We became aware very soon after launching Perceptive Planning that many of our clients have achieved their wealth by the sale of a family owned business. In jargon terms, that makes them ‘First Generation Wealth’.
The cliché is that “The first generation builds the business, the second makes it a success, and the third wrecks it”. A recent American study showed that an amazing 90% of wealth is lost between the first and third generation.
With that firmly in mind, we have worked with a range of clients to help their children understand that the family wealth is a finite resource, and the importance of careful financial management.
This means initially ensuring that parents are safe and secure, with an income stream they cannot outlive wherever possible.
Once that happy position is reached, then we look at gifting money, ensuring that ‘Gifts come with a Planner’. That helps get the next generation – and the one after that – used to the possible life changing effects of wealth, whilst understanding how to control and preserve it.
This often means ensuring that all available allowances are used. It means Cashflow planning to show the effect of choices and changes to capital and expenditure. It means taking a long term, multi generational view, rather than a traditional ‘Fund Picking’ approach
Each family is different. And siblings within families have different attitudes and expectations. So tailoring and personalising our advice is critical in these situations.