A quick Google search will tell you that “strategy” means, “a plan of action or policy designed to achieve a major or overall aim.” When you start with a definition like this, it could lead you to wonder: what are my major aims? What exactly do I want to achieve? Why?
And when it comes to wealth management, we believe the thought process should be no different: what is your wealth management strategy pointing to? What purpose is hidden behind your financial tools and systems?
Many articles on wealth management avoid this topic entirely, and seem to treat it as an end in itself. But today, we want to suggest that bringing your whole-life ambitions to the surface (in the context of this blog, generational impact) could help you see clearly which wealth management strategies are right for you.
If generational impact — the impression you leave on your children, grandchildren, and the causes in the world you care about — is important to you, read on for five examples of wealth management strategies that can be directed towards this aim.
Understanding Wealth Management
Before we plunge into the detail side of our five strategies, however, you need to understand the difference between wealth management and financial planning.
Financial planning is a catch-all term that deals with a variety of tools that will help you to a) organize your finances responsibly, b) direct the assets at your disposal towards growth and c) navigate regulatory financial requirements wisely. In short, financial planning is primarily focused on your personal financial practice.
Wealth management goes deeper than individualized financial discipline: it’s all about holistic stewardship, envisioning and preserving a financial legacy that will maintain momentum through the generations after you. It’s about honoring what you have been entrusted with in this life, aligning it with a purpose beyond yourself, and watching it grow to bless others.
Who Benefits Most from Wealth Management?
Most articles on wealth management assume that high-net-worth individuals with considerable assets at their disposal benefit most from a strategic approach to wealth management.
But we would bring it back to purpose: no matter who you are or what your bank balance says, the main beneficiaries of your wealth management practice will be the next generations in your family line, so that is where we believe your focus should lie.
Although you and your spouse could benefit from these strategies in the short- to medium-term, the financial work you do on this earth will ultimately impact others, once the time comes for you to pass on what you have.
And if that is the eventual aim — passing on what you have — then we believe you should approach what you have now with that mindset front and center, so that you can set your heirs up in the best way possible.
5 Momentum-Building Wealth Management Strategies
We believe that each of the following five wealth management strategies can serve the dreams you have for your family and the world. And what could be more important than that?
When the time comes to say goodbye, wouldn’t you like to be able to look back at your life — and especially at the people you have touched — and rest, satisfied, knowing that you’ve done right by them? We hope these suggestions will help you get at least some of the way there.
A. Retirement Planning
Although “retirement planning” might seem like a relatively new concept in our cultural zeitgeist, you might be surprised to know that the heart behind the idea has been around for thousands of years. Consider this quote from ancient wisdom literature:
“Know the state of your flocks,
and put your heart into caring for your herds,
for riches don’t last forever,
and the crown might not be passed to the next generation.After the hay is harvested and the new crop appears
and the mountain grasses are gathered,
your sheep will provide wool for clothing,
and your goats will provide the price of a field.And you will have enough goats’ milk for yourself,
your family, and your servants.”*
At first glance, you might be wondering: what does this strange metaphor about flocks, mountain grasses and goats’ milk have to do with Roth IRAs, 401(k)s and other retirement planning tools?
Ancient Wisdom, Present-Day Application
Upon closer inspection, you can uncover the principle at work here: if you are diligent with what you have now (“the state of your flocks”), then even when seasons change from harvest to the cold bite of winter, you will have a source of life to rely on (“wool for clothing” and “goats’ milk”).
The basic tenets of retirement planning are no different: if you are careful to look after and set aside some of your income through tax-efficient retirement planning options, then even after your current life season ends (full-time work), you will still have a stable source of income to rely on in “winter” (your retirement years).
Notice the phrase, “for yourself, your family, and your servants.” Now, you might not have any servants (unless you happen to be the King of England!), but if you make wise choices and preparations at this juncture, you could end up having enough to look after your entire community further down the line. In other words: generational impact.
There is one final thing to notice from the first few lines, where the author offers a very timely disclaimer: “riches don’t last forever, and the crown might not be passed to the next generation.” There are no guarantees in life, so take care to steward what you have with a long-term perspective.
