Helping clients move their wealth from one generation to the next can build loyal clients over multiple generations, says Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management.
A sense of urgency is growing over wealth transfer because of the number of advisors who now have clients who are ready to retire, says the strategist from Brown Brothers, an investment bank and securities firm in New York City.
“Advisors are in a prime position to help their clients transfer the wealth,” he says. “Fifty trillion dollars will change hands in this generation alone.”
The transfer of wealth to the next generation involves different skills than those needed for investing and growing wealth.
Multigenerational wealth transfer means concentrating on wealth as a means to an end rather than an end in itself, he says. And parents do not always know how their children will react when they are left large sums of money.
Clemons says he has found this out personally with his clients. One client couple is transferring about $10 million to each of their four sons. One son wants to run for public office and is determined to give away his money so he won’t be seen as buying his way into office. His parents are trying to reach a compromise.
Another family that is a client of Clemons has had recent business success that means their five children will inherit a total of more than $100 million.
“The father is afraid he has not laid the groundwork for the children to handle the wealth because the money was earned rather quickly,” says Clemons.
One family’s solution to preparing the next generation was to create a family foundation with the children on the board, including ones as young as six years old.
“You’ve never been grilled until you have been questioned by a 6-year-old about how much money he can give to the local zoo,” Clemons says. “It’s touching and it is educational for the children.”