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Can impact investing more fully engage the next generation in the family’s financial planning?
Mar 28, 2017

Can impact investing more fully engage the next generation in the family’s financial planning?

Not enough parents are making it a priority to pass down to their children the knowledge and tools necessary to responsibly handle a significant inheritance. Often, they believe their children’s values have become distortedby the comforts and benefits that wealth provides when those same children are not given the proper guidance. Ultimately, these parents fear members of the next generation will squander their wealth rather than useit as a tool for positive change. The first step, then, is helping children appreciate the positive impact their inheritance can have.

This may be easier than it seems: According to a survey from Morgan Stanley’s Institute for Sustainable Investing, 84 percent of millennials are interested in investing sustainably. What’s more, the fulfillment that sustainable investments allows may well stimulate the younger generation’s interest in managing their inheritance and giving to the causes they care most about. Their excitement usually grows even stronger when they realizethese initiatives don’t hinder the performance in the portfolio, and may even enhance returns.

Children are more likely to be prepared to invest sustainably when parents have communicated their values and expectations for the family nest egg and when these children also understand their parents’ motivations. Likewise, parents are more likely to feel assured that their legacy will live on when their children and other beneficiaries learn to invest money and contribute to society via philanthropic giving.

The sooner you have the ‘money talk’ with your children, the better off your legacy will be.

Hosting regular family meetings provides a space where your closest loved ones can share both their expectations and concerns, as well as discuss issues and reach agreements together. Many families develop a family “mission statement” that outlines their family history, shared family values and common objectives. Children should be involved in these processes from an early age.

The good news is that the task of transferring wealth from one generation to the next can be finessed. Parents may achieve the results they desire through a multigenerational effort involving collaborative planning and openchannels of communication. As a business magnate, entrepreneur and philanthropist once said, “… With great wealth comes great responsibility… to give back to society and… to see that those resources are put to work in the best possible way.” The magnate was Bill Gates. And as Gates, a father of three, understood, the sooner you have the “money talk” with your children, the better off your legacy will be for both you and your children, and their future.

The Vector Group at Morgan Stanley is a financial advisory team with the Wealth Management division of Morgan Stanley in New York City. The views expressed herein are those of the authors and may not necessarily reflect theviews of Morgan Stanley Smith Barney LLC, Member SIPC (http://www.sipc.org). Morgan Stanley Financial Advisors engaged Worth to feature this article. They may only transact business in states where they are registered or excluded or exempted from registration (http://fa.morganstanley.com/thevectorgroup). Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where they are not registered or excluded or exempt from registration. The strategies and/or investmentsreferenced may not be suitable for all investors. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and federally registered CFP (with flame design) in the U.S. CRC1679035 01/17

This article was originally published in the February–April 2017 issue of Worth.

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