Bloomberg Audio Studios, Podcasts, radio News. Welcome to Marin Talks to Your Money, the personal finance edition of Meron Talks Money and these bonus podcasts and they are very good bonus We talk about the best strategies for making the most of your money. I'm Maren Sunset Web and with me senior reporter and Money Distilled author John Steppeck Hi mail, Hey John. Okay. So this week we're answering a question
from Kevin who says he is a millennial. I've reminded that is anyone born between nineteen eighty one and nineteen ninety six, and it's about him profiting or sorry, benefiting. Profiting is the wrong word, benefiting from the great Wealth Transfer? Now what is the great Wealth Transfer? It's this idea that the older generation are one of the just generations ever and their money is gradually going to filter down.
These are Vanguard numbers. By twenty thirty are projected eighteen point three trillion dollars will be transferred globally, and by twenty fifty, Vanguard expects seven trillion to pass between generations in the UK alone. So that's all about the aging population. It's about increased wealth concentration, and it's about these longer life expectancies that have allowed the older generation to build up these fairly massive fortunes. Right, so we have this transfer.
It's an extraordinary opportunity for inheritance and I suppose for financial advisors as well along the way. It might be a challenge for older people to try and figure out how to do it, and it's a challenge, I guess, for everybody to figure out how to manage that money when it comes. And we all know the old stories about her generational wealth disappears, right, somebody makes it, the next generation spends a lot of it, and by the
third generation is basically all gone. And in fact, vank God do have some research on this from the US that shows that as many of many of ninety percent of wealthy families have their wealth completely disappeared by the third generation down. So if you're getting this money, you really want to find a way to hang on to it, or at least manage it well or even you know,
spend it well. So here's the question, Kevin, and by the way, lucky Kevin has inherited some money and is expecting to continue to inherit money in the nearest future. He wants to know what to do with it. So in his letter, so long a letter, he says, I don't want to just stick it in bitcoin or gold Fair or a generic SMP five hundred tracker. I find it stressful as I worry I could lose it. You could or invest it unwisely, also possible, or have it
wiped out by inflation, also very very possible. Kevin's got a good handle on the risks here. What are the best ways to get good, well rounded advice at a low cost. Currently TikTok is nudging me to a global well I mean, I guess you're getting very cheap advice from TikTok. Whether it's well rounded, I mean, I don't know about that. But your show makes me want to use an active manager. Okay, John, So I'm going to
start here with our usual disclaimer. We are not accountants, We are not financial advisors, we are not fund managers. This is not financial advice. We do not know all the nuances of Kevin's financial situation. Although we already envious of him, I'm only two minutes into the podcast. We can give him some general knowledge that we hope will help inform him on decisions he'll want to make with
his money. But actually, do you know what, Before we get onto Kevin, I wanted to start with Warren Buffett. Have you seen his letter?
Actually no, I haven't.
Not his latest Warren Buffett put uta a letter on the World Press release. I guess you'd call it from Buckshire halfaway on Monday this week, in which he talks about how he's distributing his money and gifts he's making into his foundation, etc. But along the way he talks at me such an interesting man. He talks about his will and how it's written, and his children, and he
makes his woman. He's quite old, you know. Father time always wins, he says, but he can be fickle, indeed even unfair and even cruel, sometimes ending life at birth or soon thereafter, while at other times waiting a century or so before paying a visit. To date, I've been very lucky. But before long he will get around to me. That will be a very sad day. His children are seventy one, sixty nine and sixty six, So when he talks about what he's given to his children, he doesn't
want to create a dynasty. And his cornerstone of the whole thing is that wealthy parents should leave their children, and this is the key bit, should leave their children enough so they can do anything, but not enough that they can do nothing. I hope that's what Kevin.
Is getting unless he offer I think's playing more for yeah, yeah.
And the other well, I think he's only he's left is his children are getting money, and the tens of millions rather than the hundreds of millions. And then they already got ten million from their mother, and I can't remember the details of what else he might give them. But again, they're not going to be rich, but they are going to have an insane amount of money at their fingertips to give us philanthropic gifts.
I mean, that's that's rich. And also, I mean I do think that I think Buffett is that's very sensible and all the rest. At the same time, it's got the same sort of underlying tone as a lot of his other quotes, which is that out of the context, you know, you can take them the wrong way. But I mean, for most people, leaving your kids tens of millions is enough to do nothing. His particular realm of super billionaires that you know, this is it supplies to it.
But it's good.
It's a good concept.
Okay, So what do you think? What do you think? John is enough to do anything? But not nothing? What's enough?
It really does depend on your background, because because because of lifestyle inflation, I mean, at their their level, you know, the kinds of houses they'll be expecting to live in, the kinds of places they'll expect to go to, the kind of lifestyle they're going to expect to have will require.
