This article is part of our summer special report on wealth in Canada.
Bill McLean sees it all the time: the family that puts off having the “wealth talk” with children. Fearing the next generation will grow up spoiled and entitled, the family founders neglect to tell their children that they are affluent, fail to discuss future plans and do not assign roles to carry the business forward. Often, the next generation become adults without fully realizing their family’s wealth.
The reason this happens is simple, says McLean, partner and head of family business transition at Richter in Toronto. “The parents were largely raised in a world where people didn’t discuss this,” he says. “It’s quite obvious that the family has everything—vacations, homes, private school—but it’s the biggest secret in the world.”
The challenge, says McLean, is when the children get into their 20s and 30s or even later, and discover the extent of their family’s wealth. “They end up getting this massive wealth shock, where they now become aware of how much the family is worth or what is going to be coming their way at some point in time. It’s emotionally paralyzing for some of them.”
It’s a big mistake—but one that can be reversed, says Jeff Halpern, business succession advisor, TD Wealth in Toronto. “It’s not too late—even at that stage.”
Halpern says it’s the job of advisors to “go in and interview not only the patriarch of the family but also the next generation to find out what their views are, what their goals are, what their vision is. A facilitator can really make a difference to creating a pathway for how to do this in a comfortable manner.”
While some may put wealth conversations on the back burner, the families that are transparent about the wealth generated by the family business may help ensure that their business continues to thrive long after the matriarch and patriarch are gone. These conversations should start early and involve the assignment of roles and sharing of future goals. Advisors can initiate and facilitate these conversations to ensure the views of the generations are represented.
McLean urges families to reach out to a trusted advisor. “There might be some personal pain associated,” he says, “but if it’s on your mind, go and have the conversation with the right person.”
Six best practices for talking to children about your wealth
Brad Jesson, vice-president, family office advisory at Northwood Family Office in Toronto, says his firm has been holding dinners across Canada with its clients to facilitate those exact conversations. “We’ll have 20 people in a private room at a restaurant and we’re talking about kids and money,” he says. “It’s a popular topic.”
Jesson says the first thing he conveys to his clients is that the approach isn’t one-size-fits-all. “There’s no silver bullet solution,” he explains. “Parenting is very personal. All you can offer is best practices.”
Those best practices include:
Start financial education early
Jesson believes that financial conversations should begin with informal chats about money between the ages of 7 and 10. “It can’t be ‘When they’re 18, we’ll put them in a program,'” he says. Some common educational strategies include delaying gratification by saving up to buy a special toy, or putting aside some money every month. The focus should be on self-control and judicious spending.
Begin with values before discussing wealth.
Advisors are well positioned to lead discussions about a family’s values. Halpern says that many of the conversations he has with clients focus on what the family stands for, what its philanthropic goals are, and what is expected of family members. “I think it’s understanding the vision of the family, the values of the family, what this family wants to see happen, so that you become a participant in it, not just a bystander,” he says.
We’ll have 20 people in a private room at a restaurant and we’re talking about kids and money. It’s a popular topic.
Brad Jesson
Hire a professional to help spark the wealth conversation.
“You don’t have to do it alone,” says Halpern, adding that advisors have a big role to play in ensuring families convey what wealth means—and how to manage it effectively. They can facilitate family meetings, provide financial education to younger generations, assess financial literacy and encourage communication between generations. “There’s no single specialist who does everything with regard to this,” he says. “There are teams of different professionals that are involved in this process.”
Avoid parenting with a wallet.
Jesson tells his clients that families who indulge their children continually without discussing where the wealth came from don’t end up with children who become conscientious stewards of wealth. “It’s easy to parent with your wallet, but that’s not going to win over the long term,” he says. Instead, he suggests families not use money to solve parenting challenges, but rather revert to commonsense approaches.
Normalize money conversations.
Families should discuss wealth in stages as children get older, says McLean. He suggests matching discussions to the children’s abilities and maturity, making them accustomed to hearing about money and how it’s best managed. “Start to normalize it, so that they understand that wealth is not something to be embarrassed of, but it’s something to be proud of.”
Discourage wealth flaunting.
Families should discourage younger generations from showing off wealth, particularly on social media, says McLean. Not only can this create tension among peers, but it can also be a security issue. “It potentially creates risk for the individual or for the family,” he says. “There are a lot of cyberattacks that occur based on information that’s provided on social media.”
The end goal, for Halpern, is arming the next generation with skills around wealth management rather than simply transferring wealth and hoping for the best.
“Preparing the next generation is more important than simply transferring wealth,” he says. “The human side of succession is every bit as important as the financial side.”
Anna Sharratt is a business and health reporter and editor with more than 20 years of experience. Based in Toronto, she has written for Canadian Family Offices since 2021. A regular contributor to the Globe and Mail, she has written for Inc.com, Forbes, Business Insider, Canadian Business, MoneySense, the National Post, The Toronto Star and other publications. She is the former managing editor of smallbiz.ca, health editor of Chatelaine and senior health writer for the CBC.
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