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Do your children expect to inherit from the ‘Bank of Mom and Dad’? Recent surveys point to mismatched expectations between generations on the issue of inheritance and just how much they can expect. A recent Vancouver survey made waves when it revealed that 39 per cent of British Columbian millennials expect to inherit $300,000 or more, while only 12 per cent of parents anticipate being able to match that amount.While about 1.5 million Canadians are apparently relying on inheritance as the primary source of funding for their own retirement, their reality may be markedly different when the time comes. Decima Research’s 2006 Canadian Inheritance Study indicated Canadians then expected to receive $150,600 compared with the actual average inheritance of $56,000.

[PNG Merlin Archive]

So how do you feel when you hear about the much hyped great wealth transfer that is expected to take place over the next 20 years? An estimated $1 trillion is said to be changing hands in Canada as boomers pass down their wealth to the next generation. If you are like many people, the idea is fraught with emotion:

How can I leave a legacy to my children and grandchildren when I don’t even know how long I will live? How much will I need to age comfortably in a volatile economic market?

I meet with people approaching retirement age almost every day and nearly all of them are wondering these same things.

This week was Make A Will Week in B.C. and it brings up the question, “What do I do?” I believe people need to think about investments and financial decision-making in a new way, to take what I call “smart risks.” Emotions — our own limiting perceptions, beliefs and expectations — are often what hold us back from making significant financial progress. To overcome these, I recommend a framework that follows five guideposts, or the ‘5 P’s’, to help you rationally and objectively assess probabilities of outcomes and compare risk versus reward in a prudent and disciplined way. This allows you to consistently stack the odds in your favour and keeps you on the path to long-term financial success.

  • Purpose: whether you are looking to secure your own financial future or leave a legacy to your children, you need to begin by defining your purpose;
  • People: surround yourself with the right people to help you make smart decisions. Build a circle of trust with people who are experienced, resourceful and who have your best interests at heart.
  • Plan: a good plan is one that is designed to be flexible as the marketplace takes unexpected twists and turns and sets appropriate risks and return targets.
  • Perspective: being open-minded to changing your views will allow you to take actions that break through any emotional baggage holding you back.
  • Positive Action: this is often the hardest step; it is also where the momentum and resilience you’ve built up can propel you forward to achieving your goals.

You’ve worked hard all your life; it’s time to make your money work hard for you — and for those you love and plan to pass it on to. Starting with the 5P’s can help you clarify steps to achieve your purpose, and then prepare for the conversations with your kids to help manage expectations effectively.

Maili Wong is executive vice-president and senior portfolio manager with Wellington-Altus Private Wealth.  Her published book Smart Risk: Invest Like the Wealthy to Achieve a Work-Optional Life became a #1 bestseller on Amazon.


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