Although Buffett lives and as everyone always says, he lives in a relatively humble house. I've driven past it myself on my visit to Omaha, quite nice actually, and they were talking about it being very humble. It's actually very nice. But that's only because we're English. In our house is a crap and their houses a big and nice. You know, if we drive past any old house in America, we think it's amazing. It's necessarily puffet.
I mean a Buffet is unusual. I mean he's unusual in a lot of ways, you know, and by no means remotely traditional either. I mean my point is that they higher up than just your social standing and your social states. And I mean one reason because all the problems at the moment. Is Peter Touching points to is
the idea of elite over production. And what it is is you get an awful lot of kids who go to UNI and whose parents owned a house when they were x age, and you know, you find that you're you know, you think yourself being in the middle class. You've probably got a middle class job, but you're hitting forty and you're still living in a one bedroom flat where you know, a newborn baby or something like that.
And yeah, by the standards of someone brought up in Eastern house say, you might be extremely wealthy, but you certainly can't do nothing. In fact, you feel as if you haven't got anything like the amount of money you need to live even a more middle class life. And I got a lot of sympathy about that person because
it's absolutely true. So I just think that number, I don't think you can you can pull that number of out of a heart without knowing about someone's background and what lifestyle expectations are.
All right, right, all right, all right, I just wandered. I just wanted to listen. I know, the endless lecturing. Listen, everybody, listen. I want you to send me in your number. What is the number that would make you feel that you could do anything, the number that would make you feel that you could choose any career, but you wouldn't necessarily do nothing. I'm really interested in this. I've got it is.
I've got a number of mine. We will discuss this when the other numbers come and send me your numbers, and I will give you my number right now. There is one other thing that I want to read from this buffet letter. I will Keven. I'm coming to you. I'm coming to you. But there's one thing he said. This is so important that this is not for Kevin. This is for the people who might leave money to Kevin. This is buffet. I have one further suggestion for all parents,
whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it. Be sure each child understands both the logic for your decisions and the responsibilities they will encounter on your death. If any have questions or suggestions, listen carefully and adopt those found sensible. You don't want your children asking why when you are no longer able to respond.
I think that is incredibly valuable advice. Incredible. And you've seen so many families driven apart by wills that they don't understand, leave them confused, leave them angry, leave them jealous, leave them absurdly them poorer than they expected to be, etc. And it's a terrible thing. So this, if you can do this in advance, this this honesty between families, and I think that's incredibly valuable, So much valuable advice from Warren over the years. But I think that one absolutely
nailed it right, Kevin. We are actually now going to pay you some minor attention, John. What should Kevin do?
He's right about notes, thinking they're all in the bitcoin or gold, the generic.
Although we will I will interrupt you there and say, look how well Charlie's bold strategy has done. That's back. Go read my news letter from two weeks ago, learn about how if she had both over the last and while you would have done rather well. Of course, I entirely agree with John, you shouldn't go sticking it into both.
No, I think the thing he said at the start like we don't know the rest of his circumstances, and those actually really my So he needs to get an overall view of how much money he's already got invested, including an I'm assuming his auto enrollment pension. See where all that is already allocated, and then if he's happy with that allocation as it stands, then just top that
up with the money. But by the sounds of it, he probably hasn't thought about that yet, So I think what he first of all needs to do is look at it, because I'm assuming he's got some savings. So actually, so where are those just now? Kevin? Are you happy with the way those are distributed? And if you're not,
figure out how you do want to distributed. And by that, I just mean what percentage you want in equities, what percentage you want in bonds, and what percentage you want in cash and gold basically, And the other thing I would say there is he's millennial, so he's still quite young.
He's younger than me, younger than us. He's he should have a heavy weighting to equities, assuming that he's got a normal human being's risk appetite, because equities are the thing that do best in the long run and the other thing that should deliver a return above and inflation as long as what's happened in the past one hundred and nigy years continues to happen. It's not advice, it's boarding suggestions. But but that's it. We are money, now are you happy to be that? Where that is? You know?
Add to that, as long as the money's for the long term I'm assuming it is. If it's for the house deposit, then obviously he needs to stick it in a cash savings account and wait till he's built up in off. But that doesn't sound like what it's for.
No, And I suppose a thing we should say again, it doesn't seem that this is Kevin. But if you haven't got six months worth of cash in an easy access account, it is not. You're not yet ready to invest at all. So I'm really hoping that Kevin is inheriting enough that he the six months of cash and nothing to him pennies and he's got that already in a nice higher interest in scent access accounts account. That that's just paying, that's just paying for your friend.
