There is a Chinese proverb that translates into “Wealth doesn’t pass three generations” and “From rags to riches and back again in three generations”. The idea is that it is extremely difficult to build, preserve, and transition assets, and influence to the next generation.

The reasons can be complex and the landscape is constantly changing. Many things are outside of your control; family dynamics, individual interests, world events, demographics, shifts in cultures and values, and behaviors change as time marches forward. We recognize the complexity of this challenge.

However you want to define success, whether it’s preserving and building purchasing power during your lifetime or passing wealth across multiple generations.  Success is measured in decades, lifetimes, and centuries.  There are no easy solutions and one only gets to try once.

Consider the following.  All are known factors that have an effect on your ability to compound and grow capital over time.  I will loosely use the term “disintermediation” to convey this message.

Disintermediation makes compounding real wealth (Inflation adjusted purchasing power) less than optimal since there is always some outside force chipping and nibbling away at your progress.  No one will ever leave you alone and everyone is trying to grab.  Some of the obstacles include the following:

  • Inflation
  • Fees of all types
  • Taxes
  • Product fees
  • Trading  costs
  • Possible currency depreciation
  • Wealth transfer taxes
  • A tax system that doesn’t index cost basis for inflation

The financial services industry is a complex industry and one of the largest parts of our economy.  The only way that this industry can be so big and to support so many interests is through disintermediation.  Someone has to pay to support it.  It is basically the middle ground between saver and borrower.

Salmon Bay Wealth Management wants to do everything possible to line the odds up in your favor as you try to build and compound wealth over time.  Disintermediation is an important concept to understand and provides a rich playing field for identifying planning opportunities and strategies to help build and optimize wealth over time.