Carter says wealth managers may encounter issues such as clients overspending, not sticking to financial plans, or the children not being trained properly, and the underlying cause is that the plans often don’t take into account psychological realities.

In the family discussion, “’it’s too easy to assume silence means agreement,” says Carter. “Silent fighting often happens in discussions over money.”

There’s also the mentality, prevalent among some who have grown up with extreme wealth, that “there’s always more where that came from.” Perhaps a wealth creator had a fairly hard childhood and so wanted to spoil his or her children, but they have actually done a disservice to the younger generation, explains Carter.

And while over-spending may not seem like a key concern for a client with a $30 million fortune, it is important to live within your means whatever they are in order to free up the necessary resources for long-term investing. After all, the running costs of yachts, planes and multiple properties add up very quickly.

Starting the conversation

These issues are often hard to broach, especially for advisors whose knowledge and experience lie in altogether different fields. Due to this, some engage specialists to work with their clients, giving rise to a relatively new breed of firm which comes into the family discussion specifically to tackle these issues.

Carter’s process involves a two-stage conversation. Firstly, there is the family history meeting, to try and look back over at least three generations of the family’s past and get members interested in their personal history. And these meetings should involve spouses too, in order that they feel connected, she says.

The next part of the process is the family money meeting, which is not about the financials, but about what family members want to use the money for, and what’s important to each of them.

Another approach is one that has been created by the Chicago-based firm Inheriting Wisdom, founded in 2004 by Dr Carolyn Friend and Dr James Weiner: the “legacy wheel” represents aspects which families deal with of both a tangible and intangible nature. On one side there are the tangible decisions – financial, legal, medical, cherished possessions – and on the other, there are the intangibles – spirituality, accomplishments, family culture. “Usually when people talk about money, they are thinking only about the tangibles. We believe you also need to talk about the ‘dragons’ that exist in families: jealousies, greed, the things that get in the way and how to manage them,” Dr Weiner tells Family Wealth Report.

“For the first time ever, we live in a time where it’s possible for four generations to be alive at the same time, and at least three often are. Also, families can be spread out all over the world,” says Weiner, highlighting the gap which must be breached to find common ground in families.

Reframing the conversation

There are many sides to this: first of all money is a taboo, as Weiner and Friend point out in their book, the Legacy Conversation; secondly, when it is talked about, it is usually started at from a financial angle; thirdly, as always with people, miscommunication prevails. A well-intentioned piece of advice can be taken as a confirmation of someone’s insecurities. In their book, Weiner and Friend provide the following example: Often we tell second-, third- and fourth-generation wealth holders “behave responsibly.” We do this because we believe that unless they manage their wealth successfully, all will be lost. But this admonition backfires. How easily the message turns into scolding. “You better be responsible! We all know you couldn’t have created this wealth, and you probably don’t deserve it.”

The viewpoint that firms such as Baton Consulting and Inheriting Wisdom advocate is: start from a more creative, personal angle, and end up with money, rather than starting to talk about finances and ending up at personal roadblocks. After all, a new approach can help shed light on problems that appear deeply ingrained.

Another organization that is looking at the wealth conversation is Shaking the Tree, a non-profit organization that uses theatre as a medium to raise the intangible issues around wealth.

Shaking the Tree provides “Living Case Studies” to explore the emotional issues around business succession, corporate governance in family enterprises, trustee/beneficiary relations, family decision-making, and the responsibility of inherited wealth, including philanthropy. “Family members recognize themselves in the story,” says Paul McKibbin, a family office consultant and founder of the ten year old organization.  “Afterwards, the actors stay in the first person, and draw on the experience of the audience for advice and solutions.  Allowing the actors to play out scenarios can help the family ‘step back’ and gain objectivity, trying out new approaches from a safe distance, and engaging in the discussion from a fresh perspective.”

The future?

This industry is still at a relatively early stage of development, and the wider wealth management industry is also in a state of flux. It has yet to be seen to what extent wealth management firms will embed efforts to address the issues that drive families apart in their practice. Dr Friend believes that once advisors realize the positive outcomes this can have on the end results, they will clock on; both she and Dr Weiner insist the most successful firms outsource this capability. And as wealth managers seek to differentiate themselves in an evermore competitive world, it may well be a growing phenomenon.

Carolyn and her husband, James Weiner, used that experience, and the expertise that came from being doctors of psychology, to recalculate their careers, write a book and start a new venture.