I mean other things you could look at as if he's got a mortgage and he wants they can certain amount of security that goes by having paid that down more than you need to know. You could look at doing that to me a lot of the thing that's actually more a psychological choice. Certainly in the recent past you've been able to get an investment that's on much
better than the interest ry on your mortgage. At the same time, I remember James Ferguson once saying years and years ago that it's never a bad idea to pee down your mortgage, And I mean in terms of the psychological impact, that's definitely are I think that's a fair thing. You see.
Yeah, I think it's the same with maxing out a pension quite early. Wouldn't it feel great to have put the maximum in for say five years or something. I know that you've got a really really good base, and if you don't contribute later, everything's going to be fine. So you know that rapper that your mortgage rapper, your pension rapper, your is a rapper having those all filled up so during those years of your late twenties early thirties, so that you can then sit back and go, that's
all done. My base financial security is a show, definitely, and now I have much much more financial freedom I might have before. I really like that idea. But one of the things that he's really asking in this is do I go passive or do I go active? And that we've both written about this and talked about this
a lot over the years. So as you listen to one of our round Up podcasts from last week where we talk a lot about how expensive the US market is and about how over the long term, buying expensive is usually a bad idea and buying cheap is usually
a good idea. One of the things that is assumed in that conversation is that if you believe that the US market is in a dangerous situation, you must also believe that passive investments are in a dangerous situation, in that the US now makes up a huge amount of the global industries, well over sixty percent, and the big tech stocks in the US make up a very high
level of the US index. If you're a passive investor, you will be automatically holding a huge amount of the US and a huge amount of the very few giant tech stocks in the US.
Just for clardity here, yes, we're using passive to me a global track of whereas obviously you could buy you could buy a passive fund that only invested in the foot C two FT for example.
Absolutely, and so.
We're not really talking about low course versus high court. Well, we're literally talking about doing nothing but following the exact makeup of the global equity market index.
Yeah, which is one of the things that that Kevin asked about, you know, shitty buy one of these big, big bang global global trackers. And the answer is there's risk inherent in it. Yeah, So you can go passive. But if you're going to go passive, make sure that it's a much more diversified way of going passive. As John says, maybe you don't want that big global tracker, Maybe you want maybe you want a bit of a small cap UK, maybe you want some large CAB UK,
maybe you want some emerging markets, et cetera. But you want to I would say, and again not advice. You don't want to be too weighted to the expensive part of the global market over the next few years.
Yeah, I mean I think that makes sense. Some of it also depends on your appetite for get and involved with your own asset allocation, and that then kind of boils down in your own personal tolerance and then in your own judgment your own ability to manage this stuff and make the effort. I mean, I do think at this stage, because we talked about this a couple of
weeks ago. I think in one of the podcasts. The difference may help with Stewart, the difference between accumulating assets and decumulating and the thing about this side, the accumulating side, it's actually not that difficult, and it is something that you can probably manage yourself, unless you get extremely complicated
personal life. It's only whenever you come to start taking the money out that it starts to get a bit More's the sensitivity of various things goes right up, like when you take the cash out and the cash flows and sequencing risk and all that stuff. But the saving side, as long as you can be bothered sitting aside a day every three months or so to kind of make sure that you're up to dating what's going to be your portfolio, is pretty manageable for a more person, I think.
Well, the only thing I would say to that is that Kevin does say I find this stressful, and one thing I wanted to say is, actually, do you know what it is stressful? It is stressful investing money, having money, worrying about money. It is stressful and there's no getting away from that. And if you find it particularly stressful, then you should hire a wealth manager to do.
It for you.
You know that you can offload that responsibility onto somebody else. It's going to cost you, but you can do that, and you can do it cheaply. There are online wealth management companies now that can manage this for you. You can do it expensively by actually having you know a person who buy you lunch at Christmas and talk to you about it a lot. There are different ways to do this, but if you find having money and managing money keeps you up at night, get someone else to do it.
Yep, that's absolutely fear and Chaine should is kind of a fee based manager.
A flat fee based manager rather than a commission based manager.
Do you think yeah, rather than you know, a percentage of your of your mind?
Mmmmmm? Do you know what I think? This is a completely different podcast or it is an extension podcast. So over the next month or so we will do a Marin Talk to Your Money podcast on wealth managers online and and not online, and we'll discuss that more thoroughly. So Kevin, listen out for that one. Listen out for that one. Anything else, John, We're kind of hoping to meet you now, Kevin Dinner. Thanks for listening to this week's Merrin Talks to Your Money. If you like our show,
rate review, and subscribe wherever you listen to podcasts. Also be sure to follow me and John on x or Twitter at marinas w and John Underscore Stepic. This episode was produced by some Mesadi, production support from Moses and and sound designed by Blake Maple's questions and comments on this show and all our shows always welcome. Our show email is Merror Money at Bloomberg dot net and that is the same address that I want you to send your number into.