You can also listen to this podcast on iono.fm here.
CIARAN RYAN: Whether you are from the older generation keen to safeguard and pass on your family’s wealth, or a younger member eager to grow and manage that inheritance, today we’re going to explore effective strategies for intergenerational wealth management. Generational differences influence the way we manage money, so this conversation offers practical insights for both younger and older listeners.
While honest conversations and sharing your family’s values are essential for a smooth, confident transfer of wealth for younger listeners, we’ll highlight the importance of financial literacy, how to make the most of digital tools alongside expert advice and why starting to invest early can really pay off.
You’ll learn in this podcast why estate planning is more than just a legal formality, but rather a vital step to protect your legacy for years to come.
On top of that, we’re going to delve into values-driven investing, showing how aligning your money with your principles can lead to growth that’s responsible and rewarding.
Joining me today is Adriaan Pask, chief investment officer at PSG Wealth. Welcome back, Adriaan. Thanks for joining us.
Intergenerational wealth – how you build it, manage it, pass it on – is an important topic. Could you start off maybe just sharing some advice for the older generation? What should they be focusing on as they plan for the future and how they will pass on their wealth?
ADRIAAN PASK: Hi Ciaran, and hello to the audience as well. It’s good to be on the show. One of the foremost things that comes to mind when it comes to intergenerational wealth and what we see currently – and I think there’s a huge gap in the market where investors are currently obsessed about what’s happening in geopolitics and where they can invest their assets to enhance their returns, et cetera, [and] something that often goes overlooked is estate planning.
As much as we try maybe as an investor to eke out another 2% or 3%, or you might be a touch cost-sensitive, those things are relatively small in the context of the bigger picture that considers estate planning.
So, when the older generation eventually passes on, there’s a lot of friction in terms of passing those assets over to the next generation, and effective estate planning can be a very useful tool for doing that in a very tax-efficient way without leaking too much capital.
But I think the relevance and appropriateness of an estate plan also goes beyond just its tax efficiency. I think it also provides some continuity in terms of capital management and how the family thinks about building wealth over the long term.
Obviously, those goals need to be set down as multi-generational goals.
If you start to build wealth in the form of a trust, for example, others will eventually be the beneficiaries of those trusts and have to look after the trust. So, to ensure that proper continuity, it’s best to pull in the beneficiaries of the trust to acquaint them with the approach and the strategy and the thinking. So that part is completely essential.
Also, what we do often see obviously, is that whenever there is money involved there is opportunity for conflict among siblings and those kind of things. I think if you involve people from an early stage and make it very clear what’s happening, you can sort of put aside a lot of the risks that come with that.
But then there’s also a lot of knowledge and experience that comes with the older generation, and that knowledge can easily then flow into the next generation, where people currently are quite cagey about their finances and do the planning in isolation.
Someone passes away and then someone else has to pick up the pieces from scratch and equate themselves with finances – whereas an estate plan and the continuity and the long-term thinking provide a very useful platform for ensuring that you can actually essentially educate the younger generation on how to think about money, have the right conversations, create a little confidence in how many work, and what to do.
It’s quite a lot to take on if you don’t have any financial literacy, or you aren’t experienced or versed in some of the more basic concepts of how to grow wealth over multiple generations.
I think there’s also opportunity – we see new technologies come out, for example, in terms of how people can educate themselves, so the younger generation is obviously more equipped to deal with the new technologies out there.
They consume information differently, but that can also be beneficial to the older generation – things like podcasts and things we use to keep ourselves abreast of what’s happening in the world and how to think about numbers and those kind of things.
It creates a very good platform for families to have conversations around money, and it’s a very healthy bridge for where historically we’ve seen the older generation find it incredibly difficult to have many conversations with the younger generation. But a platform like a podcast, for example, is a very useful tool to facilitate debate, for listening to those things together, and then discussing those things that are top of mind and asking the simple questions and using it as a tool for educating the younger generation.
CIARAN RYAN: Yes, it’s fascinating how the older generation’s behaviours often shape the behaviours of the younger family members. There seems to be a transfer of values and habits and attitudes that come with it.
With a strong foundation in place, what would be the key considerations for the younger generation? They’re not only inheriting the wealth, but there are also those values and the legacy that comes with it.
ADRIAAN PASK: I think it boils down to involvement. Like I said, I think it’s often a case where the older generation manages the finances of the family in isolation, and the beneficiaries will be the beneficiaries. But it’s actually also a very useful platform for educating, like I mentioned.
But in that process, you need to provide some exposure and practical experience in terms of the basics of how you set up a budget. What is saving? If you invest in a stock on the stock market, what actually happens? Where does that money go? What is it utilised for? How does it affect the economy? How does the economy affect the stock? Those kind of things.
And I think there is really an opportunity to develop a growing interest in these kind of things and enhance how younger generations become more financially equipped.
We’re all aware of the statistics that say how many people have insufficient savings – and that can be largely combated through just saving earlier.
But if the younger generation doesn’t have the skill sets, and there’s no one teaching them how to do this, then it becomes complicated.
It is not part of the curricula in schools to teach people how to invest.
You might have some very elementary [teaching] around how to work with money, but in terms of interacting, understanding what your contribution to the economy is, and where people fit in, those kinds of things are incredibly important.
