A Spanish proverb says, “First generation, trader; second generation, gentleman; third generation, beggar.” That’s an over generalization, but as with most sayings, there is some truth to it. Preserving wealth over centuries mainly comes down to proper succession planning. Families need a structured approach supported by complete documentation. That also presents a key challenge for wealth managers: how to support clients in structuring succession planning so that it reflects each generation’s preferences and priorities?

The challenges of passing on wealth

There is a natural psychological barrier to preparing for the death of a beloved family member. But postponing the necessary steps can be a costly mistake, as tragic events often come as a surprise. Succession planning might be an uncomfortable process, but the risk of losing what has taken a lifetime to build is much worse.

The handover from one generation to another is a challenge that involves the whole family and its advisors. Everyone should be on the same page. Those who pass on wealth are just as interested in proper succession planning as those taking over. However, the generation in charge may, understandably, feel uncomfortable giving up control over its affairs. Besides, it may fear overburdening the following generation by handing over too much responsibility at once.

On the other hand, the incoming generation may be eager to take over that responsibility and would prefer to speed up the process; yet, it is often blocked because they can’t access information. That can be particularly painful if the family has a business that needs one person to be fully in charge.

Besides the psychological barriers to succession planning, incomplete documentation adds to the struggle. Many families still keep paper-based documents or excel files. Even worse: some data might not be recorded anywhere. That creates a single-person risk – if the person safeguarding the information dies unexpectedly or suffers memory loss, data could be lost forever.

Technology as mediator

To avoid the pitfalls of improper succession planning, all involved parties seek an adequately managed process. The good news is that technology has made this process significantly easier. Digital wealth management platforms provide comprehensive solutions for the challenges ahead.

In the old days, passing on wealth meant discussing account statements, paper folders and excel sheets, explaining what the family owns, where information is stored and how to access it. The greater the wealth, the more complex the handover, and the more oversights typically happened. Information might dispersed or insufficiently documented, increasing the risk that following generations would not even know about certain family assets, let alone how to access them. 

Technology can greatly reduce this risk. On modern wealth management platforms, users can store all information in a digital vault. Ownership documents, mortgage contracts, insurance policies or account statements; the digital vault provides a single data centre where everything is recorded. The account owners can decide which folders, assets and documents they want to make accessible for other users at what moment. Thus, family heads might give their children access to parts of the family wealth without passing on too much information and overloading their successors. They could subsequently open up more information, giving the incoming generation time to grow into its new role.

As such, wealth management technology becomes a mediator between generations. For those who take over wealth, technology becomes a means to access information; for their predecessors, it provides a way to share responsibilities step-by-step. And for both parties, digital platforms provide insurance against the sudden death of the person safekeeping all information. Data won’t be lost; instead, it will be easily accessible, organized, and up-to-date. Family knowledge and wealth remain protected.

More than just data aggregation

In most cases, the incoming generation will be more open to using digital technologies. At the same time, the current wealth holders might prioritize the paper-based filing systems they have used for a lifetime. Wealth management platforms need to address privacy and security concerns, provide a secure infrastructure and user-friendly interfaces. It’s also paramount that account owners (i.e. the account holder) can share information with their successors and involve external advisors such as tax or real estate consultants.

That’s why the ideal wealth management platform is more than just a data aggregator. It’s an interactive platform where all involved stakeholders can communicate and participate. It’s a single point of truth and a tool that makes passing the baton to the next generation easy. While professional estate planning remains essential, technology can provide solutions to one of the biggest intergenerational challenges of wealthy families.