The couple created Inheriting Wisdom, a specialty consulting firm for high-net-worth families, in 2003. Wealth creates complexity, and when families start the discussion of how to create a meaningful legacy, no one in the family wants to feel marginalized or undervalued. Inheriting Wisdom is designed to give a voice to the individual and provide a method for working collectively as a family.

What Friend and Weiner try to convey in their sessions with family members is that wealth creates opportunities.
“Connected families work actively with their trusted advisor,” Weiner says. “In a commoditized industry, high-touch and strong relationships differentiate advisors from their competition.  Knowing what matters to the family, and where the challenges exist impacts planning for the financial and philanthropic aspirations of the family.”

Their book, The Legacy Conversation: The Missing Gem In Wealth Planning, is designed to convey the central concept behind their thinking:  Sustainability of the family legacy requires planning that goes beyond thinking about what to do with the “stuff.”

“Families that cultivate the centrality of family create true wealth, while passing on guiding principles,” Weiner says. “They build enduring relationships and create a meaningful legacy, leaving their mark on the world. They seek advisors who support them in this effort.”

Legacy planning, the service Inheriting Wisdom embodies, was conceived by Weiner and Friend to help wealthy families make it through difficult transitions, such as the transfer of wealth or succession of a family enterprise, without it tearing them apart or leaving future generations wealthy, but adrift and aimless. It focuses on what the family’s values are and what its members want to accomplish with their money and talents, rather than on the money itself. It also helps uncover and preserve the family history.

“Over time, we came to understand that families seldom have an intentional, purposeful conversation about what sustains them as a family,” says Friend. “Ninety-eight percent of the time is spent planning deals with tangible things, when what is important and guides decisions are the intangibles.”

The couple started in Chicago as psychologists—Weiner started in the late 1980s and Friend started her practice in 1991—to wealthy clients who confronted normal life problems, made more complicated because of the money involved.  One wealthy client led to referrals to others and that is where their new business began.

Families often become disengaged and apathetic, they say. The first step to meaningful legacy planning is to assure that everyone has a voice and to understand what can bind the family together and what can tear it apart.  When Weiner and Friend take on a family as clients, they engage them in discovery, a structured experience, asking them to put aside discussions about money and their current business challenges.  This discovery phase is necessary to prepare them for the action phase, to create or recreate a plan with their advisors.

The process of defining a legacy varies with each family, but the discovery and action phases usually have some things in common, according to Friend. After an initial meeting with the head of the family, the discovery phase begins.

The process can involve two-day sessions and is designed to give each family member a voice and to find the strengths in the family. The program is designed to accommodate the family’s schedule and could even involve a weekend retreat. The activities allow Weiner and Friend to get to know the family. Who attends the sessions depends on which family members will be involved in the legacy planning and often it will include participants from several generations.
The second, or action phase, is customized to each family’s needs and includes the development of a long-term plan and a strategy for achieving it. Meetings are scheduled as needed and can be spread out over any time frame the family desires, with the potential that some relationships could continue for years, according to Friend.

Families that end up at their doorstep can have anywhere from over a billion dollars in assets to $10 million.  What their clients have in common is the belief that they have more than they can spend during their lifetime. Inheriting Wisdom charges $20,000 for the discovery phase when a family is less than 15 people and adjusts accordingly, by the number of people and the complexity of the circumstances.  The action phase is customized based on the objectives and complexity of the issues of the family.  Families who engage in both processes can anticipate spending about $80,000.

“During our time together, participants are surprised at how engaging and fun discovery can be. This is not therapy,” Weiner says. “The discovery phase is interactive and exploratory. It can be incorporated into a family meeting or as a family gathering.”

Friend and Weiner have designed what they call a “Legacy Wheel,” which has a prominent place in their book. It deals with tangibles, including philanthropy and cherished possessions, and intangibles, such as family traditions and accomplishments. The wheel is designed to spark conversations that might not otherwise be approachable.  Inheriting Wisdom is about developing an intentional legacy through the creation of a holistic plan, according to the couple.

Some families will want to start very slowly, with a single project such as building a Habitat for Humanity home. Or they may want to move forward rapidly on several fronts at once on things that are important to everyone or to individuals. Friend and Weiner work with the family’s financial advisor, as well as any other professional who needs or wants to be brought into the discussion.

