KUWAIT: Many heirs inherit significant assets without the necessary knowledge to manage them wisely, this can lead to financial mismanagement. By receiving financial education, heirs can learn about investment strategies, risk management, and the importance of diversification as well as other important concepts such as budgeting, taxation and estate planning.

Financial education for heirs can help prevent conflicts within families, which often arise from misunderstandings or differing perspectives on money. Ultimately, financial education empowers heirs to continue building upon the family’s wealth and creating a legacy of prosperity. A trusted advisor or wealth manager can play a key role in educating heirs and helping them make informed decisions about how to invest their wealth in ways that generate long-term returns at an acceptable level of risk.

Ideally, heirs that inherit significant wealth will invest in productive assets that generate long-term returns, such as businesses, stocks, bonds, or real estate. However, poor financial decisions — such as spending on luxury consumption or investing in low-return assets — could result in the rapid depletion of inherited wealth. Heirs should ensure adequate diversification and have a long-term investment horizon to create intergenerational wealth and build lasting legacies. With a time horizon that stretches across generations it is also more likely to be appropriate with an asset allocation that targets a higher return and accepts a higher level of risk.

The younger generation (21-43 years old) has different viewpoints on asset classes and asset allocation and therefore the great wealth transfer is likely to also have an impact on financial markets. According to Bank of America’s 2024 Study of Wealthy Americans, the most significant differences of the younger generation include a greater focus on sustainability and on companies making a positive impact, as well as less focus on public stocks.