Research has shown that in most families, 90% of inherited wealth is lost by the third generation.
When wealth is passed down through generations in a family, the long-term prognosis generally isn’t very good. Research has shown that in most families, 70% of inherited wealth is lost by the second generation, and 90% by the third. So it’s clear that the model for preserving wealth across generations is broken.
Just as an advisor should do due diligence on the investment managers he or she uses, prospective client’s are being encouraged to screen their financial advisor before they hand over their money.
How many people know how to “screen” a financial adviser? And what is the screening process anyway—particularly when there are so many to choose from, and the pool is ever-growing? The Bureau of Labor Statistics projected that by 2022, the number of Personal Financial Advisers will increase by at least 22%, a growth rate much faster than average. They also reported the 2013 median income was $75,320 annually for a “personal financial adviser” and $71,720 per year for Securities, Commodities, and Financial Services Sales Agents. Given the wide variety of designations and salaries of financial advisers brings us to the original question—what must you know about your financial adviser?
In the late-18th and 19th Centuries, Mayer Amschel Rothschild established five family banks, in Frankfurt, London, Paris, Vienna, and Naples, and assigned one to each of his five sons. His action secured the assets of Europe’s wealthiest family and preserved his descendants’ control of their wealth and affairs for generations. It gave the sons the tools to do business on their own and to cooperate with one another.
Why do smart people make poor decisions? More importantly, why do they keep making poor decisions? Perhaps they study stocks, market fluctuations, or market indicators. Only a fractional percentage of investors, both professional and amateur, manage to “beat” the market. Is their occasional above-average return a fluke? What does it show us?
Planning can dramatically reduce-or avoid altogether-some common tax hits, including: capital gains, state, inheritance, and estate and gift taxes. There are several options to consider when building an estate plan.
The physician who plans well and plans ahead can build an estate plan that reaps many benefits and serves several purposes: shield assets from creditors, litigants, and ex-spouses; eliminate uncertainties over the administration and probate of the estate; maximize the estate’s value by reducing taxes and expenses; and, ultimately, pass the estate’s assets to heirs during (and after) the grantor’s lifetime.
Can one person rise to the very top of his or her game in more than one area of life? Exploring various interests to enhance our personal development is generally considered admirable. Such pursuits might offer the average Joe knowledge and experience in diverse areas — musical composition and a weekend football league, perhaps. A vast majority of people (who attempt to do everything on their own) may gain the skills honed through regular practice, however; they are not sharpening their competitive edge in any given area.
Jo Kline Cebuhar first encountered the ancient concept of creating an ethical will while she was a volunteer at a hospice in Iowa.
The wills, nonlegal documents that pass on heartfelt wisdom to future generations — were being used to help dying patients share their final thoughts. She became taken with the idea of passing on personal lessons — not just assets. And before long, she was creating one of her own.
Articles about illegal credit card practices, money laundering, and high fees rewarding fund managers are fodder of ever-increasing skepticism. But there is another question to ask:
Why do perpetrators of financial crimes choose to commit them? The short answer is–because they can. Financial wrong doing, even when it’s proven, can occur multiple times within the same institution. Addressing the Government Enforcement Institute at the University of Texas School of Law, Deputy Attorney General James M. Cole said, “. . . when a bank’s employees repeatedly engage in criminal misconduct, the institution as a whole is the entity that is appropriately held accountable.” That’s great–when it works.
A will and estate plan specifies the distribution of assets; more complex succession planning may include trusts and other structures to be passed to subsequent generations. But what about memories, ideas about mistakes to be avoided after decades of trial and error, personal values, as well as general wisdom earned over a lifetime?