Sustaining Wealth Across Generations:
“Wealth is something we build for ourselves and for our future generations. It becomes part of the legacy we leave behind, interwoven with our values, aspirations and the heritage we carry forward.”
Generational wealth encompasses much more than just financial resources; it’s a holistic approach to preserving and enhancing the well-being of future generations and there are several factors that contribute to this:
Being Part of the Family: The bedrock of generational wealth are your family members, their unique culture, traditions and beliefs. Building a strong family bond and a shared perspective and understanding are essential in ensuring family wealth is protected and built upon. It’s important for each member to feel a sense of belonging and pride, so that they are motivated to contribute positively to the family’s legacy.
Developing Your Family’s Strengths: The collective knowledge, education, and skills within a family should be passed down, built upon, and should by no means be limited to the academic. If preserving or growing the family’s wealth is the goal, members simply cannot afford to rest on their laurels and instead, lifelong learning, curiosity, and continuous skill development should be strongly encouraged.
Your Family Name & Network: Connections, relationships, and a positive reputation within and outside your family are all important factors in building your family’s social and financial capital. Having a broad and diverse social network can provide access to resources and knowledge that are not readily available within the family. As part of this, it’s important to seek out and maintain fruitful business connections and trusted relationships with advisors. Essentially, it’s about keeping your family close to anyone that can offer opportunities for growth.
The Family Finances: The most recognised aspect of generational wealth is of course a family’s financial position, i.e. the tangible monetary resources and assets a family owns, such as real estate, stocks, bonds, and businesses.
Proper management of these assets is crucial for sustaining wealth across generations. If done well, one family member’s success can live on for centuries with great, great grandchildren and beyond benefiting from their ancestors’ foresight and strong planning.
At Capital International, we have assisted many clients in preserving and growing their generational wealth and consider the following steps critical to this:Establish a documented investment philosophy which provides guiding principles for the family’s wealth management.
Create a diversified investment portfolio that aligns with your family's risk tolerance and long-term goals.
Encourage younger generations to begin investing as early as possible and to generate engagement in inter-generational wealth management. (The earlier you start, the more time compound interest has to work its magic, creating growth over time)
Spread investments across different asset classes like shares, bonds, property and exchange traded funds (ETFs) to reduce risk and provide a more balanced return. This protects the family’s wealth while still allowing it to grow.
In an increasingly mobile world, it is imperative that a global approach to wealth management is employed to avoid becoming too focused on one or two geographic “home” markets, missing out on wider opportunities as well as diversification benefits.
Regularly review and adjust your financial plan to adapt to changing circumstances and goals. Educate family members on financial management and the principles of investing.
Work with a professional investment manager who can assist you in all these areas, helping you to learn, as well as to reduce the risk and stress of managing the family wealth for future generations.
In closing, “The investment philosophy and objectives of a family office are the guiding principles that define and shape its approach towards wealth management. These core values play a pivotal role in establishing the investment strategies, policy formulation, and overall direction of the family office’s financial management.”
Permit me to introduce myself, my name is Lerato Lebitsa, Business Development Manager for Capital International Group – Discretionary Investment Management. We offer powerfully effective investment solutions that are effective, with ultimate flexibility, and are risk rated. With our central investment philosophy, based on sustainable alpha, running through all our services we offer advisers and their clients a variety of ways to structure their portfolio.
About the Author: Lerato Lebitsa is Business Development Manager for Capital International Group – Discretionary Investment Management. They offer powerfully effective investment solutions that are effective, with ultimate flexibility, and are risk rated. With a central investment philosophy, based on sustainable alpha running through all their services they offer advisers, family offices and their clients a variety of ways to structure their portfolio.
DISCLAIMER:
The views, thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute views as at the date of publication and are subject to change.
Capital International Limited is a member company of the Capital International Group and is licensed by the Isle of Man Financial Services Authority. Capital International Limited is a member of the London Stock Exchange.
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