Intergenerational wealth transfer

The Ritcey Report

Written by Lynn Healy-Goulet
June 16, 2017

Exceptional insight doesn’t mind where it comes from. That is why I want to draw your attention to a document called Wealth Transfer Report 2017, published by RBC.

Lucid, painstaking and comprehensive, it is an analysis dealing with intergenerational wealth transfer – an issue I have explored in the past and will likely do again.

First, some background. Wealth Transfer Report 2017 is a study to find out how prepared families are to give and receive inheritances.

The survey included 3,105 individuals in Canada, the UK and the US. Respondents were worth, on average, US $4.5 million and included professionals, entrepreneurs, business owners and retirees.

What follows are the highlights from the Executive summary:

  • People are generally unprepared to give or inherit wealth. Only 26% of respondents have a full strategy in place.
  • 1 in 3 benefactors have done nothing at all to prepare for passing on wealth to the next generation.
  • People are more likely to have a wealth transfer strategy if they have received an inheritance. 32% of previous inheritors have a full wealth transfer strategy, compared to only 15% of those who have yet to inherit.
  • There is a direct correlation between preparedness and confidence in wealth preservation. For those with a wealth transfer plan, 58% are confident the next generation will sustain their wealth, compared to 33% with no preparation.
  • The key to raising financial literacy levels is to start early. On average, structured financial education begins at age 27. 66% of respondents who began before 18 rated themselves as confident.
  • Such financial education that is given is largely informal and guided by family. 3 out of 5 say family conversations are effective. 4 out of 5 say that structured financial literacy programs are effective.
  • The intention to educate children on financial matters does not necessarily translate into action. 35% have yet to educate their children about wealth and money, but plan to in the future.
  • Many plan to pass on their wealth through their estate. 57% of respondents intend to pass on all their wealth upon death or illness, compared to 29% who plan to gift it gradually during their lifetime.

As I mentioned in an earlier examination of this issue, Canadians between 50 and 75 years old are poised to inherit $750 billion over the next decade, the largest intergenerational wealth transfer in Canadian history.

Wealth transfer is about family legacy, true. But it’s also about driving economic growth and giving back to the community.

One of my responsibilities as a wealth advisor is to ensure that all my clients – actual and prospective – have a high degree of preparedness to handle this important issue. Based on the findings of Wealth Transfer Report 2017, they still have a considerable way to go. For my part, I work in close collaboration with our Estate and Trust Consultant from The Bank of Nova Scotia Trust Company to provide my clients with such a service. Let me know if you think I can be of help.

Dave Ritcey, The Ritcey Team, Scotia Wealth Management