Educating Inheritors About Wealth Planning and Managing Financial Assets

The heads of many of the wealthiest families in the country are concerned about their heirs’ ability to deal with the money and business assets they will one day inherit, as well as their ability to be good stewards of these assets. This is especially true among the first-generation of wealth.

Their fears are understandable, however, since it has been found that 70 percent of wealthy families lose their wealth by the second generation, and a stunning 90 percent by the third, according to the Williams Group Wealth Consultancy.1

For that reason, many business owners often take steps to prepare heirs to take the reins of the company. Typically, that involves the heir, or heirs, getting hands-on involvement in the business and learning from the ground up. Additionally, there are many organizations and professionals—from business schools to life coaches, and from consultants to trusted advisors—that can provide additional guidance to inheritors of family businesses.

But what about inheritors who won’t have managerial roles—passive owners? Likewise, what about heirs who may receive investment assets only—such as a sizable portfolio of liquid securities like stocks, bonds, and mutual funds?

These heirs also need to know how to manage their assets intelligently and effectively so that wealth continues to grow and is not quickly depleted due to lack of proper planning.

That said, it’s important to help heirs in ways that they’ll respond to and act on—otherwise, educational efforts can become nothing more than wasted time.


Helping to guide inheritors

Many inheritors may not be interested in learning even the fundamentals of money management and wealth planning. Rather, they may prefer turning to professionals to invest their assets and help them deal with the range of planning issues they can face—from tax matters to protecting their fortunes from legal challenges.

Wealthy heirs—the second, third, and fourth generations—as well as others who may inherit significant wealth (such as spouses) tend to share two overarching goals:


Goal #1: Find and work with talented investment professionals and high-end wealth planners

Very few inheritors are going to personally manage their substantial inheritances. Most will turn over the day-to-day responsibilities to qualified professionals. Even when an heir takes an active role—such as in making direct investments in private companies—professional advisors are often a significant participant of that effort.

The most effective way to find high-caliber experts—and avoid those who lack the most important capabilities—is typically accomplished through one of the following avenues:

  • Referrals from other professionals.
  • Referrals from peers.
  • Prominence in the private wealth industry.


In addition, four core criteria are central in selecting high-caliber investment advisors and wealth planners:

  1. Proven integrity. By being meticulously attentive to making sure you choose a professional of the highest integrity, you’re ensuring the most appropriate management for your investment portfolio to meet your specific goals.
  2. A sense of purpose and a deep concern for clients. Elite professionals generally are driven and see their ability to deliver their expertise to their clients as a calling. Moreover, they are truly committed to making the lives of their clients meaningfully better in accord with the clients’ wishes and requirements.
  3. Operational transparency. It’s essential that a professional be completely open and forthright with you. This takes a number of forms, including being clear about the right to obtain multiple opinions in order to verify the viability of the solutions proposed, as well as through fee clarity—knowing exactly what you will be charged for specific products or services.
  4. Extensive technical expertise. It is usually necessary to evaluate the technical competence of a money manager or wealth planner, including reviewing track record, professional experience, and recognition from peers in the financial and legal communities.


Goal #2: Understand what can be accomplished

Although they may not care to learn how legal strategies and investment products work at an in-depth level, inheritors will likely want to have a “big-picture” understanding of what they can accomplish with their wealth. Therefore, they can benefit from guidance on how to develop wealth strategies which their assets can be positioned to support. Getting this type of high-level guidance and vision-creation often means working with a wealth manager who focuses on helping clients define their financial, and personal, values and goals.


Deeper dives

Of course, some inheritors do want to learn and be involved in the technical aspects of investment management and wealth planning. Many organizations provide programs for teaching the mechanics of investment management to the next generation.

Example: A variety of wealth management firms (from private banks to multi-family offices) have developed instructional programs explaining how the markets and specific investments work. These programs address a wide array of issues, from the very basic (such as the difference between a stock and a bond) to more advanced investment management concepts (such as asset allocation, rebalancing, and investment selection techniques).


When it comes to wealth planning, the focus is usually on an overview of the different types of planning services. Sometimes, the basics of the tools and techniques, such as trusts, partnerships, and life insurance, are explained.


Important: While the wealthiest families may be especially concerned about how their children will manage the wealth they have created, getting educated on the basics of personal financial management and how to seek out high-quality expert guidance is a vital step for anyone. You don’t need to be a member of the top 1 percent, or even the top 50 percent, of Americans in terms of wealth to benefit from learning how to better manage your own wealth, get the help you need, and avoid professionals who don’t have your best interests at heart.


Indeed, taking the right steps to become informed about managing wealth and access the expert guidance you may need could be just what helps catapult you to the highest levels of personal and professional success.


Contact Resolute Wealth Advisor at 419-422-4400 about helping your heirs become better-informed about managing wealth and planning for their financial future. This can also be a good time to discuss any other financial concerns you may have.




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