How private banking can help families prepare the next generation for wealth

The sight of children walking wide-eyed across RBC’s trading floor isn’t quite as unusual as you might think.

A group of kids aged from five to 15 recently toured space in Toronto as part of financial literacy month in November, arranged for the extended family of an RBC Private Banking client. “It was meant to be lots of fun with games and active elements, all infused with an honest discussion around financial values,” says Jennifer Wood, an RBC private banker who helped organize the event.

Those talks can lead to deeper financial discussions with the parents about their own financial planning, she adds. The event left a strong impression, with these types of soft services attractive to high-net-worth families.

“Private banking is about the trusted, personal relationships we make with our clients,” Ms. Wood says.

This relationship combines with a strong lineup of tailored products or services to satisfy clients. “It’s about profoundly understanding their complex needs.”

Instilling values—and financial literacy—in the next generation

One of the most complicated, yet necessary, needs within high-net-worth families is figuring out how to manage intergenerational wealth. Wealth transfers are periods in time when past financial decisions bear fruit and new decisions are made. Through it all, a central question looms large: is the next generation ready to handle what’s coming?

Many private banking clients have net worths of several million dollars, encompassing sizable investment portfolios, significant real estate and numerous business interests. They want a tax-efficient transfer of assets from one generation to the next, and they want to not only preserve but grow their wealth over time.

These clients also seek to instill values around wealth in the next generation, to ensure they will become good stewards of the family’s fortune. “That really speaks to their desire for wealth to promote family harmony,” says Kim Mason, executive vice president and head of RBC Private Banking Canada.

Clients want the best outcomes possible for their children and grandchildren. That often involves ensuring their financial and emotional well-being are supported by values and financial literacy, helping them become well-rounded, independent and productive members of their community.

“Our clients will often ask us to help their family members get ready for this responsibility,” Ms. Mason says.

That can mean connecting clients with the right professionals to establish family office-style structures, such as governance and shareholder agreements, and family councils. If clients already have family offices, private bankers work with these entities hand-in-glove to facilitate whatever is required to build succession, estate and business transition plans that protect a healthy family dynamic, Ms. Wood says.

“When we first meet with a client, we look at their situation as a family, not just the individual or the couple,” she says. “It’s about understanding the big picture first, and then figuring out how we can help.”

The importance of preparing children for wealth transfer

RBC Private Banking’s comprehensive approach aims to help families address intergenerational wealth challenges from the start, recognizing that preparing for generation two or even three doesn’t happen overnight.

“Good, meaningful learning takes time,” says Stephanie Dean, manager of Financial Literacy for RBC Family Office Services.

Private bankers often call on their team to help clients with financial education for their family members. It’s a big task; one that’s challenging for individuals to do alone.

“Many families take it upon themselves to educate their children about money, wealth and the family business. Parents are always juggling priorities, and for every 10 things they address, there may be three or four they’re missing. That’s where we step in to help fill those gaps,” says Ms. Dean.

When it comes to preparing the next generation, RBC private bankers emphasize the need to be proactive. “The ideal scenario is when parents are thinking well ahead about succession,” Ms. Wood notes. That way, fewer surprises are likely to emerge, like parents realizing at the last minute that their adult children have no interest in taking over the family business.

“When we’re building relationships of trust not just with parents but with their kids, we help clients avoid those scenarios,” Ms. Wood concludes.

This article was originally published in The Globe and Mail .