Canada’s millionaires don’t have much faith in the future.

According to a new study conducted by RBC Wealth Management, 58% of millionaires think their children are facing an uphill battle when it comes to managing their finances and 49% don’t have confidence in their children’s abilities to manage the inheritance. They are living for today and not preparing for the future.

“It is probably endemic to the baby boomer generation who thinks the next generation cannot handle things. There is also more wealth to pass on. We have all raised our children in a more affluent world and all of us wonder what effect that will have on them during the course of time,” says Tom McCullough, president and CEO of Northwood Family Office, an independent boutique family office in Toronto catering to wealthy families whose net worth is in the $10- to $500-million range.

Thane Stenner, the founder and director of wealth management at Stenner Investment Partners, an independent private family office group within Richardson GMP Limited, is not surprised by RBC’s findings. In fact, it mirrors the results of his own company’s research from 2006. In that survey, the top concern of the high-net worth clients was how their children would handle the family finances in the future.

“What is interesting is there still seems to be some procrastination taking place. That is not surprising. Most successful, wealthy families are busy. They have a lot on the go. Estate planning or issues like that are never seen to be urgent and that is one of the reasons why a lot of the times quite candidly, that estate plans are not updated and are not properly papered,” says Stenner, who works with 52 families who are worth $10 million or more.

Although 67% of Canadian millionaires feel it is their responsibility to preserve wealth for future generations and leave their children with a healthy legacy, 39% have no estate plan to speak of. Accepting the responsibility of being the caretaker of your family’s future, but doing nothing to guarantee it, might seem like an odd position to take, but McCullough chalks it up to people just being human and not wanting to face what the future might hold for them and their loved ones.

“Estate planning is complicated. It is about the future. It is about death. They don’t want to have to make those decisions now,” he explains. “I think it is one of the most important things people need to do is to sort through their personal affairs and their estate but there are a lot of folks who don’t do it, don’t get to it or don’t know how to do it.”

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Getting clients to take that leap is not easy, but Stenner has a strategy that seems to work well for him and his clients.

“It is part of our duty as advisors to gently nudge and prod our clients during regular wealth planning reviews to update things,” he says. “We actually ask permission from our clients to be the ones who follow up. Invariably they say ‘Yes’, so as advisors it enables us to persist and help them get the big picture planning done.”

The one piece of the puzzle advisors might overlook are ways to bring the children into the conversation; to educate the next generation about finances and wealth so they can make informed decisions about their family’s future.

“That’s a delicate thing. Sometimes how much a family is worth can be a taboo subject, but what we see is the most successful families make that transition well because they are inclusive with their children,” he said. “They are drawing them into conversations. They are introducing them to their advisors. The ones that take the silent approach with their kids are the one who end up having the most challenges.”

The RBC poll also found that 90% of Canada’s millionaires believe the only way for their children to learn the value of money is through hard work. When it comes to their financial success, 60% attribute their success to making long-term financial security a priority. More than half recognize the influence of their parents or grandparents in teaching them the importance and value of keeping good finances.

Canadian millionaires: facts and figures

Older millionaires

  • Average age: 54
  • Majority (59%) are married with grown children
  • Well educated — 28% have post grad degrees
  • Accumulated their first $1 million by age 42
  • 31% have household incomes under $150k, one-third (33 per cent) $150k-$300k and 30 per cent $300k + (7% preferred not to say)
  • 40% are business owners
  • 21% were born outside of Canada (and 29%of those with assets of more than $5 million)Younger millionaires
  • Under 45 with more than $1 million in investable assets
  • Are generally wealthier with 35% having accumulated assets of more than $5 million
  • Are increasingly entrepreneurial with over half (53%) owning a business
  • Are more likely to have been born outside of Canada (27%, compared to 20% of those aged 45 and over)(09/30/10)
  • Originally published on Advisor.ca