But the entire process, which can involve many meetings, is also meant to be fun and a deck of cards called “Conversation Starters” is part of the process. The cards ask questions that are meant to elicit personal feelings and information that other family members may not know. “When did you first compare your friends’ possessions to yours?”  and “A scholarship in your honor would be created in what field?” are examples.

“Many financial advisors shy away from these ideas because they are not comfortable dealing with family dynamics,” says Weiner. “From an advisor’s point of view, these are some of the things that are hardest to figure out because they focus on the intangibles, the integration of one’s guiding principles and beliefs, family culture and traditions and life experiences.  Advisors can focus on growing and preserving the family’s wealth, leaving us to focus on the family dynamics.”

Every family has obstacles, dubbed “dragons” by the couple. They include jealousy, greed, envy and other emotions that can get in the way of real planning. Why does one brother deserve more than another; how do you divide precious family possessions; who takes the lead in the family business?

Like Friend and Weiner, Tim and Judy Barg of Wheaton, Ill., came to the realization that they could use guidance in legacy planning when a grandmother died and they started cleaning out the family home.

“We uncovered a lot that we did not know growing up,” Tim Barg says. “Either they did not think it was important to tell us or we were not listening. I did not know I had been raised on land that was homesteaded by my grandfather until I came across a deed.”

The Bargs decided they wanted help in passing along the things that were important to their six children, ages 10 to 22.

“It is hard to describe how Jamie [Weiner] and Carolyn do it. It is not just a conversation about what is important to us, it was a process of sharing that transformed our thinking about what is valuable,” Tim Barg says. “We did not want our family to get upset about what might or might not be coming to them. That is part of the discussion.”

The Bargs have only done the legacy planning process with themselves and their children so far, but they say they want to bring in their siblings eventually.

Likewise, financial advisors say they feel they need assistance in this abstract part of their clients’ lives.

“The other side of estate planning is legacy planning,” says Brent Novoselsky, vice president of GCG Financial in Chicago.

“As a financial planner, we were challenged to extend beyond the legal and financial details of a family,” adds Ron Bernstein, a financial planner at GCG Financial. “We found Jamie and Carolyn’s abilities to articulate the generational transfer of life experiences important for our clients.”

“There is frequently an inherent conflict between the generations, and Jamie and Carolyn can help us work through these issues,” says Novoselsky. “The idea of passing on knowledge and ideals is that you can’t pass on the garden but you can pass on the seeds if you identify them.”

The legacy planning sessions give the principals at GCG a chance to sit with their clients with guidance and work through these issues and the obstacles that can crop up over a long period of time, rather than just highlighting the ideas in one session, the advisors say.

Legacy planning is not all “pie in the sky” thinking—it involves solid plans with outcomes, note Friend and Weiner.
“What we are trying to do for the advisor is to prepare the family so that legacy planning can be incorporated in wealth planning or family governance,” Weiner explains.

Legacy planning also allows family members to pursue their own goals as well as bring value back to the family as a whole, according to the couple. That could involve entrepreneurial pursuits or philanthropic work.  Or it could allow individuals to pursue an art or music career, or engage in research.  Family wealth provides family members with time and freedom of choice.

“We want to encourage the value of the individual, while making use of the collective strength, the ‘we,’ of the family,” Friend says.  “Then the family legacy can be intentional, articulated and passed on.”

Meanwhile, wealth managers must bridge this gap in order to help their client-families most efficiently achieve their goals, and also to ensure they keep clients in their businesses for the long run.

“It is not wise for an advisor to work exclusively with the wealth creator, especially if the next generation is already in the picture,” says Leslie Voth, president and chief operating officer at Pitcairn. “The risk is that when the decision-maker passes away, there may not be a well-understood plan in place to ensure a seamless transition. Loyalty to one does not necessarily transfer to the next generation. If family members haven’t been given their own voice in the relationship, the advisor stands a far greater chance of losing the client. It is important to have those relationships in place before the inevitable happens.”

A rich seam

It is common to hear that the younger generation are alienated from the financial advisory industry, and that advisors don’t know how to reach them.

Research backs this up. A recent survey by US Trust found that while 84 per cent of wealthy parents thought the next generation would benefit from talking to a financial professional, over half had never introduced them to the professionals who manage their own wealth. Furthermore, 27 per cent of respondents had never discussed intergenerational wealth transfer with their advisor.

