This weekend, Michelle Slatella’s article in Barron’s, “Goodbye Family Fortune” caught my attention. As I’ve said before, I’m not a big fan of how-dysfunctional-families-lose-their money articles. They’re titillating as only dirty laundry about the rich can be. But I’m struck with how rarely the families we work with at Independent Means show up in such pieces. We’re just not very helpful to families who persist in spending more money on litigation than education.
But Slatella is a terrific writer, so I read it. She writes:
“The hysteria among the super-rich is palpable. They’re worried their kids and grandchildren will fritter away the money it took forebears lifetimes to earn. They’re asking: How do you prevent a child from growing up to be a ne’er do well? Should you leave a spendthrift heir nothing? Or money with lots of strings attached? And what if the family squabble escalates into an expensive lawsuit? “
Slatella goes on to share juicy stories of family dysfunction. There were at least half a dozen screenplays waiting to be written in the article, but the line that really caught my attention was this:
“Increasingly bankers and advisors are offering to talk to the kids on behalf of their parents.”
Can we talk about how many parts of that sentence are wrong?
With all due respect to my friends in finance, this is like saying my dentist has been cleared to discuss my heart problems. It should seem too obvious to say, but: bankers and advisors are experts in finances, not education. And then, having the banker talk to kids on “behalf of the parents”? Abdicating parental roles—and family leadership—to one’s banker is the real risk to the family fortune.
Fortunes are made—and sustained—by people who are ready and and prepared to handle the responsibilities of wealth as well as the privileges. That doesn’t happen by accident. I recently spent a few days with a family who began training their kids for the responsibilities of wealth when the children were very young (the youngest was just turning five at the time, the oldest 13). This is a fun family to work with. As the dad describes it, “The process is organic, part of what the kids see as ‘normal.’” What the dad was saying is that the education process we put in place is integrated into the family values, the expectations of the children, the very core of who they are as a family. I was reminded of how this family works at it—steadily—when, as we got out of the car to attend a function celebrating the opening of a museum they helped establish, the dad turned to his kids and asked, “Are you ready? Do we have our manners on?”
He was reminding his kids, clearly but kindly, of who they were and what was expected from them. This dad will not be asking his banker to talk to his kids on his behalf. He doesn’t ask me to talk to them on his behalf. He talks to his kids. They understand that they have great privilege. They know that responsibility accompanies that privilege because their parents have an ongoing conversation with them about this.
SEPT. 26, 2008.
The markets had been tanking all week. I was giving a talk on Raising Financially Fit Kids at the Harvard Business School Alumni Reunion. People poured into Morgan Hall that day. These masters of the universe were filled with anxiety—about their assets—and their kids. There were roughly 300 people in the room and I began by asking, “How many of you have talked about what’s going on with your kids?”
THREE people raised their hands. Out of 300. ‘What did you say?’ everyone wanted to know. One guy told us he’d given his 10-year-old daughter a lesson on what “sub-prime” means. ‘She really understands now!’ he laughed. Another man said he’d been on the phone with his son for over an hour and a half. The son called to see if he had to cancel his winter ski trip, “But,” he told us, “I haven’t talked to my son for so long since he was a kid.” I forgot what the third person shared, but it doesn’t matter. What matters is the talking and how few parents are willing to just have a conversation with their kids. What you say doesn’t matter as much as the talking.
If more parents would talk with their kids, instead of asking bankers to relate balance sheets or lawyers to lay down the law, we’d have less litigation and fewer juicy stories of frittering. Jamie Johnson famously made his documentary, “Born Rich,” as a way to get his dad to talk with him (you see how uncomfortable his dad is to be in conversation when you watch the documentary). Routinely, I ask my clients: do you want to surprise your kids when you’re dead with information they’ve not been properly prepared for? Or do you want to share now, when they can actually have access to your wisdom, experience, knowledge, values, and the benefit of your own mistakes and discovery? Guidance from the grave, through “beneficiary rescue instruments,” trust directives, and proxy parents (those advisors and lawyers) is way less effective than real time conversation now.
The Slatella article suggests that raising thoughtful stewards of family assets is the exception, rather than the rule. She cites the seven-generation Laird Norton family as a model for doing it right—and they are. In large part this is because they are intentional. They invest time, money, and heart in developing their human capital with as much care as they invest in their financial capital. They are a thought leader family.
The families we work with are like the Norton Laird family. It’s not easy. They do not do things right all the time. Their kids screw up. They fumble important conversations. But every morning they get up and go at it again. Great families do not think of financial education in terms of a four-day seminar, a meeting with an advisor, or an afternoon with a bank psychologist. Those things are valuable, but families intent on sustaining and building the family fortune create a culture of learning, not an event.
The Slatella article was a good read, and, because I’m out here on the Left coast, I did think fleetingly about turning one of the nuttier tales (I particularly relished the story of the woman in the St. John suit who resisted the settlement of her lawsuit) into my own movie pitch. But then the phone rang and I was in conversation with another family. If you missed the article you an catch up here.