Most of our clients also share this desire to pass on wealth to their children, or more often these days, assist their children during their lifetime. We hear more and more often how difficult it is for the younger generations to acquire ownership of a residence due to rapidly rising prices.

Historically speaking, the Baby Boomer generation are the first generation in Australia to inherit wealth from their parents. Looking back to 1900, life expectancy for a male was 55 years, in 1947 it was 66 years. Over that time span there was the Great Depression of the 1930s and two major world wars. There was little opportunity for general population to acquire wealth. Now, life expectancy for a male is 80.4 and for a female 84.5. The reality is that most will live well into their 90s.

Up to the 1950s home ownership was not an expectation. It wasn’t until the post war periods of 1919 and then 1940 that governments introduced housing schemes and subsidies. From the 1950s home ownership rates soared. In 1947, home ownership percentage was 53.4% increasing to 70.4% I 1986.  Interestingly, home ownership rates have declined slightly to 69.8% in 2006.

The fact that housing was acquired in the outer suburbs by the pre-Boomer generation, the growth in suburban development meant that the Boomers inherited valuable properties located in what have now become inner suburbs. As a Baby Boomer, I recall that my parents built their home in what was the outer Melbourne suburb of Highett. I remember our house was built on a dirt road surrounded by paddocks and bush. Now Highett is considered an inner suburb where the median house price would be close to $1 million.

Whilst superannuation was not universal for the previous generation, there was a growing number of those who had superannuation and there was a growth in personal savings. Superannuation became more prevalent with the baby Boomers. With the introduction of compulsory superannuation to Australia in 1992, serious levels of wealth began to be accumulated by the Baby Boomers. No doubt, with the sustained level of economic prosperity and absence of world conflict, Australians progressively became more financially well off.

In my view, one of the major faults is that the Australian superannuation system is that it is designed to exhaust capital by forcing increasing minimum capital withdrawals over the lifetime of retirees. It makes little sense for retirees to withdraw larger amounts as their financial requirements reduce and would make more sense to preserve their wealth for future generations.

For me the challenge for Australia’s economic future is the preservation of personal wealth going forward to future generations to:

1. Improve the financial security for Australian families, which translates into better standards of housing, education, health and general living standards.
2. Relieve dependence on the national purse and enable the provision for ever increasing demands for infrastructure, health and education services and support of the needy.

A side benefit of increasing the wealth of Australians is the resultant growth in philanthropy and charitable giving. By comparison with the developed world, Australia is not strong in this regard. Without wishing to drift into political comment, we all need to appreciate that governments don’t have any mechanism to make money. They rely on taxes and borrowing to fund their projects and in a rapidly aging population that is a massive challenge. We need to get used the idea of self-funding our own requirements stop the ever-increasing demand and dependence on government.

As financial planners, we see one of our key tasks as designing financial strategies that primarily achieve our clients’ goals and objectives in their lifetime but incorporate the goal of multi -generational preservation of capital and efficient wealth transfer. Whilst this certainly incorporates Estate Planning, there is an increasing trend to provide financial assistance for items such as housing and education to the future generations during our clients’ lifetime.

Financial planning and a robust strategy is key to dealing with these issues in an effective and efficient manner. The sooner the strategy is established, the more achievable and effective it will be. I encourage those grappling with these issues to seek good, professional advice.