Wealth on the move

Expected multibillion-dollar transfer from one generation to the next, accelerated by COVID, has Canadians thinking more about money, its meaning, and their legacy

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Hey there, time traveller!
This article was published 18/12/2021 (344 days ago), so information in it may no longer be current.

Money is always on the move.

Its flow is like blood coursing through the economy.

Of course, it pools with age and for good reason as we need to use it slowly and gradually in retirement.

Tijana Martin / The Canadian Press files Dilys D’Cruz, head of wealth management at Meridian Credit Union, says it’s natural for financial affairs to cause discomfort given how families dislike talking about money.

And those pools of assets have grown to unprecedented value.

Altogether, Canadian households own $14.2 trillion in 2021, up by about 19 per cent from the previous year, Statistics Canada noted this fall. And about 20 per cent of households — about the percentage of greying Canadians — own about two-thirds of that sum.

A not-so-insignificant fraction of that — about $700 billion — is forecast to flow from one generation to the next by 2026, a recent report from J.D. Power reveals.

Undoubtedly, the pandemic has accelerated the generational wealth transfer or, at the very least, COVID-19 has many people thinking about their estates, legacy and, in some cases, pending inheritances.

To that end, another recent study by Investment Planning Counsel found two in three respondents worried about leaving an estate for loved ones. As well, it reveals inheritance issues were the second most in-demand advice people were looking for from financial professionals, only trailing retirement planning.

“The survey shows people want more advice on estate planning and the efficient transfer of wealth,” says Sam M. Febbraro, executive vice-president at Investment Planning Counsel.

“Those things are top of the list, and that’s not surprising.”

Indeed, many Manitoba residents want their wealth to help not only themselves but their loved ones, as yet another study — this time by Edward Jones — found, revealing eight in 10 consider leaving an inheritance a priority.

Despite good intentions, Brandon financial adviser Dave Wiebe, with Edward Jones, says not everyone is well prepared on this issue largely because they have been mum on their intentions, though that is changing too because of the pandemic.

“Talking about money always seemed a little taboo in the past,” says Wiebe.

“But things have shifted a lot.”

He and other financial professionals have long assisted clients not solely with plans to fund retirement. They often help people understand they have more than enough wealth to fund their lives. In turn, they help individuals create estate plans and even sustainable strategies to give to family and charities while alive.

“I have clients who want to transfer wealth to their kids, and the big question is ‘What’s the best way to do that?’” he says.

He often replies with a question of his own: ‘‘What would you like to see them do with it?”

That’s often where bringing adult children into the conversation is beneficial, albeit potentially uncomfortable at first.

The discomfort is understandable given many families don’t talk about money, says Dilys D’Cruz, head of wealth management of Meridian Credit Union, Ontario’s largest credit union.

“I would say my family fell in the bucket of 40 per cent of Canadians who don’t talk about money when growing up,” she says, referring to another recent poll, this one by Meridian.

Only recently did she and her brother meet with their aging parents to discuss a will, its contents and other issues like needs and wants for later life-stage care.

“There can be a lot of emotion involved in these discussions,” she says. “But if you don’t have them, then what?”

For aging parents, there’s often a concern wealth could be squandered (for example, spent on fast cars and big boats). It’s an ancient worry, encapsulated by old adages like, ‘from shirtsleeves to shirtsleeves in three generations.’

Made popular in the 19th century by Andrew Carnegie, one of America’s original ultra-wealthy individuals, the saying speaks to a real-world problem with intergenerational wealth. That being the first generation creates wealth; the second squanders it, and then the third must create wealth all over again.

Of course, starting discussions early about money is important because there is an opportunity to discuss the idea of wealth stewardship — which can involve simply learning about budgeting and saving — that will serve children well in adulthood,

It’s especially beneficial if kids eventually receive a large windfall like an inheritance, says Janine Guenther, president of Dixon Mitchell Investment Counsel in Vancouver. Increasingly clients — often women in their 50s and upward — are dealing with sudden wealth due to the death of a spouse, divorce or inheritance, she adds.

Not all are well prepared because, even among spouses, discussions about money — particularly investments and estate planning — are not all that common.

“When you’re married, with jobs and kids, the family divides and conquers, so generally what ends up happening” is one person oversees the finances and the other manages household operations, she says.

“And there is rarely enough time for the two of them to meet together with a financial adviser.”

More broadly talking about money — be it with your partner, young children, adult children or aging parents — is likely to be most beneficial for everyone if it happens sooner than later.

That way, gifts of assets — large or small, while alive or after death — are likely to have more meaning and benefit.

Discussions don’t have to be comprehensive or lengthy, but it is important to be open to each other’s perspectives while being flexible with our own, Wiebe says.

“If you stipulate in the will, for example, that you want half the money to go to an annuity so your kids can’t spend it all, that is trying to manage things from the grave.”

He adds that is generally less than ideal.

“Instead, the conversation should be about what they need to make good decisions with wealth to best help them and their own children.”

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