ELITE ADVISOR BEST PRACTICES
What’s Keeping the Affluent Up at Night?
Knowing the secret fears of the rich can give elite advisors a significant edge
By Vic Preisser and Roy Williams
- Research shows that high-net-worth individuals care more about the impact of wealth on their heirs than how much (or how little) wealth will be passed on.
- Philanthropy is an excellent vehicle for discovering meaning and value in the wealth heirs receive.
- In the future, well-prepared financial advisors will complete the second half of the estate-planning equation—preparing the heirs for the assets.
With the elections finally behind us and an uncertain tax landscape on the horizon, there’s an awful lot to keep the affluent and their advisors up at night. But does great wealth really bring fulfillment? An ambitious study by Boston College suggests not. In an article about the study, The Atlantic’s Graeme Wood notes, “For the first time, researchers prompted the very rich—people with fortunes in excess of $25 million—to speak candidly about their lives. The result is a surprising litany of anxieties: their sense of isolation, their worries about work and love, and most of all, their fears for their children.”
Wood’s observations reinforce what we at The Williams Group have discovered through years of working with wealthy families. We co-founded the Institute for Preparing Heirs to educate advisors on how to make families aware of the risks they face in the transition of wealth and how to offer tools and resources for families to use on their own or with guidance from their advisors. If a family elects to take further steps, resources are made available.
Further reinforcing that finding, the biannual U.S. Trust Survey of Affluent Americans (XIX) asked parents what they worried about most. Their primary worries had nothing to do with tax or wealth-transfer issues. No, their top six concerns were centered on the impact of wealth on their heirs!
- 65 percent: “Too much emphasis on material things”
- 55 percent: “Naive about the value of money”
- 52 percent: “Spend beyond their means”
- 50 percent: “Initiative could be ruined by affluence”
- 49 percent: “Won’t do as well financially”
- 42 percent: “Hard time taking financial responsibility”
The greatest secret fear of the super rich and just plain rich seems to be centered on their heirs and their heirs’ families—not on how much or how little wealth can be passed on. Dr. Bob Kenny, the principal researcher of the Boston Study and also a visiting faculty member at the Institute for Preparing Heirs, stated that philanthropy is an excellent vehicle for discovering meaning and value in the wealth that heirs receive. As noted in the aforementioned Atlantic article, philanthropy “helps teach the giver that money sometimes carries its burden with it and can harm or unsettle a recipient if given without caution.”
Perhaps participating in the act of philanthropy gives an heir a clearer view of some of his or her own personal feelings about inheriting wealth.
You might say the big secret is that the rich consider their greatest treasure to be their children, not their financial assets. To hear that about the rich may alter conventional wisdom at a time when we are facing the largest transfer of wealth in history—almost a trillion dollars a year for the next 50 years in the United States alone! Couple that with a historic post-transition loss rate of 70 percent and you have both a tragedy and an opportunity in the making. So what can the professional advisor take from this unique study and its disclosures?
First, pay attention to the concerns of the wealthy with respect to the impact of wealth on their heirs and heirs’ families. Learn how to initiate conversations about that topic of money and its impact on heirs. It’s the primary concern of the parents (not just the latest tax regulations).
NOTE: Our firm’s book “Preparing Heirs” offers ten questions that serve as conversation starters on the topic of intergenerational wealth transfer. Call us at 626-389-8664 for more information.
Second, develop your own knowledge base about how to measure or assess the risks heirs may be facing. What exactly are the heirs’ deficiencies, if any, that are of concern to the parents? How great are those deficiencies? Are the deficiencies actually measurable with any known assessment tools? Assessment or measurement tools are now available from the Institute for identifying and measuring the risks faced by an individual family.
Third, educate yourself about resources that are available to help affluent (potential) clients. When clients seek to take action to manage the impact of wealth on their heirs, where can you direct them for assistance? What resources might help them better prepare their heirs? Currently, the Institute is assembling a National Family Coach Registry—a collection of experienced family-coaching specialists. Much like a registry of CPAs or a list of members of the State Bar (with specialties of practice areas noted) or the Society of Trust and Estate Planners, a new resource is emerging that can help families ready their heirs for wealth and responsibility.
In the future, well-prepared financial advisors will help complete the second half of the estate-planning equation—preparing the heirs for the assets. That is the future of estate planning because the tools for preparing the heirs for the assets are becoming established and available to those advisors who are trained in their usage. The professional advisor who knows the unspoken concerns about heirs and can confidentially and professionally raise those concerns with his or her client may possess the greatest differentiators available to an advisory practice.