Wealthy Canadians woefully unprepared for generational wealth transfer

“It’s possible that Canadians believe that by simply having a will, they have everything they need,” says Leanne Kaufman, head of RBC’s estate and trust services. “But the will is just one part of a[n estate] plan.”

The lack of estate planning preparation among HNW Canadians ties into the importance of education about the process of transferring wealth, according to Kaufman.

The study suggests that those receiving the wealth — and those passing it on — could use some additional guidance about the way an inheritance works and the role they will be expected to take within the wealth transfer process.

When Canadians who received an inheritance were asked about how prepared they were for this event, 75% said they were aware of the value of the inheritance. However, less than one-third of the survey participants were familiar with how the wealth would be transferred and only 14% were introduced to the individual who would be steering that process along.

Financial advisors can play a role in educating their clients and the next generation, but advisors also have to balance their desire to help with clients’ own wishes, says Tony Maiorino, head of RBC’s wealth-planning services.

“Getting to know the individual [receiving the inheritance] to the extent that the parents are comfortable with that is step one,” says Maiorino.

Advisors also may want to keep in mind that HNW Canadians are more likely to depend on their own family members to help guide their children’s education about wealth, with 51% saying this is the case compared with the 35% who rely on their advisors or private bankers to provide this guidance.

The advisor is one element of an overall education in financial literacy that should also include informal conversations with family, according to Maiorino. Where an advisor can distinguish him- or herself is in providing resources such as online tools or access to planning experts who can help answer questions.

Advisors should consider that individuals learn differently, and tailoring financial literacy strategies to each client’s offspring is more likely to lead to success as opposed to using the same tools for every individual, says Maiorino.

The Canadian portion of this research is based on the responses of 1,054 Canadian HNW individuals who had an average net worth of $3.8 million. The global version of the study also includes responses from HNW individuals in the U.S. and the U.K. Survey participants included men and women, professionals, retirees and business owners, and givers and receivers of wealth. The data were collected between June and August 2016.

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