Managing money for wealthy families is becoming less about asset management and more about making sure the generations that inherit that wealth know how to keep growing it. To some clients, the asset management role has become a “commodity,” Chris Heilmann, U.S. Trust’s Chief Fiduciary Executive and a Managing Director of Bank of America, tells eFinancialCareers. What clients with more than $3 million of investable assets increasingly need and want is help educating their children and grandchildren on how to make future financial decisions.
More than half (58%) of wealthy parents are not fully confident their children will be well-prepared to handle a financial inheritance, according to the 2013 U.S. Trust Insights On Wealth And Worth report, which surveyed 711 high net worth and ultra high net worth adults across the country. Many parents don’t think children will be mature enough to manage their inheritance until they are at least age 25, and 57% believe their children will be mature enough between ages 25 and 34. Nearly half (49%) of parents age 68 or older believe their children won’t be ready until they are older than 40.
While nine in 10 wealthy parents believe their children appreciate the privileges of family wealth, nearly half worry that the next generation also feels entitled to their inheritance and that this will prevent their sons and daughters from achieving their own success, the survey found. Two thirds of those who already have received an inheritance were given a lump sum payout of cash without any guidance on how to invest it.
Heilmann says U.S. Trust identified these problems and a dire need to educate children and grandchildren of primary family wealth holders in 2008, when the survey revealed that a staggering 78% of respondents said they felt that children couldn’t handle the family’s wealth responsibly. U.S. Trust's Financial Empowerment program was created to teach young adults in their 20s and 30s how to make informed financial decisions on philanthropy, trusts, protecting wealth and preparing for and reacting to life events.
Sometimes young adults are more inclined to listen to a third party than to their own parents and grandparents, Heilmann says. The financial empowerment program starts with a short online demo and then a customized program can either be delivered online, in one-on-one sessions or in groups for the entire family. “You’re not going be relevant if you’re not online,” says Heilmann of courting the next generation.
Each member of the wealth management team must be comfortable and capable speaking with young people.
“We do not sit here by design saying we are hiring someone younger. It stands to reason (that) as we continue to hire advisors and investment professionals, a crop of interviewees can tend to be on the younger side. We look at that in terms of having the right chemistry,” says Heilmann.
“We have intern programs that are alive and well,” he says. “One of benefits of adding individuals who have recently graduated is if they are interested in this business they can work side by side with very experienced people. That makes for a great long time career.”
“Very clearly the mindset needs to shift from a client based mindset to a family based mindset,” says Heilmann. “Success in this space is having professionals who can work with clients and families. …This is not a one-string guitar.”