Advisors must also be family educators.
Give a person fish; feed him for a day. Teach a person to fish; feed him for life.
So goes an old Spanish proverb that could be relevant for the children of your high-net-worth clients. That's because your client's wealth can quickly destroy a child, keeping him or her perpetually dependent on the parents.
"It can affect his or her whole mindset. It can affect what jobs they pursue and how they approach life," warns Christiane Delessert. She is a certified financial planner with her own firm, Delessert Financial Services, in Waltham, Mass. Delessert has numerous stories of clients who never talked about money with their children. The client's kids grew up to become dependent adults who drained their parents of needed retirement assets.
A young person's recklessness with money can wreck the family's assets. Financial relationships that took the advisor years to build can be quickly ruined, according to financial professionals. They say that often it is critical for the advisor to know the children of their clients.
"What we're saying to the advisor is that you need to understand child development. You can't give your client good advice if you don't understand the issues of their children growing up," says Jon Gallo, an estate planning attorney and advisor.
Gallo and his wife, Ellen, a psychotherapist, are child-care specialists.. They founded the Los Angeles-based Gallo Institute and are the authors of the book Silver Spoon Kids: How Successful Parents Raise Responsible Children. They work with parents on how to develop sound attitudes toward money, issues that the Gallos say can be important to both parents and children.
In their book they pose a disturbing question: "How much money does it take to ruin a child?"
"It is common for affluent parents to worry that their values, gratitude and financial education will be passed along to their children," according to Diane Pearson, a CFP licensee with Legend Financial Advisors in Pittsburgh.
"Where I come from, the parent needs to be the role model when it comes to money, no matter how much money the family has," says Thomas Space, a CFP licensee and the department manager of Laconia Savings Bank's Investment Trust Services in Laconia, N.H. His clients, on average, have investable assets of $1 million or more.
Jennifer Harney, a CFP licensee in Natick, Mass., also says that she tries to remind clients of their obligations as a money educator.
"It's really important for the parent to talk about money and the value of money and the value of things," Harney says. "It's important to teach kids about the value of saving so they will appreciate what they have."
"Tell clients to start teaching their children at an early age," Space says. "Watch their spending habits, and just say no when they come to you for more money when they've spent all their allowance on stuff." Pearson contends that advisors should help affluent parents learn "how not to raise a rich, spoiled kid."
That's because advisors, if they are to protect family wealth as it passes from one generation to the next, often need to participate in the process of educating young people. Sometimes, advisors say, they should meet with the children and possibly do something that the parents haven't been able to do: Help develop healthy money attitudes. Nevertheless, the best strategy for ensuring that the children of high-net-worth clients are not hurt by the family's wealth is for the parents to be the prime educators. They should begin when the children are very young, advisors say.