Communication, trust & stewardship: the key elements of a successful wealth transfer

Coyne_Headshot-150x150John Coyne, Vice Chairman

Ask any advisor who has been at it for a while, most clients come to them having spent more time planning vacations than planning for retirement. Similarly, parents spend their working lives preparing money for the family, but don’t prepare the family for the money.

Research supports both sentiments. Forty-five percent of parents remain close-lipped on the topic of wealth, while only 4 percent of those surveyed indicated they hold regular family meetings where money is the main topic.

Whether talked about or unspoken, the next generation stands to inherit a good deal of wealth. Industry experts estimate between $30 to $41 trillion will transfer from the Baby Boom generation to Generation X and Millennials over the next 30 years. Another reality is that in the majority of instances, seven out of ten, the second generation loses the wealth it inherits. In 90 percent of families studied, the money disappears by the third generation.


Research cited in a 2014 Forbes article set out to better understand the shirtsleeves to shirtsleeves paradigm. It found that communication and trust played a far more influential role in predicting the success of the intergenerational transfer of wealth than planning or investments. Six out of ten of those who lost their family fortune blamed their condition on a lack of communication and trust in the family. Nearly a quarter of the respondents indicated their heirs were not prepared financially to inherit the wealth. Interestingly, only 3 percent attributed the losses to poor planning and investments.

The more the next generation knows of your hopes and dreams for the assets you’ve accumulated and plan to leave behind, the better positioned they will be to conduct themselves as financial stewards. Heirs inherit assets. Financial stewards assume the responsibility of caring for the wealth to benefit the family.

Below are five ways to encourage financial stewardship among heirs:

  1. Introduce the concept of family wealth planning. Begin to explain how family values contributed to the creation of the wealth, and how financial resources helped past generations achieve individual and family goals. Emphasize the notion that in order for wealth to serve multiple generations, family members must talk openly, trust each other and act as financial stewards.
  2. Create a family mission statement. Like a corporate mission, a family mission defines the full scope of the family’s wealth, its values and why money is important.
  3. Expand decision-making powers. The education-by-inclusion approach has proven quite successful in preparing the next generation for the assets it will one day inherit. Instead of you and/or your spouse making all of the financial decisions, you could gradually involve the next generation. Philanthropy and family vacation planning are the most common places to expand the decision-making dynamic in the family. To start, you provide parameters, set a budget, and establish your voting authority, but later take a step back and let your heirs develop a plan.
  4. Conduct regular meetings. Make legacy discussions part of your family’s calendared events so you have a forum for an open dialogue about your family’s values and vision for the future. Many families plan these discussions around events intended to create a shared experience, make memories and have fun. The activity doesn’t matter. Rather, building trust, cultivating harmonious relationships, having candid discussions and creating a healthy decision-making environment matter.
  5. Introduce your advisory team. Include your financial advisor in family meetings so children and grandchildren know where to turn when the time comes. A financial advisor can help set achievable investment goals and maintain reasonable performance expectations. When an advisor monitors, tracks and communicates progress toward goals, family members can more easily refrain from acting on short-term market conditions.

For 30 years, Brinker Capital has served financial advisors and their clients by providing the highest quality investment manager due diligence, asset allocation, portfolio construction and client communication services. Brinker Capital Wealth Advisory works with business owners, individual investors and institutions with assets of at least $2 million. To learn more about the services available through Brinker Capital Wealth Advisor, click here.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.


Prevent Social Media from Leading Thieves to Your Doorstep

John_SolomonJohn Solomon, Executive Vice President, Wealth Advisory

As the class divide widens, modesty has become increasingly important to the wealthy. A recent study indicates nearly nine out of every ten wealthy individuals (89%) believe in the concept of stealth wealth–the idea of keeping their level of wealth under the social radar.[1]

While there are plenty of statistics to support the stealth wealth movement as an aspirational lifestyle, many wealthy Americans unwittingly leave digital breadcrumbs that could reveal their riches.

If you want to fly under the radar, you and your children need to be cognizant of how the use of social media could put the family’s reputation, and even its physical security, at risk. After all, your children don’t have to use the hashtag #RichKidsofInstagram to paint a picture of their lifestyle. Simply by posting pictures, checking in at trendy locations, or tweeting family adventures could draw unwanted attention.

