We all know that quantifying the most important things in life is hard.
How do we calculate the value of health, knowledge, time, experiences, or relationships (which are built through important conversations)? I imagine one day we’ll be able to calculate the value of these assets (through what our bodies signal, what our choices cost, and what our time produces), as the ability to triangulate human biology, wearables, and artificial intelligence continues to advance. And when we have these abilities, I suspect the price tag for these assets would be substantial.
But perhaps we don’t have to wait for these advancements; perhaps we can extrapolate the value of certain intangible assets based upon the information we currently have.
Here’s one example: the historic transfer of wealth, from one generation to the next, is providing us with a unique opportunity to place real numbers on the value of important conversations—and the cost if we forgo them. So, today, let’s attempt to quantify the unquantifiable in a very analog, “back of the envelope” way, by way of the Great Wealth Transfer.
I know your time is valuable (despite not being able to quantify it—insert chuckle here), so without further ado, let’s dive right into our “back of the envelope” cost of foregoing important conversations (all the while exploring a wee bit of context along the way).
As you might know, personally or anecdotally, the Great Wealth Transfer is now underway, which will place $105T into the hands of the next generation by 2048. Therefore, multi-generational conversations are more important now than ever before, yet—admittedly—they’re hard to have! In fact, 86% of Americans have not had detailed conversations with their family about inheritance.
Before we get to our math, let’s first open up the envelope to see what’s inside this 86% statistic: according to Cerulli’s research, regular family meetings and communication are rated the single most effective wealth-transfer strategy (81%) among high-net-worth advisory practices. Educational support (59%) and organized succession planning (31%) are certainly helpful, but they don’t offer the same success that communication does. Therefore, the most effective way to preserve family wealth is by talking about it.
With these considerations in mind, our back of the envelope math starts to become approachable. Let’s take the $105T set to transfer by 2048 and multiply it by the 86% (.86) of families who haven’t had a detailed conversation about it. What we see is that roughly $90T has the potential to fall through the fingers of the next generation. Why? Because the strategy proven most effective—talking—is the one 86% of families are foregoing. And I assume not intentionally! Life does get busy after all.
So, in our attempt to quantify the unquantifiable—more specifically the cost of foregoing important family conversations—we see that $90T could be at risk throughout the Great Wealth Transfer. Not because of a lack of liquidity or love, but because of a lack of communication about both.
There’s one final point I’d love to emphasize here: important conversations are net worth agnostic because regardless of net worth, everyone invests in different assets in their lives: health, knowledge, time, experiences, or relationships. And conversations are oftentimes the currency for those investments. This means that everyone might consider delving into rich conversations with loved ones today, and for generations to come. And don’t fear the hard ones, because those tend to yield the greatest returns.
So, push the envelope, open up the conversation and… happy chatting!
P.S. This summer I joined and spoke at three family office conferences. In June, The Family Office Alliance in Finland; in July, The Family Offices Global in Lake Como; and in August, Opal’s Family Office & Private Wealth Legacy Summit in the Hamptons. While each experience was unique in its own way, there was one through line: the importance of family conversations. A big thank you to each organization for creating the space for these important conversations!
P.S.S. These pictures are from Opal’s Summit in the Hamptons last month, at the stunning Parrish Museum. Highly recommend this museum on a bright, airy day or a rainy, moody day. 🌤️
I've seen the cost of not having these conversations. It's particularly difficult for the sandwich generation taking care of aging parents and young children, and for children who are left to interpret what an inheritance, or lack of, is supposed to mean.
Excellent insights Jennifer. One of the consequences of elder generations not being comfortable or forthright in having these conversations, is that for many in my generation, with children (Gen Z), we believe in much more transparency and joint decision making - which has to be a good thing.