Holidays are a wonderful time to relax, slow down and spend time with friends and loved ones. They also offer families a valuable opportunity to do something most people would rather avoid: Talk about their shared financial interests.
Every November, Carrie Rosen looks forward to reconnecting with a sort of secondary family – that of her long-standing client, a family matriarch.
“Most of her family lives near her, but she’s got a son who lives in Georgia, and he comes home to see everybody every Thanksgiving,” said Rosen. “Several years ago, we started having a family meeting [around his visit] with the matriarch and all the kids.”
The meeting revolves around family finances.
Rosen, an RBC Wealth Management financial advisor and branch director based near Chicago, said it’s important for families to have open and frank dialogue about their shared assets.
While there are delicate discussion topics at times, the outcomes are generally positive. And the process helps family members deal with issues that are bound to come up sooner or later.
For many families with members living across the country or the globe, the holidays provide a great opportunity to have those conversations about things that will directly impact each family member’s financial future.
For the family Rosen works with, the meeting has evolved over the years. The client has now moved into an assisted living facility – and so has the meeting. Grandchildren have also been added to the roster.
“There are three generations of the family and we meet every November,” she said. “We order some pizza, we’ve got our sodas and coffees, and we just sit around and have a good time.”
Studies show that families often avoid having discussions about their financial interests. But avoidance can lead to confusion down the road, when adult children must begin making financial decisions or take over managing their parents’ finances.
“It used to be considered taboo to discuss finances,” said Rosen. “I think it’s a stigma that’s slow to change over the generations.”
Family meetings give everyone a chance to get up to speed on financial topics, health needs, and allocations for the mother’s living and medical expenses. Having an open and regular conversation can also reduce uncertainty and resentment on critical family issues, like inheritance planning or handing over the reins of a family business.
Holding a productive family meeting
While some people may put family meetings in the same category as a root canal, they are often surprised at how much good can come from the get-togethers, said Todd Weiland, an RBC Wealth Management financial advisor and portfolio manager based in Atlanta.
“The more knowledge that each person has, the better – and I think that’s particularly true when you’re talking about family finances,” said Weiland.
But in order for the meeting to be worthwhile, family members must be willing to tackle difficult topics. Knowing how challenging this can be, Weiland helps clients by serving as a facilitator. He typically talks to the client first and asks what direction they want to take. “And then we sort of steer it there,” he said.
“We want it to be a productive meeting,” said Weiland, who recommends preparing an agenda to handle complex issues more efficiently. Key topics can cover a broad range from general financial well-being, to wills and trusts, to the condition of the family home. When there’s a younger generation involved, funding education is typically added to the agenda.
“It may be a case where we need to talk about estate planning and help give parameters about why a trust may be necessary,” said Nora Yousif, a Boston-area RBC Wealth Management financial advisor. “Or it may be, ‘By the way, Mom and Dad have quite a bit of money – a lot more than you thought – and you are going to have responsibility when they pass.’”
Yousif favors Sunday dinners for family meeting updates, or will invite clients into her office when family is home in the days between Christmas and New Year’s.
The problem with procrastinating
Perhaps the most important topics for discussion at a family meeting involve life insurance and retirement planning – topics that family members may be prone to put off. “Finances are easy to push to the backburner, because of the immediate needs that come up,” Yousif said.
Procrastinating on a difficult discussion can be a natural reflex, but it can leave you and your family in a vulnerable position. Take, for example, an unexpected family death.
“What if we don’t put in place an insurance policy?” she said. “Then it’s too late, so it’s always better to get ahead of it.”
While a traditional one-on-one meeting with an advisor can accomplish a lot, it’s often the case that families tend to let one member handle financial decisions, which can lead to big problems if the individual with the purse strings unexpectedly becomes incapacitated.
That’s exactly what happened when one of Todd Weiland’s new clients passed away, and he quickly discovered a lot of material of which other family members had been unaware.
“It ended fine financially,” he said. “But due to a lack of communication within the family, there were people who thought they were somehow involved in the financial state of this family and they weren’t, and the spouse wasn’t exactly clear where everything was.”
Informing the next generation
With children and grandchildren in the picture, a regular meeting can also act as a sort of Finance 101 and a chance to break down complex financial issues into layman’s terms.
“I think the young generation of high-net worth people tends to make some assumptions that may not be true,” said Weiland.
For instance, they may know how to use a debit and credit card, but they may be a bit shaky on fundamentals like the importance of paying bills on time, what a credit score is and how a 401(k) works.
While scheduled meetings are helpful in this respect, keeping the conversations going is key.
“People don’t know what they don’t know,” said Rosen. “They do their own thing, they’re busy with life, they’ve got their own job or families or their own ambitions. This is just so far down on the list that for a lot of people it’s an afterthought.”
Rosen advises clients to stay in close contact with her by text or phone. This leads to more meetings and sharing of information. And the extra effort it requires to keep communication lines open is more than worth the investment in time.
Scheduling meetings can be a hassle. But with the family already together over the holidays, updating the financial situation can help avoid future tensions. And sandwich lunches are a great way to get rid of leftover turkey.
This material is not intended to replace the advice of a qualified tax advisor, attorney, and accountant or insurance advisor. Consultation with the appropriate professional should be done before any financial commitments regarding the issues related to the situation are made.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
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