Investing for the Next Generation | Arrow Insights | Ep 11
In this episode of Arrow Insights, Mark O’Leary and Kreston Leggett explore the growing importance of intergenerational wealth transfer and the strategies families can use to invest for their children and grandchildren. With rising education costs, an increasingly challenging property market, and shifting financial landscapes, more affluent families are looking for structured ways to provide long-term financial support. Whether it’s education funding, early-stage investing, or strategic wealth planning, this conversation highlights practical ways to create lasting financial security across generations.
Understanding the right investment structures—whether through education bonds, investment portfolios, or tax-efficient strategies—is crucial for maximising benefits while maintaining control and flexibility. In this discussion, Mark and Kreston break down key considerations, from tax implications to long-term wealth preservation, helping families make informed decisions. Watch the full episode to gain insights into how tailored financial planning can help secure your family's financial future for generations to come.
Transcript
Introduction
Mark O'Leary: Welcome to the latest edition of Arrow Insights. I’m Mark O’Leary, and today, I have the pleasure of introducing one of our advisers, Kreston Leggett. We’re discussing an increasingly important topic—intergenerational wealth transfer—and the work we do in helping families plan for the financial future of their children and grandchildren.
Kreston, why is this such a critical issue today?
Kreston Leggett: This topic is highly relevant, particularly for our affluent clients. Historically, many of our conversations revolved around wealth preservation and retirement planning. However, we’re now seeing a growing focus on succession planning and how to support the next generation.
Planning for the Next Generation
Mark O'Leary: One example of intergenerational financial planning is education funding. Over the last 30 years, we've seen how proactive planning and investment strategies—particularly those leveraging compound growth and tax efficiencies—help families manage the substantial cost of education. Planning ahead is a much better approach than funding school fees out of after-tax salaries.
But beyond education, what are some of the key reasons clients are investing for their children or grandchildren?
Kreston Leggett: It comes down to values. Many parents and grandparents have both the financial means and the desire to provide assistance. On the other side, younger generations are facing increasing financial challenges. The cost of living, housing, and even establishing financial independence have become more difficult.
The key is having structured conversations within families to ensure wealth transfer aligns with both aspirations and financial prudence.
Investment Structures & Options
Mark O'Leary: Years ago, people might have saved money in piggy banks, but today’s financial landscape offers many more sophisticated options. What are some of the best ways families can invest for their children?
Kreston Leggett: There’s a broad array of investment options, including:
Savings Accounts – Simple but offer limited long-term benefits.
Shares & Investment Portfolios – Parents may pass down shares or set up portfolios for children.
Investment Bonds & Education Bonds – These offer tax advantages for education and long-term financial goals.
Superannuation – While retirement is a long way off for children, early contributions can grow significantly over time.
Property Assistance – The Bank of Mum and Dad continues to be a major factor in helping children enter the housing market.
Mark O'Leary: And tax considerations play a big role in these decisions, right?
Kreston Leggett: Absolutely. Tax and control are two critical aspects of structuring investments.
Tax Considerations: Investments held in a minor’s name may be subject to high tax rates. Structures like investment bonds can provide tax-efficient solutions, depending on the family’s goals.
Control & Timing: Parents need to decide whether children have access to funds immediately or at specific milestones. Some families prefer a structured approach to avoid financial mismanagement.
Aligning Investments with Family Values
Mark O'Leary: Beyond financial products, investing for the next generation is about values and long-term planning. How do you approach these conversations with clients?
Kreston Leggett: Each family is different, so understanding their ‘why’ is essential. As advisers, we facilitate discussions that align financial strategies with the family’s values. This ensures that wealth transfer happens in a way that benefits not just the recipients but also the broader financial goals of the family.
For example, some families prioritize education, while others focus on helping children buy a home. Others may want to build investment portfolios that instill financial discipline in younger generations.
Key Takeaways & Final Thoughts
Mark O'Leary: Before we close, have you noticed generational differences in financial values and aspirations?
Kreston Leggett: Yes, definitely. The needs of affluent parents often differ from those of their children. The younger generation faces financial challenges their parents may not have experienced, making structured wealth transfer more important than ever.
For me, helping clients create a solid financial foundation for their children and grandchildren has been incredibly rewarding. Investing isn’t just about financial returns—it’s about ensuring future generations have the right financial education, opportunities, and security.
Mark O'Leary: That’s a great perspective. Arrow Private Wealth has been advising families for nearly 40 years, often working with three or four generations within the same family. With an enormous wealth transfer expected over the next two decades, these conversations are both timely and essential.
If you’d like to discuss how intergenerational investing can benefit your family, feel free to reach out to us. We’d love to hear your thoughts and feedback.
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