If you're like some advisors, you think of your clients' children only when you need some idle chit-chat to fill gaps in otherwise productive conversations. (Or you may view the kids as decadent descendants, draining the parents' portfolio faster than you can grow it.) But treating your clients' offspring with ignorance and apathy (you don't know them, and you don't care about them) means you are neglecting the most important aspect of the parents' very existence. Here's why and how you should use your skills to foster money harmony between generations, and ensure a position as the family's primary advisor today and tomorrow.
@*BODY (Minion):Advisors grab at straws to find what money and lifestyle “hot buttons” they can push to connect with clients. But for all the talk about beta-adjusted alpha returns or the virtues of a bottle of 1993 Pouilly Blahblahblah, the most urgent issue may be right under your nose — and is probably living under your clients' respective roofs.
Since 1993, U.S. Trust has surveyed a sampling of the wealthiest slice of Americans. For 2006, only those with annual incomes of at least $300,000, or a net worth of at least $6 million, made the cut.
One question asked of those with six-figure incomes and seven-figure portfolios is: “What is your biggest financial concern?” The money worry cited most often over the years (and by 83 percent of respondents in 2006) has not been taxes, investment performance, the economy or even “I can't understand my brokerage statements.”
Instead, it has been: “I'm concerned that my next generation will have a tougher time financially than I did.”
And if this is the biggest financial fear of the wealthiest 1 percent of Americans, imagine the anxiety held by those who may not have the luxury of bequeathing millions to their beloved beneficiaries.
Where You Come In
As long as a client wishes to provide for a child's financial future, it's a given that you'll be in charge of the planning and investing needed to achieve that goal. But your importance and expertise can go far beyond just overseeing college savings accounts, trusts and life insurance.
Your first step may be to simply suggest holding an introductory meeting with the clients and their children (bonus points for you if the kids could already pick you out of a lineup). Topics for discussion could also include why the parents are saving and investing; the expectations they have of the children for both contributing to and benefiting from the money placed with you; and how you may be able to help the kids now and in the future.
[Oh, and you might think that your clients' kids are more interested in MySpace pages than money management, but you'd be wrong. The Wealth and Values Survey from PNC Wealth Management found that three-quarters of wealthy teens “felt a strong sense of responsibility” to properly handle their share of the family fortune.]
With your clients' approval, you may even want to schedule future conversations with older children — without the parents. Developing a one-on-one dialogue can accomplish two goals. First, it gives kids in their late teens and early 20s an opportunity to broach money topics that might be mutually uncomfortable to discuss with parents. Second, it may prevent the kids from turning to another advisor for help, whose proverbial camel's-nose-under-the-tent could be the first step to stealing the entire family's assets out from under your oversight.
Serving Two Masters
Helping your clients' children develop the wisdom needed to manage wealth is a noble and needed function. But swinging from limb to limb in the family tree can require diplomacy and discretion. From the outset, both your clients and their children need to understand that although you can help the kids answer questions about financial planning and investment concepts, any information pertaining to numbers and dollars has to be provided by the parents, if it is to be provided at all.
Certainly, it's a good idea to find out what your clients' biggest concerns are for their children and their money, and to do what you can to guide the kids toward the desired outcome. But you'll never gain the trust of the younger generation if your advice just parrots what they're already hearing from the parents.
Instead, phrase the guidance in the manner of, “Your mom and dad are concerned about the cost and benefit of sending you to grad school. Here are some things you might want to do to alleviate their fears.”
And if your gentle admonishment can't steer a wayward child back on to the proper path, appeal to her inner greed instead. “You know,” you might say, “money is a funny thing — especially when it comes to parents. They tend to give more to those who seem to need it the least.”
Writer's BIO: Kevin McKinley is a CFP and vice president of investments at a regional brokerage and author of Make Your Kid a Millionaire — 11 Easy Ways Anyone Can Secure a Child's Financial Future. kevinmckinley.com
It's hard enough to explain hedge funds and housing starts to the average adult. Getting someone half your age or less to grasp money basics is even more difficult.
@*BODY (Minion):Thankfully, there are plenty of programs available on the Web to help advisors teach children of all ages the knowledge and discipline needed to become and remain financially secure.
The most comprehensive of the bunch is that of The Jump$tart Coalition for Personal Financial Literacy (www.jumpstart.org). The nonprofit is a partnership between dozens of public organizations and private entities, one of which might be your employer.
And since April is Financial Literacy Month (as if I had to tell you), now is a good time to start perusing their offerings. Start with the Jump$tart Clearinghouse (www.jumpstartclearinghouse.org), a vast compendium of CDs, DVDs, teaching materials and interactive Web sites, all of which are geared toward initiating newbies into the wonderful world of wealth.
If any of your clients are mothers, fathers, sons or daughters, you should pick up a copy of Wealth and Families by Charles Collier, the senior philanthropic advisor at Harvard University. Published last year, and priced at just $15.00, the author shows how families can use wealth to maintain and enhance not just their own well-being, but the rest of the world as well in just 110 pages.