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How should families discuss their finances?

We are seeing the largest inter-generational wealth transfer in history – an increase of 66% in the United Kingdom over the next 10 years to £115 billion in 2027¹, according to the Centre for Economics and Business Research. The OppenheimerFunds Generations Project set out to better understand the impact extraordinary shift is having on individuals, families, and on the field of wealth management.

  • The research found that too few advisers help families with financial education.
  • Advisers, with their financial knowledge, should be a natural part of this education process.
  • Investors are reluctant to discuss finances with their families.

Two of the key findings centred on how families discuss finances with their advisers and among themselves. The research found that too few advisers help families with financial education. A legacy is about much more than leaving money to the next generation. It’s also about transferring important ideas about wealth, including valuable wisdom on subjects such as spending, saving and borrowing that can help younger family members develop a sense of financial responsibility and independence. 

Advisers, with their financial knowledge, should be a natural part of this education process. Yet the study found that just over a quarter (26%) of Millennial advisers are providing financial education materials or training to their clients, while still fewer Gen X advisers (23%) and Baby Boomer advisers (21%) are doing so. 

The only area where advisers appear more engaged with the children of clients is around borrowing. Nearly half (46%) say they are currently educating the primary clients’ children on borrowing. This may be due to the fact that advisers see a fairly high rate of family conflict around both borrowing and the purchase of property. For example, 23% of advisers report conflict within their clients’ families around borrowing and 21% see family conflicts around buying property.

The second key finding was that investors are reluctant to discuss finances with their families. Almost half of the investors surveyed were not currently having financial conversations with their spouses or partners and in fact, 30% have never discussed these matters with their significant others. Additionally, almost one in five (17%) investors say they are not currently engaging in conversations with anyone about their personal finances. 

For some families, money may not seem like a polite subject for conversation. For others, the person responsible for amassing the wealth may feel the decisions are hers or his to make alone. Indeed, 62% of investors surveyed say the majority of their wealth was earned compared to 20% who say they inherited the majority of their wealth, which may mean that many of today’s HNW investors have little experience with intergenerational wealth transfers, and have no precedent for conversations around passing it on.

Yet open communication is essential to ensuring a smooth, efficient transfer of wealth and an enduring legacy. The good news: 69% of surveyed investors are currently engaging in conversations about their personal finances with an adviser. Yet almost half of surveyed investors are not extending those conversations to their partners, let alone additional generations of family members, which can pave the way for smoother transitions of wealth.

For more information on the report, click here.

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