The 60-year strategy: how long-term wealth planning can empower

Wealth can offer a lot of benefits to a family, but can also bring pressure. It’s important to make good financial decisions so your wealth is working hard for you today and will be preserved to pass on to future generations.

A long-term financial plan should ensure your wealth is protected against inflation and is in the best position to grow in the future. In this article, we will talk you through a 60-year financial plan which will help you visualise your wealth today, tomorrow and for decades to come.

There are many reasons you might be starting your wealth journey. Our Global Advisory business frequently works with entrepreneurs who are considering selling all or part of their business, often as part of a strategy to diversify their wealth. The age of the business is not supposed to be prescriptive, but provides a guideline for broader considerations, ranging from reaching a certain stage in life or taking account of other factors such as a need for new investment or management change.

A potential business sale is a common reason to consider wealth planning, but you may also have inherited family wealth or be a professional who has accrued wealth. In all cases it’s crucial your wealth is managed sensibly for the benefit of your heirs. Our Wealth Management business works alongside a range of clients to ensure your wealth is growing and can be passed down to future generations.

2025, first generation – 45-years-old, second generation – 8-years-old

Our journey begins today, and our first generation family member has already started their wealth accumulation journey. This could be thanks to growing a business, strong career earnings or receiving a large lump sum.

Wealth preservation should be at the front of your mind. You need to ensure your money is being preserved in real terms and can grow sensibly in the future. Inflation can have an eroding effect on your wealth, particularly over many years, so you should be targeting inflation-beating returns over the long run.

You’ll have many potential places to invest your cash, so it might be helpful to divide your wealth into ‘pots’, which vary in their purpose and in the expected risk and return:

• Nest egg. Your long-term diversified investment portfolio
• Growth. Private equity, real estate, businesses owned by friends or family, individual stocks or shares
• Cash. Your income or salary, allowances, dividends, bonuses, easy-access savings
• Lifestyle. Your home, holiday or second homes, art, furniture, clothing, jewellery, cars, boats, pets, private education
• Business. Your primary business or businesses that you have founded or operate, as well as new ideas

This can help you visualise your wealth and ensure it is in the best place to grow. Diversification is important. While cash savings rates can sometimes be tempting, remember that investing generally delivers higher returns over the long term so your cash pot should be restricted to money that you need to access quickly.

Even at this early age, it’s important to engage your children on the subject of wealth. It can be interesting and fun. Whether your family has passed down wealth through many generations or has enjoyed more recent financial success, you must carefully navigate these complexities through preparation, counselling and honest conversations.

Start young and introduce concepts like value, purpose, and how to spend and save. Parents are always keen to avoid raising a ‘overindulged child’ who does not appreciate the value of money, or who fritters wealth away, so start these conversations early to put them on the right path.

2035, first generation – 55-years-old, second generation – 18-years-old

By age 55 you’ll be thinking about the next stage of your life. If you’re a business owner, this is often a period where many founders choose to sell the business, either in full or in part, and take a step back from the day-to-day management of the company. Selling a business can be a well-deserved reward for years of hard work, but also poses a new set of questions for you to think about.

After a business is sold, entrepreneurs generally go from earning a regular income to receiving a large cash lump sum. Given the regular income stream is no longer in place, the lump sum needs to generate enough money to sustain your desired standard of living.

Cashflow modelling can help you visualise how much money you’ll need to ‘retire’, for example. It’ll also help you plan one-off costs. That’s important because as your children reach adulthood you may be thinking about how you can support them in the short-term. It is common for parents to help their children pay for university fees, rather than handing over a large sum of cash at this stage.

You’ll also want to ensure they understand some of the broader financial decisions at play. It’s useful to involve your children in conversations about the purpose of your family’s wealth. Remember, your children may have a different view to yours, perhaps preferring to invest in areas that deliver a positive social impact or have higher growth potential, such as technology firms or start-ups.

As you’re having these conversations, you’ll also want to make sure you’re building a network of trusted advisers who can assist with your wider financial matters. This could include seeking tax advice, as you will want to ensure your wealth is growing in a tax-efficient way. Rothchild & Co does not offer tax advice but works with a network of trusted partners who we regularly connect with clients.

2050, first generation – 70-years-old, second generation – 33-years-old, third generation – 3-years-old

Moving on another 15 years, our first generation family member is now in retirement. You’ll have arranged for cashflow planning to ensure you can sustain your desired standard of living in retirement, but there are another set of financial decisions to consider.

The second generation family members are now in their 30s and settling down. It’s common at this point for the first generation to assist them with a property deposit to help them onto the ladder. By this stage, we’ve also welcomed a new generation to the family.

Another expense the new grandparent may want to consider is paying for their grandchild’s school fees. At this stage, you may want to examine the use of tax-efficient structures such as trusts and lifetime gifting. Inheritance tax planning could also play a role. These are appropriate conversations to have with your tax adviser and having a plan in place can give you the structure needed to make better financial decisions.

Another aspect to consider is family governance. This may include wealth management but also potentially business succession (if the business has been retained) and the next generation’s involvement. This process should establish your family’s goals and map out a framework to help navigate any decisions or disagreements in the future.

2065, first generation – 85-years-old, second generation – 48-years-old, third generation – 18-years-old

At this stage, you should be thinking about legacy. This is a topic we care passionately about at Rothschild & Co. Our business is controlled by the Rothschild family and is led by Alexandre de Rothschild, the seventh generation of the family to stand at the helm of the company. This means family, heritage and long-term thinking are at the heart of what we do.

A key aspect of this is ensuring you’ll be remembered after you’re gone and that your family members are provided for. The structures you’ve already established should help ensure that the fruits of your labour are not squandered.

Charity can play a major part in establishing this legacy and it’s at this life stage many people consider their philanthropic aims more closely. You may also want to consider establishing a charitable trust.

At this stage, we are 40 years into our 60-year plan. While nobody knows what the future might bring, you’ll have experienced multiple prime ministers and other political leaders, and the upheaval that potentially brings. There will no doubt have been highs and lows in financial markets to navigate too.

That’s why having a long-term financial plan is crucial. While everyone has different financial circumstances and goals, having a strong strategy in place is the best way to achieve continued prosperity. This includes weathering any political or economic storms.

2085, first generation – death, second generation – 68-years-old, third generation – 38-years-old, fourth generation – 3-years-old

We are now 60 years on from start of our plan. The first generation family members have sadly passed away but have successfully built a legacy that has now spanned multiple generations.

The second generation have built a family of their own and the plan put in place has laid the groundwork for the third and fourth generations to succeed, and many more beyond that.

There's an old adage that says families often go from “shirtsleeves to shirtsleeves in three generations”, meaning the wealth that the first generation builds is maintained by the second generation and then lost by the third generation. But this fate can be avoided by building a robust plan as we’ve detailed here.

But remember that preservation of wealth requires long-term thinking and for financial lessons to be passed down from generation to generation. The foundations of any successful legacy are preparation, education and communication. Achieve these three objectives and you’ll have the building blocks for generational prosperity.

^{Past performance is not a guide to future performance and nothing in this blog constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.}