Consider taking these steps to protect your family’s privacy on social media:

  • Talk to your entire family about the importance of exercising discretion on the web. It’s helpful to identify and create guidelines for the appropriate and inappropriate uses of social for everyone, regardless of age.
  • Establish an alert with Google to notify you whenever your name or your children’s names are mentioned on the Web.
  • Follow and monitor your children’s social media accounts as well as your extended family’s accounts. Many extended family members may post pictures of their favorite Aunt and Uncle’s summer home, and a seemingly harmless caption could lead na’er-do-well’s to your door.
  • Have different user names/passwords for each account.
  • Regularly change and be more creative with passwords. If you are like most people, you use a password you can remember … like your dog’s name. Savvy hackers, however, troll social media sites for pictures of your pets and captions that reveal their names – which often provide fruitful password clues.

Now, managing your online presence is potentially time consuming that you neither have the time nor inclination to pursue; however, there is help. Services and applications exist to help you keep private information off the web, while also offering online reputation management services. The fact that there are so many resources available in social media protection and management is a testament to how important you must take it.

[1] New Elite: Inside the Minds of the Truly Wealthy, Jim Taylor, Doug Harrison and Stephen Kraus, p. 57

The Brinker Capital Wealth Advisory team delivers service and support to meet the unique wealth management needs of high-net-worth and ultra-high-net-worth investors, family offices, institutions, and endowments. The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Guiding Your Child to Financial Independence

John_SolomonJohn Solomon, Executive Vice President, Wealth Advisory

Good money management is a fine example of a skill best learned young. The earlier your child gains control over their financial world, the more time your child has to make thoughtful decisions that bring them closer to financial freedom and the fulfillment of their life goals.

You can guide your child towards financial independence by imparting these valuable lessons:

Promote Him/Her to Account Manager

The best way to encourage financial responsibility is to make your child responsible for their financial decisions.

When your child is young, you most likely make all of the financial decisions for them. You probably opened their first bank account when he or she was just an infant. You instruct when to make a deposit and when money should be withdrawn.

At some point, well before the child reaches the age of maturity and can legally take independent action on the account, you should begin to cede some control. The child should start to take on the responsibility that comes with managing the account, getting comfortable with the decision-making needed to guide financial growth. After all, this is the money that will fund future whims.

Once children feel ownership over some pool of money, it should be the source of funding for non-essential items. As the account manager, the child then must decide whether he or she wants something badly enough to take money out of their account. If money is spent from the account, your child will have to figure out how to replenish it. Discretionary purchases exceeding the amount available in the account should be discouraged, to emphasize the notion that money is a limited resource.

Let Consequences Teach

There comes a time in a young adult’s life when they must live with the consequences of their decisions and circumstances. For example, often young drivers fail to consider insurance, fuel, and routine maintenance when they calculate how much they can afford to spend on a car. Increased expenses are a natural consequence of car ownership. Sometimes, these overlooked costs dawn on the teen only after the uninsured car is in the driveway, with an empty gas tank. This is a prime time for natural consequences teach the lesson. If you swoop in to protect your child from a painful lesson, they learn an entirely different lesson. They learn that when their money runs out, they simply need to tap into yours.

Encouraging Surfing

Before your child makes a purchase, insist upon comparison shopping. Encourage your son or daughter to surf the internet to explore the best deals available.

Make Them Honor Financial Commitments

Teenagers can come up with all kinds of creative excuses for not following through. Backing out of commitments, especially financial commitments, should be non-negotiable. If your child asks you to float them some money for an impulse purchase, make them pay you back. If your child agrees to shovel a driveway or babysit a neighbor, make sure they show up, on time and ready to work.

Set Guidelines

Before your child receives his or her first paycheck, you should talk about the importance of saving for both short- and long-term goals. Set the expectation that each a certain percentage of pay period should go towards meeting those objectives.

Give Incentives

Some children seem hardwired to spend their money as quickly as it is earned while others save every penny. To encourage saving, consider providing financial incentives. For example, you may deposit $10 for every $100 your child puts in the bank.

Give Them a Peek

Many families don’t talk about money. Parents often worry their child will misconstrue the information, share it with others, become complacent, or endure an unnecessary burden. When you explain certain aspects of your financial life to your child, however, it provides context and clarity to your decisions. It also allows you to talk about what money means to you. Nothing makes an example clearer for a child as when you explain trade-offs you have made in your life, like buying a smaller house closer to work, so you spend less time commuting and more time with the family.

