Skip Navigation

​Risk Management and Multigenerational Wealth Planning

VIEW NEWSLETTER (PDF)

At historic average rates of inflation, an income stream must double every 17 years just to maintain today’s purchasing power.

Summary

Preservation of wealth is often the paramount concern for families with unique wealth, with risk defined only as loss of principal value. While investing to maintain principal can play an important role in a portfolio, a singular focus on retaining principal and collecting interest can be destructive.

At Abbot Downing, we believe a more holistic risk management program is necessary, with an examination of a much broader spectrum of risks. Our process focuses on identifying, managing, and mitigating risks so that you and your family are better positioned to achieve your vision for the future.

In this issue of our newsletter, we explore a variety of risks and provide a process to address them through comprehensive family wealth planning. We also share an Abbot Downing case study about a multigenerational family faced with a significant tax risk related to a trust distribution, and our solution to minimize taxes for family members.

KEY TAKEAWAYS

  • Playing it safe can be risky. The ability to maintain purchasing power requires some growth in wealth to counteract drags like inflation and frictional costs such as spending, expenses, and taxes.
  • The preservation of wealth requires a strategically diversified portfolio of assets, viewed holistically, and structured to mitigate the risk of a decline in any particular sector. The objective is to capture as much appreciation as possible, while at the same time avoiding potentially fatal blows to the investor’s financial health.
  • Following a structured approach to identifying risks faced by a family helps to uncover all areas of potential exposure. Abbot Downing explores multiple dimensions of risk organized into four main categories:
    • Wealth preservation and enhancement
    • Ownership and control
    • Financial security and compliance
    • Family communication, preparation, and governance

Disclosures

Wells Fargo & Company and its affiliates do not render tax or legal advice.

WRITTEN BY