Meanwhile, younger people increasingly turn to social media for advice, and are far less likely to have a relationship with an advisor in place. This represents both a great challenge and opportunity.

Same process, different tools

While many advisors probably already realize the necessity of working with “Gen X” and “Gen Y”, they may be less clued up about how to do so.

“One important point to remember is that, broadly speaking, while the tools change, the fundamental points don’t – from culture to culture, or from generation to generation,” says Charles Lowenhaupt, chairman, president and chief executive of Lowenhaupt Global Advisors.

He analogizes working with different generations to working across cultures: the vocabulary has to change.

“Chinese families are not going to talk about philanthropy, but when you talk about duty they get it. The need to define and engage in communities is true across cultures and ages, but the language, tools, and currencies change,” he says.

Lowenhaupt runs a business which has its roots in one founded by his grandfather, serving clients including families that have been involved with his family business across seven generations, so has direct experience in this matter. He says part of the solution to remaining successful in a fast-changing world is being slim-line, rather than building up complex tools and infrastructure that don’t adapt well.

“If you look at the principles – the fundamentals of wealth management – it starts with the question: what is the wealth for? That’s regardless of age or culture,” says Lowenhaupt.

Communication

But just getting younger clients through your door may be the hard part. There is perceived to be a lack of trust towards the industry among the younger generation. The disaster of 2008 likely added to this.

“If you don’t build communication tools, you’re going to lose this generation; but it’s about communicating the fundamentals,” says Lowenhaupt.

How do you communicate this point, how do you have this discussion? Lowenhaupt gives a case study of parents trying to engage their children with a foundation.

“They at first had the idea of the children being little versions of themselves, but the kids weren’t interested at all. What the kids really understood was technology. So delegating responsibility for technology to the children got them excited about the foundation, and also gave them a sense of responsibility,” he tells Family Wealth Report.

So it seems finding something relevant to their skills and interests, and delegating them some responsibility, can inspire them.

There is also a lot to be said for using technology inventively. Technology is often cited as a barrier to reaching the young (as it can be hard to keep track of the latest trends), while also being vaunted as the only way to do it. Both are certainly true, and financial services companies are investing heavily in this area.

Citi Private Bank, for example, is developing a social networking site for the offspring of its clients. The firm also launched an Apple iPad application last year, and is now moving into the iPhone application space.

The iPad app, Citi Private Bank Mobile, was designed exclusively for Citi Private Bank’s ultra high net worth clients. Users have the ability to view global economic commentary, global, equity and fixed income research, advisory services newsletters, finance reports as well as video interviews and commentary.

“They’re used to getting info from other sources, and the way they think, their concentration has been altered from growing up in front of a screen. There are firms developing websites where families can communicate with each other, and only certain people can view them, and you can learn about the family history, and this is exciting,” Dr Jamie Weiner, a principal of Inheriting Wisdom, tells Family Wealth Report.

Another example of the online portal approach is Wealth Resources, a free site recently launched to help families and their advisors prepare younger generations for their economic future.

“The fundamentals about human beings stay the same, but yes, tools change, and the younger generation are used to social media,” adds Dr Weiner.

There are many who espouse the benefits of social media, and for certain businesses it has no doubt been a useful if not essential way of marketing themselves and creating awareness.

However, it is probably not a panacea to the problem of communicating with younger clients or potential clients. Lowenhaupt does not use it for his business, as he does not think it is conducive to the kind of discussion that is productive about wealth. It is a busy and public forum, which doesn’t necessarily align well with the principles of managing extreme wealth. This is perhaps very much a matter of what kind of services you are offering and to whom.

They do want to talk

Speaking from observation as a multi-generational wealth transfer specialist, Dr Weiner says the stereotype that the younger generation do not want to engage with the family and its advisors is not true. From the “baby boomer” generation himself, he expected this to be the main client segment of his business, but has actually found there is plenty of interest from the young and wealthy.

The age-old tension between generations still and likely always will exist, “no matter what kind of a family, or where,” he says. The challenge, if you are in the position of working with wealthy families, is starting this conversation, and understanding the language your clients speak.

Conversations naturally create connections and help build the foundation for your legacy plan. As you design your plan, it is essential that you place it upon a solid base. For that structure to reflect your values, your input and leadership are required. A legacy conversation is a personal exchange with a purpose. It is a chat. The give-and-take of thoughts and ideas is clearly focused on passing on the family legacy. It is the beginning of your intentional legacy plan. You engage those people important to you, perhaps the next generation. Remember, initially it may feel awkward.

