Every family has a history. With some families, that history—and often associated legacies—go back generations.

When it comes to family financial management for multi-generational clients, how do we manage expectations for all involved, especially as we are in the thick of the greatest wealth transfer in the history of financial services?

For financial advisors, the ability to tap into the family’s past business and investing successes, current financial situation, and future goals to leave a legacy is truly a specialized skill.

Few advisors have been trained to tackle all the financial, emotional and psychological challenges that the “modern family” brings to the table.

The good news, according to Steve Gresham, managing director of The Execution Project and Next Chapter (which partners with Financial Advisor magazine), is that advisors being trained how to tap into the great wealth transfer by knowing how to facilitate family conversations among the multi-generation clients base. “The best advisors have learned to listen carefully, understand family dynamics, bring in expert colleagues when appropriate, and know when and how to bring the family money values to the forefront of family discussions.”

Family Conversations: When To start
One of the biggest family dynamics questions in the world of behavioral finance is that parents want to know when the right time is to bring up legacy planning. Troves have been written about “the family conversation,” but it remains elusive for both deliverer and recipient of the message—both advisors and clients fear the worst when it comes to multi-generations of family members discussing its own family money values.

But it doesn’t have to be that way says Michael Liersch, Ph.D., and head of advice and planning for Wells Fargo Wealth & Investment Management and host of the Wells Fargo About Money podcast.

“The first family conversation is always the hardest,” says Liersch. “After that, the topic of money values can become normalized. People get more comfortable talking about how they expect to be involved, the taboo topics and how they express their owns needs, wants and expectations when it comes to the family and the family’s money values,” he adds.

For both parties, you need the right information at the right time. Both the deliverer and recipient have to be psychologically ready.

“We train our advisors to facilitate family conversations that spark awareness among all parties involved. Sometimes, family members are learning for the first time that the family business may be sold or how senior family members want the next generation to be involved in investment planning decisions,” adds Liersch.

When it comes to the family conversation, it’s important not to overwhelm G2 and G3 family members, says Jamie Kulik, CFP, vice president of financial planning at LPL Financial in San Diego.

“Start with awareness. Is the younger generation aware that the family employs a financial planner? If so, set up an in-person or Zoom meeting to start adult children or teens on their own financial journey. Show them how to budget and save and how to open an IRA or brokerage account with their own money,” advises Kulik.

Building Family Harmony
Most advisors agree that the somewhat evasive world of “family harmony” can be reached when everyone is informed, and expectations are laid out for all involved.

Easier said than done.

“People are hesitant to expose day-to-day finances with family members or over-revealing how much money they actually have,” says Steve Zuschin, executive vice president at LifeYield in Boston.

Zuschin suggests a technique to get the family dialogue rolling. “Try an ice breaker where parents talk about previous generations and the family values they passed onto them. Then start with the basics: Hey, we have a will… we have a trust… Ms. Jones is our financial advisor; she and her team can help you… Here’s is what a POA is all about... Here are the primary charities that our family supports….That’s just a start, but over time, you reduce the anxiety of having a money conversation and hopefully expectations will be in line with reality,” says Zuschin.

Is It Really All About The Money?
Often, younger generation family members say they appreciate the opportunity just to be heard by other family members. “It’s not really about the money, it’s about feeling respected. They recognize that they may not have a vote in all aspects of family financial management, but if at least they have a voice, that goes a long way to building and maintaining family harmony,” says Liersch.

Wells Fargo advisors are trained to get clients beyond the initial family bonding conversations and focus on the “decisioning stage.”

“At this stage, we have built some family harmony and alignment necessary to get everyone to understand who will determine path forward. It’s important to underscore that when it comes to family money matters, fair is not always equal. It’s a tough concept for some family members to process this,” adds Liersch.

But is the concept of fairness ever possible?

Liersch explains, “In our experience, we see that some people put more equity, time and effort into the family than others. That’s life. Family dynamics are highly complicated in most families. When it comes to HNW families, the core psychological challenges are universal and the financial planning principles of accountability and ownership still must be applied to serve the families current financial needs and to help build wealth for the next generations.”

Building Trust
In many families, the patriarch and matriarch spend most of their time and efforts preparing the wealth for the family. “Unfortunately, this approach does not often end well. They need a team to support them,” says Myles J. McHale, Jr., senior vice president of Cannon Financial Institute, a firm that trains advisors in technical knowledge, practice management and client conversational skills.

