Your role in intergenerational wealth transfer

It takes a great deal of time and effort to create wealth. But not nearly enough time and effort is invested in the conversation and planning around the transition of wealth.

According to a CIBC report, an estimated $750 billion will exchange hands in the next decade. This represents the largest intergenerational wealth transfer in Canadian history. Boomers will receive a large chunk of this wealth which, in turn, is expected to be passed onto their children.

Read: Massive wealth transfer to boost boomers’ assets by 20%

So, advisors must be prepared to assist clients with intergenerational wealth planning. And this will open up opportunities to plan for a generational shift in clientele—from the parents to children.

How do you adapt your practice to help these clients? We provide you with practical tips.

The client-advisor conversation

Suggest setting up a meeting with the client and his family. Then bring up the subject of legacy planning, which may be a non-threatening way to discuss succession and estate planning. The concept of legacy planning should center on family values and the client’s vision for the future. Do not start a conversation by saying, “What happens to your assets when you join the angels?” This may not be the best approach as certain clients, for cultural and personal reasons, may not be comfortable having a frontal discussion about their mortality.

Read: Father squanders multi-million-dollar legacy

Instead, say, “Who do you have in mind as the next custodian of great grandma’s tea set that’s been handed down from generation to generation?” This is a better conversation starter as it’s centered on something of sentimental value.

Also, be sure to include the children in this process. Encourage clients to attend meetings with their children—especially those that may play significant roles in the settlement of their parent’s estate. Some advisors will even invite testators (parents) and executors (children) to an estate planning seminar, which is another way to get to know the next generation. If you involve the kids, they’ll be more likely to remain with you as their advisor when their parents die.

More tips: hire advisors that reflect generational diversity, and revise asset thresholds for younger, not so well-to-do clients. For instance, if your asset minimum is $600,000, you could lower it to $50,000 as an incentive for your client’s kids. This will enable them to receive quality advice and help cement their loyalty to you when they receive their inheritances.

Finally, work with the client on a succession plan in the event of death. But keep in mind the plan may be set into motion prior to the client’s passing, as some prefer to see their children enjoy the fruit of their labour. Irrespective of when the plan becomes effective, testamentary planning accounts for wealth transfer on death; inter vivos planning accounts for wealth transfer while the client is still alive; and planning involving charitable giving may become effective prior to or after death.

Tim Brisibe

Tax & Estate

Tim Brisibe, TEP, is Director, Tax & Estate at Mackenzie Investments.