These two disparate groups look to you for dramatically different services.

America's affluent are hardly a monolithic group that can be compartmentalized into a few categories. Like the rest of this heterogeneous society, the affluent exhibit a rich (no pun intended) diversity in their relationship to their wealth-old and new, active and passive, engaged and detached, entrepreneurial and entitled.

This diversity creates a number of complex issues advisors need to consider. None of these issues is more important than the relationship between client and advisor. Marty Carter, family communications advisor for Charles D. Haines LLC in Birmingham, Ala., observes that old-money folks are more comfortable with financial advisors than their new-money counterparts. They are less anxious about their wealth (they trust it will be there), and they are accustomed to being served (they trust their advisors), Carter says. While old money expects concierge services, new money tends to view such services as extravagant. As Carter says, new-money clients who are inclined toward conspicuous consumption of tangible assets still tend to be reticent about spending a lot of money on services.

Cathy Longo of Accredited Investors in Minneapolis concurs that old-money clients are more comfortable than new-money clients with letting advisors run the show. While new-money clients have a difficult time giving up control, advisors have a tough time getting old-money clients even to read their financial statements. One consequence of old-money clients' assumption that things are being taken care of is their particular distaste for staff turnover. According to Longo, although this attitude drives up the cost of financial services by putting established relationships at a premium, new advisory firms need to pay closer attention to an issue with which family offices have long contended.

However, not all old-money clients are so devoted to their financial advisors. As Dick Wagner of WorthLiving LLC in Denver, notes, "Many old-money clients feel victimized and objectified by the money management process. Advisors need to get out of their little boxes and start treating people as people. Being raised in old money is a different way of growing up. It's a pretty lonely experience actually." Wagner recalls the classic story of the little boy, driven to school everyday in a chauffeured limousine, being laughed at by the other kids and not understanding why he was different.

The difference in experience naturally leads to a difference in financial service needs. As Boulder, Colo.-based Myra Salzer says, "Working with inheritors is very, very different from working with clients who have earned their money. Our office is not strong on option planning because our clients don't have stock options. We don't work much with retirement plans because our clients were born retired."

Longo once asked a client what he did before he retired, to which he responded, "Before I retired I was a baby." While new-money clients obsess on financial services and retirement projections, old-money clients find value in the softer, lifestyle services-having all the family insurance coverage coordinated, having travel arrangements taken care of, management of household staff, bill paying-as well as the education of the next generation about wealth and philanthropy management.

The issue of concierge services sparks quite a lively debate among advisors. Carter warns about the dangers of family offices enabling their clients. "Old-money kids grow up absolutely clueless about the cost of things." Her office, Charles D. Haines LLC, is moving away from providing concierge services.

Hausner applauds the move away from concierge services. "If a client has never written their own bills, how can they ever know about budgeting? If family offices don't make sure generational clients are financially competent, they foster enormous dependency and make their clients easy targets for unscrupulous financial advisors."

Salzer agrees. Much of her work is coaching and simplifying. Wealth Conservancy Inc. does not do weddings, travel planning or similar concierge services. "We spend a lot of time unraveling what our clients own, simplifying the big picture and putting it into perspective," she says. "We also spend a good deal of time flow-charting the trust documents in which our clients are primary, partial or tertiary beneficiaries."

Consolidating client portfolios so they can see the big picture (what percentage of their money is in large-cap growth, hedge funds, real estate, etc.) is an inherently labor intensive business. Software can only deal with accounts that are on the Internet or are downloadable. "Account aggregation software is not going to download the 5% ownership in the 28-story building my client owns, or the oil and gas reserves, or the 5% ownership of a closely held manufacturing company," Salzer says.

Another important issue separating old and new wealth is risk tolerance. The entrepreneur probably will have a much higher tolerance for risk than will the trust fund inheritor. Wealth creators often feel that, even if they lose it all, they can make it again. Furthermore, wealth creators favor active portfolio management because they assume if they can beat the market in their own industry, they can beat the market in other areas. Indeed, some of their biggest problems arise from the fact that success came all too easily for them.

Old money favors preservation of capital. Most of Salzer's clients have the bulk of their assets in passive index-type investments. "It's no accident that we're called the Wealth Conservancy, because our clients don't need to double their money overnight. They don't need action and they don't need sex appeal."