*Proverbs 27:23-27 NLT
B. Legacy Planning (Estate Planning)
The second key principle in Dr. Stephen Covey’s seminal book, The 7 Habits of Highly Effective People, is to “Begin with the End in Mind.”
Fittingly, then, Legacy Planning, sometimes called “Estate Planning,” is the second of our five momentum-building wealth management strategies, as it brings Covey’s second key principle to life in our present context.
Legacy Planning is all about starting at the end, and working your way back to the present moment: planning what will happen when you pass on, and therefore deciding what you need to accomplish before then.
If you do that — start with the end in mind — you can better plot your next steps, and you can especially see how generational impact can act as a throughline for every part of the legacy planning process.
Legacy Planning and Generational Impact
The crux of legacy planning is to ensure your wealth is distributed according to your precise wishes, with minimal tax implications for your beneficiaries. A comprehensive legacy plan can include wills, trusts, powers of attorney, and directives that specify your final financial decisions.
The best legacy plans also set aside sacred space and time for you to tell your story to your children and grandchildren, so that you are able to pass on your values as well as your assets.
Through your storytelling, you can communicate why you have structured your legacy plan the way you have, and you can inspire the next generation to take up the same causes you have poured into during your lifetime.
For a more in-depth look at Legacy Planning, why not check out our free resource here?
C. Education Planning
Iron Point Financial is a financial advisory firm that serves the Greater Pittsburgh Area, so it shouldn’t shock you to know that we are proud of where we are from, and that we champion the institutions that hold Western Pennsylvania together.
One such institution with worldwide renown is Carnegie Mellon University (CMU), which was founded by a local “Yinzer,” Andrew Carnegie, who emigrated from Scotland to the US in 1848 and went from working in a textile factory to overseeing an entire local industry (the world’s largest steel production company).
Even though Carnegie was immensely rich in his lifetime, he believed that “to die rich is to die disgraced.” One of the best examples of how he lived this out came in 1900, when he donated $1 million for the foundation of a new technical institute: The Carnegie Technical Schools (which would later become CMU).
For context, $1 million in 1900 is the equivalent of about $36.6 million today. Suffice it to say, this was a sizeable gift, and it served a weighty, noble purpose: “a school where working-class men and women of Pittsburgh could learn practical skills, trades, and crafts that would enhance their careers, lives, and communities.”
Education Planning for Generational Impact
You may not be the richest person in the entire world — like Carnegie was, for a time — but you can still make use of our third key wealth management strategy: education planning.
There are plenty of educational investment vehicles out there, but perhaps the most famous is the state-sponsored 529 plan. Contributing to a tax-efficient fund like this could provide for your children’s or even grandchildren’s education, and give them a learning-based headstart in life.
That way, even when you’re no longer around, your desire to see your family make their own way in the world can keep bearing fruit for years to come.
D. Philanthropic Causes
Continuing in that same vein — bearing fruit for years to come through future-focused gifts — leads us to the next of our four wealth management strategies: strategic philanthropy.
To this day, the US remains the most consistently generous nation in the world on a per capita basis. That means that of all the citizens in the world, Americans regularly give the most to charity.
And no wonder! The US tax system is set up to reward generosity through tax-deductible giving (especially for filers who choose to itemize their deductions).
For high-net-worth individuals especially, this can be a great opportunity to decide which causes you want to help make an impact, in as direct a way as possible.
And when you think about giving from a generational perspective, there are plenty of ways you can go about inviting your family to join you in supporting what matters most.
Are you concerned for our national parks or green spaces in general? Why not take your family with you to one, and show them why they’re worth preserving (and donating towards).
Do you care about feeding the homeless and less fortunate? Why not volunteer together at a local food bank, and share time and resources to stop the neighbors in your city from going hungry?
What about important movements for change outside your country’s borders? Maybe you want to see more people around the world have access to clean, safe water? Or perhaps you would like to see children in developing countries receive life-saving medical care? Or do you have a heart for people in urgent need after natural and human disasters?
The possibilities are endless, and once your children and grandchildren have the opportunity to see what matters most to you, they can be motivated to follow in your footsteps.
