‘Why’ Just as Important as ‘How’ When Creating Generational Wealth

VettaFi ETF Trends, March 12, 2024 — In today’s article, reporter writes, “First-time wealth builders often fare better with advisors who can help them achieve their goals. However, those advisors must consider a variety of factors, including familial and cultural values, as part of charting the best way to achieve client objectives with regard to generational wealth.

Establishing generational wealth requires a higher level of planning and commitment than arranging for a one-time exchange of assets, Marguerita “Rita” Cheng said in an interview. She is the CEO and founder of Blue Ocean Global Wealth.

“To me, inheritance might refer to a one-time event, a passing of assets, upon someone’s death,” said Cheng. Whereas generational wealth is “an ongoing transfer of wealth,” she explained. “It’s passing on wealth, and the person doesn’t necessarily have to be gone (to do so). They can see their wealth in action. First-generation wealth builders often face a learning curve, not just in acquiring wealth, but understanding the basics of estate planning, insurance and other foundational tools for preserving wealth.”

“It’s not because you don’t know anything, but you haven’t experienced that. We might talk about estate planning and insurance,” she says of clients. “Insurance is a very powerful tool for wealth transfer. It’s important (as an advisor) to be mindful and set the stage for discussing these topics,” she explained.

Some critical discussions may include making sure individuals understand the benefits available to them through work, Cheng said. She cited life insurance as just one example.

‘Generational Wealth’ Open to Interpretation

What “generational wealth” means also varies from one person to another. Therefore, it’s important to understand what individuals want to achieve as they build wealth.

“I am really intentional about taking the time to connect with others. I think even asking the question: ‘What does generational wealth mean to you and your family?’ is important,” Cheng said.

“The most important thing is to ask people and set the stage, and they’ll tell you what’s important to them. I had one client who said they never had children of their own, but their nephew was like their child and they would really like, if anything were to happen to them, for him to have enough money to go to school,” Cheng shared.

Another key factor to consider is that individuals aiming to build generational wealth may be overwhelmed just by nature of being the “first.”

“There are some experiences where people may feel a little bit guilty for being the first,” to have certain financial resources, Cheng said. “Also, understanding that being the first — the first person to buy a home, start a business, or to have equity compensation in your family — there’s emotions (around that).”

Maybe for the first time, individuals are faced with the responsibility of what to do with large amounts of money, as well as how they will set boundaries with loved ones, she added.

“One of the best things you can do is take care of yourself. Put your mask on first,” Cheng said.

Taking Culture Into Account

Read more here.