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Getting Past the “Money Talk Taboo” to Make Financial Planning an Intergenerational Process

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Generally speaking, when we talk about financial planning, we envision a couple or an individual sitting down with a planner to talk about their own finances. Traditionally that concept has worked fine, most people agree. But is there a better way? What if, besides the couple and the planner, the adult children had a seat at the planning table? What if financial planning were truly an intergenerational process?

This recent article from Kiplinger makes just that argument, and we found the logic intriguing. The article was written for Kiplinger by a woman named Aditi Javeri Gokhale, who is a highly-placed official with Northwestern Mutual. As the firm’s Chief Strategy Officer, Gokhale is well-placed to evaluate the financial planning landscape. Her article does talk quite a bit about products and services offered by Northwestern Mutual, but apart from a little self-promotion, we think the piece provides insightful food for thought.

Talking About Money: A Taboo Topic?

The Kiplinger article starts with the acknowledgment that, in many families, talking about money is off limits. But, argues Gokhale, “overcoming the unspoken rule that money is too taboo a topic to discuss among family members is important going forward.” That’s because, as the article says, “The reality is that families, at some point, will need to be on the same page about wealth planning.”

This idea makes sense to us, since we at AgingOptions have witnessed hundreds of families plagued by financial miscommunication and ignorance. But there’s a better way, says the article. “What if financial planning wasn’t just a conversation between a client and an adviser?” Gokhale asks. “What if it could also be an enlightening discussion between parents, grandparents, kids and partners about their shared future?”

Financial Industry is Changing, says Kiplinger Article

Gokhale observes that financial planners have made a concentrated effort to get away from simply selling a product. “Over the past few decades, the financial advice industry has been on the march away from transactional, product-centered meetings where an agent sits across the table to sell you an insurance plan or the latest investment fad,” she writes. “In its place, the industry has increasingly prioritized people’s planning needs over product considerations.”

If that’s true, we say it’s good news, although judging from anecdotal evidence there are still plenty of old-school product-pushing planners out there. Of course, Gokhale cites her own firm, Northwestern Mutual, as being “on the cutting edge of this movement” to help clients plan more comprehensively.

But, she wonders, with this “industry evolution” going on among financial planners, what’s next? One of the answers in her view is a shift toward intergenerational planning.

Intergenerational Wealth Planning Rising as Boomers Age

“Over the next two decades, we will see the greatest wealth transfer in American history,” Gokhale writes. “It is predicted that Baby Boomers will shift a staggering $30 trillion in wealth, mostly to their family members.”

But she adds a sobering waring: inherited wealth does not last indefinitely without careful planning. “About 70 percent of affluent families lose their accumulated wealth by the second generation,” Gokhale writes. “Similarly, about 70 percent of family-run businesses fail or are sold by the second generation.” She adds that only about 20 percent of today’s millionaires became rich through inheritance – 80 percent earned that money themselves.

“These statistics are leading many families to reassess the kind of estate they will leave behind to loved ones,” says Gokhale. As head of Northwestern Mutual’s wealth management business, she relates the passion she is now seeing among families to help the next generation achieve financial success. “It’s clear, however, that financial resources alone are not enough to ensure intergenerational financial security,” she states.

Intergenerational Wealth Planning Called a Game-Changer

Gokhale cites a fact with which we agree: many families do a poor job of financial communication across the generations. “Often,” she writes, “younger generations have little insight into the inner workings of the older generation’s financial plans. This lack of awareness can create complexity and confusion, especially if a significant life event occurs. During an emotionally charged moment like an unexpected accident or illness – the last thing that anyone wants to rapidly study is a loved one’s financial situation and the options they have available.” Based on our experience, we concur.

What’s the solution, she asks? Her answer is intergenerational planning. “Coming together in a family discussion about a perfect and imperfect future can be powerful – providing more clarity, certainty and opportunity for everyone involved,” Gokhale writes.

Planning That Goes Way Beyond Mere Finances

Gokhale emphasizes that these planning efforts are about much more than money. “Beyond coming together to discuss financial planning strategies and tactics, these conversations are also moments to reconnect with children on values, hopes, expectations and the financial acumen they need to be successful in the future,” she states. Families who own a small business can find intergenerational planning especially helpful.

“It’s a chance to talk about what mindsets and moves will help them to live productive and flourishing lives,” she says. “And it’s an opportunity for younger generations to be clear about what they want – or don’t want – out of life.”

Gokhale reflects on a lesson from her upbringing. “My parents always taught me that the importance of money is not to be rich – it’s to be secure,” she recalls, adding that, for her parents, wealth was a tool to create freedom and independence. With that philosophy in mind, Gokhale ends with an exhortation. “Let’s resolve to add seats at the table for the next generation and the generation that came before us,” she writes. “Let’s rebel against the unspoken rule that money is too taboo a topic to discuss with the ones we love the most – because at some point, we will all need to be on the same page.”

“Let’s unite our family units around a common set of financial beliefs and values – and ensure that the greatest wealth transfer in history is not just defined by its size – but also by its positive impact on our families.”

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(originally reported at www.kiplinger.org)

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