E. Debt Management
Last but not least in our five wealth management strategies is debt management. While the other four strategies were about helping you put one foot forward, and inviting your family to join you on the journey, this strategy is a little different.
Left unchecked, poor debt management can eat away at your retirement planning, legacy planning, education planning and philanthropic goals. And, even worse, mismanaged debt can actively hurt and deprive the generations after you…
Although it’s unlikely to happen to you, it’s easy to imagine certain nightmare scenarios: the bank repossessing the home your children grew up in, creditors laying claim to your stock portfolio, your children and grandchildren being left with nothing by the time your will is executed…
But enough doom and gloom! Thankfully, nightmare scenarios can be banished to the darkness from whence they came, if you are willing to apply a healthy dose of planning and intentionality.
With the right debt management plan in place, you can make sure you remove all high-interest liabilities and set up the rest of your finances to pay down the rest over time.
That way, you can not only leave your family with a healthy, intact inheritance, but you can model for them the right way to treat debt, so that they learn from your example.
Implementing Strategies for Generational Impact
Yet another way the generations following you can learn from your example is in the way you seek professional financial, legal and tax advice.
Of course, you could “go it alone,” but when you have the option to show your children and grandchildren the value of trust and delegation, you could be passing up an important teaching opportunity.
The Role of Professional Guidance
Wealth advisors, estate attorneys, and tax professionals can all be important allies in your dream to make the biggest generational splash possible. Their industry-certified knowledge can be indispensable in co-creating a comprehensive, holistic plan that serves your specific needs and vision.
The Importance of Tailored Advice
That’s also why it’s important to choose advisors who will put your needs first, listen to your story, and work to come up with a bespoke solution that suits your situation.
At Iron Point Financial, for example, we always make sure to put clients through:
- A rigorous evaluation process, where we develop a deep understanding of your needs not just as an investor, but as a human being.
- An analysis of your investment objectives so that we can co-design a strategy for achieving your financial targets.
- A tailored investment portfolio that will help you pursue both your short- and long-term objectives.
- Constant monitoring and adjustment of your portfolio: we gauge performance based on progress towards your unique goals, not a market index.
Clients who work with us become more than just clients: they are our friends. If you were to choose us for your wealth management needs, that’s how we would treat you: as a friend.
And if you were to ask our clients what they thought of us, they would tell you how we care for their financial and whole-life needs, and recommend solutions with those needs at the forefront.
As a matter of fact, many of the friends who have hired us to oversee their wealth management strategies do so not just as individuals but across family generations — exactly the kind of impact you may be looking for if you have sought out this article.
Closing Thoughts
Let’s go back to the beginning, and practice what we preach about “starting with the end in mind.” In the opening paragraphs, we commented that wealth management strategies should focus on bringing your underlying purpose and desires to the surface, and planning accordingly.
We also expressed our belief that it was important to consider how you structure your planning to make a generational impact from a practical as well as financial perspective. With that framework in mind, we laid out our five wealth management strategies.
The key takeaway? It’s not just what you pass on in number terms, but how you do it: how you model your values and invite your loved ones into the process, wherever possible.
So, however you decide to incorporate these insights into your retirement planning, legacy planning, education planning, philanthropy, or debt management practices, we hope you remember to put your relationships first, and work from there.
And if you take that thought to heart, we reckon you might just do exactly what you hoped for: leave the world in a better shape than when you found it, for those you love most.
Further Resources
- The Mystery of Unused 529 Funds: 5 Ways to Impact the Next Generation
- Legacy Planning: The 5 Key Principles
- The 11 Key Components of Financial Planning You Need To Know About
- Retirement Planning in Western PA: 3 Important Steps to Take
- How to Find an Investment Consultant: 5 Things to Look For
Disclosures
- The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.
- Due to volatility within the markets mentioned, opinions are subject to change without notice.
- Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.
- Past performance does not guarantee future results.
- The opinions are those of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives.
- Limitations and Early Withdrawals: Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.
- Retirement Plans: Distributions from traditional IRAs and employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
- Roth IRA: Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax-free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
- For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
- Before investing, the investor should consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.
- All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. All information is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy. Please keep your original official statement(s) in a safe, secure location.
