PARENTS who withhold knowledge about managing assets are inadvertently preventing the next generation from maintaining any wealth they acquire.

This issue was a key focus during a panel discussion titled ‘Building Bridges to Legacy: Unlocking Generational Wealth through the Capital Markets’ at the Jamaica Stock Exchange’s 20th Regional Investments and Capital Markets Conference, held at the Jamaica Pegasus hotel on Thursday.

“Research has shown that if you are wealthy now and you are not prudent, you’re not consistent, and you’re not teaching the right values, 70 per cent of rich families don’t pass their wealth to the second generation,” said Terise Kettle, senior vice-president of investment banking at Barita Investments Limited.

Investment experts have identified common mistakes that hinder the successful transfer of wealth across generations, leading to its decline by the second generation. Speaking on the importance of building generational wealth, experts emphasised that understanding the concept early can provide long-term benefits, including financial stability, a safety net for future generations, and opportunities to pursue otherwise unattainable goals. A key aspect of generational wealth is the efficient transfer of assets from one generation to the next. However, a common concern among those establishing successful businesses is whether the next generation will have the knowledge and skills to manage those assets effectively. Teaching family members prudence and financial literacy is critical for ensuring that wealth is not only passed on but also preserved. Experts stressed the importance of education tailored to specific types of assets. For example, understanding how inherited assets, such as a family business, generate value requires a different approach than learning about equities or stocks. The failure to educate heirs on how to maximise and sustain these assets often leads to their mismanagement.

“We’re seeing a number of businesses where the family businesses are good strong businesses built up over many years, and the generation that you would want to pass it on to has zero interest,” said Kareem Tomlinson, managing director of GK Investments Limited.

For these challenges, Kettle recommends starting financial conversations with family and children early. However, she acknowledged that Jamaica continues to struggle with a culture of secrecy surrounding finances, which poses a significant barrier to building and sustaining generational wealth. She stressed that this cultural reluctance to discuss financial matters must shift if wealth is to be successfully passed on.

“If I’m not well educated, I don’t know what is happening; I’m not financially literate; I’m not going to understand how it is to even run the business or how it is that I’m going to be investing in the stocks, bonds, and managed funds that I have in my portfolio,” she cautioned.

The capital markets, such as the stock market, offer one of the most accessible strategies for building long-term wealth, according to investment experts. They stress that starting young is critical, as compounding becomes the most powerful driver of a portfolio’s growth over time. GK Investment’s managing director has noted a growing interest in building generational wealth but observed that younger individuals tend to “think very near term.” This short-term mindset, particularly in the stock market, can undermine long-term wealth-building efforts and lead to outcomes that are the opposite of what is intended.

“You need to stop taking money out of the account every year for expenses or other things. There is value in keeping a percentage of your savings in a place where you can reinvest consistently. That compounding effect over a long period of time is very powerful—the younger you are, the stronger it is,” warned John Kim, chief executive officer of Reckoner Capital Management.

Traditionally, building wealth through the capital markets has involved a mix of equity and fixed-income investments. However, experts emphasise that financial literacy is a critical component that must be addressed to help individuals make informed investment decisions. They caution that a blind approach to investing can lead to missed opportunities for maximising growth. Using the US capital markets as an example, Kim highlighted the performance of the US stock market. He explained that over the past few years, the S&P 500’s impressive returns have been disproportionately driven by just a handful of major stocks, including NVIDIA, Tesla, Amazon, and other big tech companies. When excluding those top performers, the broader stock market returned only 4 to 5 per cent, significantly underperforming for the majority of investors who did not hold positions in these key stocks.

“There is a financial literacy component that needs to be brought to bear. It’s not enough to take a blind approach to the capital markets. There is an education component, and the way to address this is by starting to read about what is happening in the market to make informed and valuable assessments about your portfolio,” said Kim.

According to the experts, understanding the basics of financial literacy is crucial for approaching the market with confidence and making smarter investment decisions. It is also crucial in the journey of wealth building and generational wealth being held beyond the second and third generations.