And, like I mentioned, the technology component for us is really important. I think there are fantastic opportunities with technology these days, even with AI. The users of AI can communicate with AI platforms in a way that they can pose a question in a format that will provide feedback out of the AI platform in a way that enables them to easily understand the explanation that then comes their way. So, using technology is really a key advantage and it bridges the gap.
But there’s also something [else] to be said. We see the next generation is a lot more values-orientated. Things like ESG [environmental, social and governance] factors start to come into play, things around sustainability and climate change, those kind of things, and there is opportunity to have discussions around what’s important for the family, what the family values are and how the investment policy of the family or the trust then aligns with that.
Just having that alignment in terms of what the real objectives are also anchors a plan in the right direction.
So, I think those things are really important. Like I say, start with small, regular contributions. You’re ultimately only trying to facilitate a debate. It doesn’t need to be massive amounts. You’re trying to settle people down into saving appropriately, understanding how things work. And you can do that with very small amounts to get them going into engaging in topics around finances and I think for many people think it’s premature for children to be exposed to money and budgeting. But ultimately these are the skills that will form the foundation of how they interact with their own money when they are older or independent.
CIARAN RYAN: Interesting. We’ve spoken a bit about financial literacy – and you may have touched on this already. You’ve mentioned podcasts and other sources of information, but where’s a good place for the young people to really start on this journey?
ADRIAAN PASK: Things like podcasts are very useful, and there are podcasts available even for the younger generation. With a bit of digging, you can find those kinds of things. But I think being involved in in the money discussions in the home is really important.
Other than that, I think there’s actually a valuable contribution that the younger generation can make to the older generation in terms of technology. There are so many online platforms available where you can introduce the older generation to the same technologies and sources of information.
It doesn’t need to be an exhaustive list, and it doesn’t have to be a list as long as your arm. If young people understand, for example, the fundamentals of personal finance like budgeting and saving, that’s one thing, and there are very elementary ways to deliver that concept.
And then there are also things like just understanding what the economy is, and what is interest rates, and why are interest rates, and how do they affect how people behave in the economy. What is the impact of very high interest rates? Those things are important.
But I also think there is something to be said for sentiment. This is where I think it’s important that the younger generation puts theory to practice because what we see is that, as investors age, they become more financially disciplined.
So, it’s almost like the compounding argument – the sooner you start, the better it is for you because your investment compounds.
But the same can be said for knowledge. So, the sooner you start to interact with your money, the sooner you become a disciplined investor and the better it will be for you in the end.
I think those are some very practical and easy things to really do; but the dividends they pay over the long term are quite substantial.
CIARAN RYAN: Okay, let’s string this all together. We have an older generation that often has the discipline, as you mentioned, and the compounding effect. They become maybe a little bit more conservative as they progress in years.
You have a younger generation with completely different priorities. They’re growing up in a fast-paced digital world and tend to adopt a more flexible approach to earning, investing and the values that they see around them. But instead of these differences causing friction, they can actually create valuable opportunities for growth and collaboration, I would imagine.
When the older generation shares experience and the sentiment and long-term perspective, the younger generation brings innovation, technological know-how and fresh ideas. So, I guess everybody benefits from that.
Maybe tie this together for us – this blend of wisdom and modern thinking, if you like.
ADRIAAN PASK: Like I said, I think the relationship is currently quite different, where I think if they are put together, they can actually complement each other quite nicely.
The older generation is very used to face-to-face advice with the wealth manager, and they discuss finances; the younger generation is a bit more acquainted with things like self-servicing and using technology, et cetera – and actually there’s an opportunity for those two things to work together.
The younger individual gets introduced to working with a mentor or a guide or a financial coach, where the older generation starts to use and adopt technology in efficient ways.
You can go into all this discussion around cybersecurity risks and those kind of things.
Technology is a valuable addition to the artillery of financial services providers to combat a lot of that. So, it would be beneficial for older people to consider that.
But I think the most important thing is actually the continuity of the trust set up, and how that not only transfers wealth in a way that is tax-efficient and focuses more on the longer term, but also the communication and the working together that it facilitates, and then ultimately the financial discipline that it instils.
It’s really important for young people to have very good financial discipline right from the beginning in terms of how they work with money, how they budget, how they think about spending money. Are they even thinking about saving and do they understand how beneficial it would be to start earlier?
I heard an example which I thought was fascinating from someone else who had a discussion with children, where they took the example of the chess board, where you start with one grain of rice on the first square, and then you put two on the second and four on the third, et cetera, to try and illustrate the concept of compounding to really drive that so that [children] can understand how compounding works.
I thought that’s quite a useful kind of example of what we’re talking about in a way that younger kids also understand what it is that we’re trying to achieve. It’s those kinds of things that we need to tackle.
And also, I think wealth managers these days prefer doing wealth planning as a family because it gives you the entire picture for more accurate planning, and it also provides continuity to the financial progress that the family makes towards their combined goals. I think that’s very helpful if you’re thinking long term and want to transfer wealth to the next generation, and make sure the hard-earned money that you put into that trust is looked after when you’re no longer around.
CIARAN RYAN: Yes, fascinating. The power of compounding, particularly when it’s passed from one generation to the next. You can never underestimate that.
We’re going to leave it there. That was Adriaan Pask, chief investment officer at PSG Wealth. Thanks very much for your time, Adriaan.
ADRIAAN PASK: It’s been a big pleasure. Thank you to everybody listening in. I hope you found it useful.
Brought to you by PSG Wealth.
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