Why the legacy plan begins with you…

Keep in mind designing your legacy plan is a personal process, directed and orchestrated by you. Oftentimes you are discouraged when the pace of what you want to achieve takes longer than expected. Even with those feelings, you know from life experience that when you are moving toward a goal, it is commonplace to initially have a choppy pace. By viewing the designing of a legacy plan as a process, you allow things to unfold and evolve.

We suggest these three steps as a starting point –

Step 1: Think of an experience you shared with a family member. For example: a celebration, family gathering, or similar activity.

Step 2: As you reflect on the event, think of the small actions or comments made by a particular family member, such as your child, a niece or nephew. Identify a comment or interaction that reflects a value, such as kindness, caring, leadership, or simply avoiding an unnecessary confrontation.

Step 3: Now take the opportunity to acknowledge the action. Go for dinner or coffee and mention what you noticed. For example: “The way you attentively talked with your aunt who told you the same story three times was very kind,” or “When your uncle began getting loud and you left the room, you wisely avoided an unpleasant scene.”

This is one way to begin your legacy conversation.

We can help you with the essential elements for creating your intentional legacy. We offer the Inheriting Wisdom™ workshop series. The Discovery phase consists of Clarify Your Wisdom and Reach Across Generations.

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+ What cherished possession might your family fight over?

That’s one of the 52 questions in a deck of “Conversation Starters” cards put together by a Chicago-based husband and wife psychologist team, Carolyn Friend and James Weiner, who help affluent folks and their financial advisors look at the softer side of business succession and estate planning.

Click here to read the entire Forbes’ article on Inheriting Wisdom’s Conversation Starters.

A: “Money creates complexity.”  Advisors who emphasize this with their clients create an open-ended invitation to clients to talk about their concerns.  It’s important not to be judgmental.  Often clients look at their own experiences and can’t understand why the next generation doesn’t work or live the way they do, mistakenly believing that they have done something wrong in parenting their children. By acknowledging the challenges that accompany affluence, clients are more likely to share their own concerns. Further conversation can lead to potential solutions.

Q: What are some examples of good conversation starters?

A: In order to open the door to a meaningful conversation about legacy, we have created a deck of cards called “Conversation Starters.”  Put a serious question in the context of a game and it changes everything.  My favourite card is: “If blindfolded for a day, pick a family member to guide you.” Advisors are not trained to navigate the ‘swamp’ of family dynamics.  A good question to ask is; “When you think of family members, what are you proud of with each of them?”  Knowing the strengths of the family is a great place to start building relationships.

Q: What are clients most concerned about in terms of legacy planning?

A: While most of the time spent with families focuses on passing down the tangibles (family businesses and wealth), often the primary concern is whether the foundation of wisdom has been set in place with the next generation.  The feedback we have received regarding our book, “The Legacy Conversation: the missing gem in wealth planning,” indicates that clients are concerned about how to pass down the intangibles.  Over the past few years, when given a choice, both advisors and family members indicate that passing on guiding principles, traditions, and life experiences is more important to them than wealth.  Often they want to be able to make sure that their values drive decisions about financial matters, but don’t know how to make this happen.

Q: What key aspects of legacy planning should advisors be aware of?

A: Advisors may not be aware of the importance of the wisdom that exists within the family, but they are aware of how jealousy, greed, envy and power struggles, what we call the “dragons,” cause chaos.  While many know how to get through that to generate decisions, most see the intangible concerns of families as the kind of pain that we all just have to live with.  It is important that advisors learn that their clients do not need to live with the uncertainty of how the family will handle the complexities that come with the wealth.  In fact, they can help find the resources to create a conversation that will aid families in creating a legacy of opportunities.

Q: Do high net-worth individuals understand the gravity of what can happen without a legacy plan in place?

A: A legacy plan goes far beyond a traditional estate or business succession plan. It can address the opportunities and concerns that exist within a family.  We believe high net-worth individuals are acutely aware of what can happen by not having an intentional legacy plan, but perhaps they believe that they have no other option other than to develop a plan that defends against the potential dangers that could exist over time.  By investing time in addressing the potential opportunities that exist, it becomes possible to continue to contribute to the family and the work for multiple generations.

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