The Brinker Capital Wealth Advisory team delivers exceptional service and support to meet the unique wealth management needs of high-net-worth and ultra-high-net-worth investors, family offices, institutions, and endowments.The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Safeguarding the Family Enterprise: Children and Wealth

Tom WilsonTom Wilson, Managing Director, Private Client Group &
Senior Investment Manager

A blog in a continuing series on the safeguarding of the family enterprise.

There is a Chinese proverb that goes, “Wealth does not pass three generations.”  This fits the notion that when significant wealth is created by the first generation of a family, the second generation gets to enjoy it, but the third generation, which was so far removed from the work ethic of the first generation, squanders it.

The conversation of wealth is often missed between parents and children.  For wealthy parents, discussing money with children can be a daunting task.  When is the best age to discuss the subject?  How much is too much information?  What if I want to give my money away to charity?  The stress surrounding these questions can often prevent these conversations from taking place.

Safguarding the Family EnterpriseWhile these questions, and others, are difficult to bring up, they are essential.  They will provide the context to determine the balance between providing enough money so that the children can pursue their dreams without a concern for their finances, and not providing so much of an inheritance that a feeling of entitlement or loss of self-purpose develops.  Warren Buffet said it best when he noted that he wanted to leave enough money for his heirs so they can do anything, but not so much money that they can do nothing.

A Wall Street Journal article on the subject gave several suggestions on how to speak with kids about generational wealth.  A favorite was the example of a pre-teen son who approached his mother and asked, “Are we rich?”  The mother replied, “Your father and I are. But you are not.”

A holistic approach to wealth management can go beyond asset allocation and financial planning.  Make sure you participate in the educating of children around family wealth.

Safeguarding the Family Enterprise: Security

WilsonTom Wilson, Managing Director, Private Client Group &
Senior Investment Manager

This is the first installment of a continuing series on the safeguarding of the family enterprise

During a recent trip in Chicago, I had the opportunity to listen to a speech by Arnette Heintze.  Arnette is a former Secret Service agent who has since created a security firm that caters to the needs of wealthy families.  His presentation included many examples of how his firm has been deployed to safeguard these families.  Some of the stories were very alarming.

Arnette’s intent was not to scare the audience, but rather to make the attendees aware that threats to wealthy families are real.  From harassment and name defamation, to extortion and blackmail, to the more personal security issues of stalking, threats, and kidnapping.  The wealthy family demographic has a variety of security challenges.

Many families contact security firms after a crisis has arisen.  This is unfortunate as preventative measures can have a meaningful reduction in the risks to families.

10.29.13_Wilson_SafguardingFamilyEnterprise_SecurityA holistic approach to wealth management can go beyond asset allocation and financial planning.  If you have not discussed the subject of security with your wealthy families, consider including this on the agenda in your next meeting.  After all, awareness is one of the best preventative measures.

The Importance of Generational Listening

CoyneJohn E. Coyne, III, Vice Chairman, Brinker Capital

I had the opportunity to speak on a panel at the Nexus Global Youth Summit in New York City last week. More importantly, I had the chance to listen to and speak with a number of those in attendance.

Nexus is a global movement founded in 2011 whose network consists of over 1,000 young philanthropists, social entrepreneurs and influencers. Their unified goal is to increase and improve philanthropy and the social impact of investing. They come from more than 60 countries and represent more than $100 billion in assets. They have the commitment, intelligence, passion and clout to act on it.

I was in awe of the debate and discussion I witnessed among these ambitious, young leaders.  What they shared, how they felt, how they deviated from each other in plan but matched in vigor and passion—it was among the most intelligent discourses I have listened to in some time. The mindset of the social entrepreneurs in attendance turned the ways I have defined this area upside down.

If financial advisors, family offices and wealth managers wish to remain relevant, it is incumbent on us to help facilitate the dialogue within and across generations, understanding that if properly equipped, this rising generation will accomplish things on an unprecedented global scale. And if we, the Baby Boomers and Gen Xers of the world, don’t adapt to the methods of investing and communicating they are evolving towards, we will be left in the dust.

I want to thank Logan Morris at Snowden Capital for including me and congratulate Rachel Cohen Gerrol on this incredible event. I must give a particular shout out to the woman who spoke from Kopali Organic chocolates.  They are delicious, and you have made a convert.

7.30.13_Coyne_NexusSummitFor a more in-depth look into this year’s  Global Youth Summit, please read this event summary published by Forbes, or take a page out of the Generation Y book and check out their Facebook page.