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Multi-generational financial planning

Multi-generational financial planning

John Hewison
Founder and Director
26 Jul 2013

One of the things we have always advocated and assisted our clients to manage is multi-generational financial strategy planning and management. This makes perfect sense to us and is embraced by our clients where applicable and is generally keeping with their objectives (the non SKIers* that is).

For those clients who do not have children or young relatives, philanthropy is another option to consider – also for those who have kids with a high net worth. Warren Buffet, one of the world’s richest men and renowned philanthropist says “the wealthy should leave enough to their children to do something, but not enough to do nothing.”

It is from this perspective that I challenge the validity of the mandated expenditure of investment capital through the design of Account Based Pensions and Annuities. Both of these retirement income streams are designed with the objective of exhausting capital over the life expectancy of the owner.

In the case of Account Based Pensions, the pensioner is required by government legislation to pay a certain percentage of the pension account capital each year as an income stream. The income percentage increases as the pensioner gets older, regardless of whether they need it or not.

In the case of an Annuity product, there is usually a fixed schedule of payments designed to return capital and investment income to the annuitant over their lifetime, regardless if this is more income than they need.

It seems to me the Government misses the vision and the opportunity to encourage multi-generational savings.  This is  ultimately  in the best interests of all concerned by  building the long term affluence of the private sector. This is turn will take the funding pressure off the public sector particularly in terms of retirement savings, social security and ancillary issues such as health care.

Taking this further, Australians are not great at charitable giving and maybe that is a product of comparatively low levels of multi-generational affluence. By encouraging multi-generational wealth transfer, there is far more likelihood that charitable giving via privately funded philanthropic trusts will increase – providing more relief for public funding and/or improved services.

I believe Australian families would benefit from some serious long term thinking at government level to address these long term issues for the sake of developing multi-generational affluence and catering for the ability to adequately fund services.

* Blog explanatory note:  “SKIers “Spend the Kids’ Inheritance”

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.