The Blind Spot Many People Miss on the Path to Building Wealth

Kamilah Williams-Kemp is chief insurance officer at Northwestern Mutual.

Wealth. While everyone has their own definition of the word, it can often feel unattainable due to economic, societal or generational impact.

I recently had the opportunity to address this and the broader topic of the wealth gap during a panel at a TED Conference in Vancouver. The perspective I shared is one that Northwestern Mutual advisors share with their clients daily: Protecting wealth while growing it and planning across generations will set the stage for financial success and reduction of the wealth gap.

There hasn’t been enough focus on the protection of risk, which is part of the reason we are seeing a lack of wealth transfer from generation to generation.

We are about to see one of the largest wealth transfers in American history, with nearly $30 trillion expected to be passed down from baby boomers to the next generations. However, dollars passed down don’t always equate to an upside in wealth accumulation.

Why?

In many cases, people aren’t focusing on key risks to their money. Things like market volatility, taxes, health problems, and living longer than expected can deplete Americans’ savings, leaving little (if anything) remaining for inheritance gain. In fact, almost 65 percent of white Americans don’t receive an inheritance or gift. For Black Americans, that number climbs to 87 percent.

I’ve seen it personally in my family. My grandparents were entrepreneurs. They earned a very healthy living. But they fell ill when my mom was still in high school. She passed on a full ride to an Ivy League school to take care of them. They died within a month of each other when she was 19. I often wonder what my mom’s life could have looked like if they’d had the tools in place to allow her to live out her dreams—even when they got sick.

Wealth doesn’t come with just a transfer or an investment; it comes with building your legacy.

At Northwestern Mutual, we’re committed to helping people create long-lasting legacies and financial futures that will continue to benefit the next generation. Our approach is simple but impactful: We focus on building wealth while managing risk. The notion of protecting what you’re building requires understanding clients’ short-term and long-term goals to recommend the best combination of financial products and services to help them get there—from investments to permanent life insurance to annuities and more. In fact, third-party research shows that a financial plan that combines all three can lead to better outcomes in retirement.

Because plans are individualized, it's imperative that clients not only identify with a financial advisor but also feel connected to that professional. That means representation matters just as much as the products we offer. We have the most diverse, fastest-growing number of financial advisors we’ve ever had, and we’re committed to growing that. It’s likely that our clients will be able to find an advisor who’s right for them within their community.

We need to have more open conversations about financial plans with our family members, earlier.

In many cases, Americans are starting over with wealth accumulation with every generation. We need to change that, and we can.

It’s time to break down those walls and have open dialogues with family members across generations to best position individuals and loved ones for the greatest financial success. After all, you’re only as financially secure as the least financially secure member of your family. It’s not easy to have conversations on what may happen if tragedy strikes or the unexpected occurs, but it’s those conversations that help ensure everyone knows the decisions to make when necessary ahead of time rather than in a time when emotions may be high.

That’s where a one-to-one relationship with a Northwestern Mutual advisor comes in. Our advisors can help bridge the conversations, help uncover blind spots in plans, and provide answers that help clients make more informed decisions in the future.

While there is still work to do to close the wealth gap, I'm optimistic that the work our advisors are doing every day—to understand our clients’ unique needs and goals, identify opportunities, and build a path to help individuals and families achieve those dreams—will set future generations up for success.