Hausner sees a growing trend among advisors to down play "fancy razzle-dazzle investment programs" and emphasize holistic planning to meet client needs. "I have been fortunate to work with financial planners who are willing to look at some soft issues and interpersonal dynamics as they create the financial model for the family."

One soft issue that stands out is the issue of financial literacy. As Hausner says, "I would like to see planners do an assessment of clients' financial literacy, as well as an assessment of clients' risk tolerance."

There is an enormous need in the marketplace for financial education programs. Hausner's firm is developing a program called PRAXIS that takes young adults (ages 17-27) and puts them through a two-year personal finance course, including investing, insurance and even making purchases (how to buy a car and purchase a home). The course might be described as a mini-CFP curriculum for clients. "An important service for the financial planner is their involvement in 'financial parenting.' Planners have a responsibility to individuals growing up in a financial family to help them truly understand the basics about money-budgeting, asset allocation models, interpreting tax returns," Hausner says.

Longo has had clients who had never paid a single bill in their entire life. "They're totally helpless," she laments.

Carter agrees that the problem is great, but regrets the built-in temptation for advisory firms and family offices to encourage client dependency as a way of securing the client's account well into the future. "Actually, it's the dark side of the much touted need to institutionalize client relationships. All we're doing is institutionalizing our clients themselves by making them dependent on us. Helping our clients become independent and financially savvy will be the main bond to long-term relationships with those clients." Along with Charles Collier of Harvard University, Carter has developed an educational program that teaches financial literacy and responsibility (as well as philanthropy) to families of wealth.

Salzer identifies another educational niche: teaching inheritors more creative ways to establish incentive trusts for their children. Salzer says that many of the trusts she reviews are too rigid or manipulative; for example, trusts where distributions match earned income, but the type of work is specified in the trust. "Too controlling," says Salzer. Or trusts that specify the first distribution on the child achieving a B.A., a second on achieving a Ph.D., and a third on matching funds from earned income ... period.

As she sees it, there's not much opening here for a person who wanted to be an artist or a philanthropist or a stay-at-home mom. This is regrettable, she says, because incentive trusts have the potential to provide the missing cause-and-effect relationship with money that inheritors often lack. Salzer asserts, ìIncentive trusts need to have multiple options the beneficiary can choose from so that they can earn money, but still have a sense of accomplishment and fulfillment for themselves.î

Chris Dardaman, a partner at Polstra & Dardaman in Atlanta, mentions another important issue related to old-money trusts. ìWhen I think of old money I tend to think of money that was locked up in trust 50 to 100 years ago. We have clients that have trusts with large institutions in the Northeast that do a terrible job of servicing their clients, but legally the clients canít get rid of them because the old trusts donít provide for alternate trustees. Weíve had old-money clients come to us, saying that theyíd love to have their money somewhere other than XYZ Bank, but they have no alternative because of the trust arrangements.î

While it is easy to scoff at rich people being victimized by their wealth, Wagner employs a useful proposition for clients who think that money will solve all of their problems. He calls it the lottery proposition. As he proposes to clients dreaming of the bright side of wealth, ìI will let you win the lottery if you will do several things. You have to change what you do for a living. You have to be willing to change your friends. You have to change where you live, how you live, what your family thinks of you, and how people relate to you everyday. Sound attractive?î Typically his clients say ìno.î For Wagner, that ìnoî is a strong indicator of financial literacy.

Jim Grote, CFP, is a financial writer who has written for numerous magazines. He can be reached at [email protected].

For Further Information

Aldrich, Nelson W. Jr., Old Money: The Mythology of America's Upper Class, Knopf, New York, 1988.

Hausner, Lee, Children of Paradise: Successful Parenting for Prosperous Families. Order directly from the author at www.dhvadvisors.com.

Price, Susan Crites, The Giving Family: Raising Our Children to Help Others. Order directly from the author at www.thegivingfamily.org.

Prince, Russ Alan and Karen Maru File, High-Net-Worth Psychology: Finding, Winning and Keeping Affluent Investors, National Under-writer Company, Cincinnati, Ohio, 2001.

Stanley, Thomas and William Danko, The Millionaire Next Door, MJF Books, New York, 1996. [This may not be the latest edition.]

Thayer, Willis Cheatham, Naviga-ting the Dark Side of Wealth: A Life Guide for Inheritors, New Concord Press, Portland, Ore., 2003.