is a plan for the next generation is something completely different. This is what financial professionals constantly impress upon their high-net-worth clients.
Helping American families leave a lasting legacy for future generations is at the cornerstone of our industry—and the promise of America. It is not a novel concept to make plans for your assets after you pass; however, we’ve seen time and time again many children and beneficiaries within these families are not always equipped to manage their inherited estate when the time comes.
Cornelius Vanderbilt was one of the richest men before he died in 1877, leaving a $100 million estate to his heirs. While one would think this kind of inheritance would be enough to maintain the family fortune for years to come, in just four generations the Vanderbilt descendants lost it with reckless spending and declining investments. A family reunion in 1973 with 120 Vanderbilt descendants revealed that not a single one of them was a millionaire.
Unless there is a plan for wealth transfer, most beneficiaries will spend it. Seventy percent of high-net-worth families do not retain their wealth beyond the second generation according to the Williams Group wealth consultancy. While generational wealth is an important concept for clients to understand, what many financial advisors don’t realize is that the same concepts hold true for their own practices as well.
A multigenerational business is one that is able to build the wealth of the first generation to care for the clients through their lifetimes, then to provide ongoing financial planning to heirs.
Not only is your relationship with your clients important, but your relationship with their families has to be strong as well. Otherwise the wealth that is passed down is at risk of leaving you and your business. The question becomes, then, how do we retain clients across generations?
According to research conducted by Cerulli Associates, a Boston-based research and consulting firm, family meetings and regular communication was rated the most effective wealth transfer planning strategy, followed by educational support and organized succession planning. Other popular strategies include enhancing technology platforms, adding services to align with competitors, and providing additional tax planning services.
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