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.

"It is never too early or too late to start working with kids, even when they are adults who don't know a thing about handling money," according to Scott Farber. He is an attorney, certified public accountant and certified financial planner with the Wealth Management Group, part of the Boston-based Woodstock Corp.

Delessert's take is a little different. She says clients should bring up the subject of money once their children start to earn some. "Then it will be more useful to talk about how to spend a salary and whether or not some of it should be put aside for college," she adds.

Farber stresses that advisors should be proactive; they should ask about their client's children and what they are learning or not learning about money.
Space agrees with Farber. He says age five is not too soon to start a child's money education.

"In most cases," Space says, "I suggest to clients that they first begin when their children are at an age when they are intrigued with the notion of having their own money to spend. Let them earn an allowance, then pay them weekly but have them put 50% of money earned into a savings account that they can watch and see the amount grow over time."

He adds that clients should tell their children to shoot for a goal, such as enough money for a video game or a bicycle.

"This will instill the power of accumulation and the power of goal setting at an early age," according to Space. Some clients resist the call to start early, but he tells them that delaying a child's money education can be dangerous.

It is easier to hook children at an early age on the value of saving, because at that age they are usually fascinated by it, the advisor believes. "However, beyond ages 10 to 12, it gets more difficult to get them to think about saving and goal setting," Space warns.

So those who wait until the client's children are almost adults to have serious talks on money are skirting potential disaster. They may find that their financial plans will fail, warns Jon Gallo, who believes that parents must be counseled to take heed of the stages of a child's development.

At different ages, children need to be taught different things about wealth, he says. They need "to be gradually phased in to an understanding of money through allowances, checking accounts, debit cards and a pre-paid credit card," he adds. And sometimes it is the family advisor who should be a part of the teaching.

"For example, let's say you have a client who has children who are three or four years old," says Jon Gallo. "They are starting to be exposed to television commercials that teach them to want or need everything they see on television." The parent must be able to explain the difference between things that "are nice to have and things are necessary to have," he says.

And if they don't, if the child becomes an adult without the proper money education, the dangers are many for both the family and the advisor who expects to earn fees or commissions from administering the family's wealth. Harney believes the greatest danger is in the families that have been always wealthy-"Families in which money has always been taken for granted."

She says that in families in which wealth was slowly achieved, in which children saw their parents working for years to achieve wealth, there is less danger of the children developing unhealthy attitudes about money. "They probably won't take it for granted," Harney says.

Planners can cite many instances of children of the rich who grew up to become irresponsible adults who believed that wealth was perpetual. Delessert warns that gifting can be a dangerous business.

"I know of a client's child, who is now an adult, who got $10,000 a year from her mother," says Delessert. After a while, she thought that she should get it forever. It was the kind of thing that changed her; that made her dependent. When she didn't get it one year, she was outraged." She also has a client who was giving her son, a lawyer in his thirties with children, $25,000 a year, who was threatening, that if it were cut off something bad would happen. Besides the dependency problems, this man apparently thought his parents were much richer than they were.

 "I had to have a very frank talk with him and tell him that his parents didn't have nearly the amounts of money he thought they did," she says.

Space, the New Hampshire financial planner, recounts the story of a 50-year old client whose parents had established a trust for him. That was a good idea, but unfortunately they made it too easy to start spending the principal.

 "The trust was funded with $900,000 less than ten years ago, but since then it has been exhausted and closed," Space says. "This beneficiary was unstable as a teenager, developed a drug dependency as a young adult, and acquaintances used him for his money."

Space bemoaned that the trustee was restricted. Therefore there was no way for the advisor to stop this adult, who had never learned about money in his youth. 

Advisors should tell their clients that money education must begin early says Eileen Gallo. "We want you (the parents) to talk to your children at an early age about allowances and credit cards," she says.

Delessert fears that  some clients don't want to discuss the subject because they want their children to continue as perpetual wards. She says two parents recently told her that their daughter was in acting and was not able to support herself. They paid for all her expenses because "that's why we have money."

But other young people,  who developed healthy attitudes about money, are uninterested in what their parents have, Delessert adds. "They don't want to figure potential inheritance numbers in their financial plans. They want to make it on their own."

Farber, the Boston advisor, wants his children to fall into the latter category. He already is planning for his son Noah, who is not yet two.

 "Whenever my son starts to have earned income, whether he has a paper route or has another part-time job, I'm going
to set up a Roth IRA for him. This will help him get in the habit of saving and having all those years of compounding, which will be very good for him," according to Farber. He also figures that, with the power of compounding over so many years, someday his son will "look back at his pop and be very, very grateful."

Children who have IRAs or savings accounts are also much more likely to contribute to their 401(k) plans when they take their first jobs, he adds. They're also more likely to use the 401(k) properly, ensuring that they obtain the full value of the employer match and put a proper percentage in equities, according to Farber. He also says that parents should also help children set up savings accounts at an early age.

"Why not tell your kids that if they save a certain amount each month that you will match it. With some of the older kids, you could also set up a monthly account to go into a mutual fund. This gets them involved in investments and possibly on the road to developing an interest in various funds," Farber says.

Someday, he hopes, his son will thank him for giving him a healthy interest. "Advisors," he says, "need to encourage their clients to do the same with their children, so they will one day thank their advisors."