According to McHale, one tool that helps advisors conduct successful family meetings is the   “ETHICAL” framework (see graphic). “This can help advisors conduct a needs analysis to identify the family’s current and future situation, feelings and family dynamics. In addition, this approach helps you demonstrate your commitment to the highest fiduciary standards and build trust with multi-generational client families,” says McHale.

The Emerging Role Of Financial Therapy
Although the concepts behind behavioral finance (BeFi) have been around for about 20 years, there’s still so much for us to learn. At PNC Private Bank Hawthorn, the ultra-high-net-worth division of Pittsburgh-based PNC, Brian Brogan is applying positive psychology to the world of wealth management.

“The number one reason families break down is the lack of trust and rapport. We facilitate family workshops and some custom family retreats with a focus on optimization of the family,” explains Brogan, who is a fellow with the Hawthorn Institute for Family Success.

The Hawthorn/PNC model is designed to bring family harmony based on seven key aspects of family success:
1. Legacy
2. Vision
3. Communications and trust
4. Togetherness
5. Decision-making
6. Wealth and ownership/ stewardship
7. Personal fulfillment

Brogan and his team works with Hawthorn advisors to handle the two sides of wealth: technical and personal.

The technical side aligns income, assets, risks and taxes. All wealth management firms know how to do that. But in today’s competitive wealth management arena, it’s the personal side of wealth that’s driving engagement and keeping assets under management.

“On the personal side, we search for commonalities. We help each other build empathy and compassion to better understand the differing personalities across the generations. Today’s families are discussing how impact and ESG investing can impact the family wealth and legacy—so money and wealth are being very personal, and we are all getting much more comfortable talking about it,” says Brogan.

Getting Comfortable With Uncertainty—And Mortality
Part of the family conversation relates to death and dying. Few people enjoy that part of the business, but those who earned their stripes in the insurance arena are quite comfortable talking about estate planning, end-of-life care and the fact that we’re all going to die.

These conversations have become natural and authentic for John Boccio, president and CEO of NYLIFE Securities LLC, a subsidiary of New York Life Insurance Company. “Our planning approach places strong emphasis on providing peace of mind; our goal is to be trusted partners that guide clients through a range of financial decisions and life events. We help our clients with the need to protect themselves and their families to ensure they don’t lose what they have, and to prosper, by taking the right steps to ensure they can flourish across all phases of their lives.”

His message for new agents and advisors is direct and specific, but it’s hard to absorb for many young people who have not been exposed to death-related life experiences. He adds, “Because our agents and advisors have deep experience with protection solutions, many of them cite the processing of their first death claim for a client as formative experiences early in their careers. But it teaches you the importance of protecting what matters most and knowing how to talk to people about the many stages of life and mortality. It’s the death and dying part of our business that we all need to feel much more comfortable talking about if you are truly going to be a holistic and trusted partner for multi-generational families.”

Fears Of Becoming A Burden
“More than running out of money in their later years, many older people are simply afraid of being a burden to their families,” says attorney Moira Bessette Martin, senior vice president and senior trust officer at Essex Trust, in Essex, Conn. “They don’t want their kids to have to give up aspects of their lives to take care of them. And in many cases, the kids are long gone, no longer living near where the family homestead remains.”

But it’s tough to support people from afar. Most families need someone on the ground and that’s where it gets tough and expensive, because there are limited affordable options for older people.

Only 15% of respondents in a recent Fidelity Investments Caregiving Study say they actually put a caregiving roadmap together, mapping out key roles and responsibilities for all family members who commit to getting involved. The data demonstrates that at every stage of the caregiving process—from deciding how to provide care, to the point at which caregiving is no longer being provided—those with a caregiving plan found the experience far less mentally stressful and can help with the unexpected.

According to Kulik, LPL and others in the industry have invested significant resources in senior investor protection programs. “From cognitive decline, elder fraud and retirement security, there’s work to be done to help educate advisors what to look for during family meetings. It’s vital that multiple generations of the family get and stay involved,” says Kulik.

To help ease the financial burden on families, one estate planning strategy to help families plan for the longer term is a multi-generational trust which can be designed to leave money to future generations, without incurring estate taxes. “As part of an estate plan, we typically help families invest in a traditional mix of stock and bonds within the trust, which can help you control what happens to your assets for your remaining years and even after death,” says Martin.

Charitable Giving Becomes Family Giving
Another important aspect of the family conversation surrounds charitable giving. From donor-advised funds (DAFs), family foundations and planned giving efforts, G2 and G3 won’t always adopt the same legacy as their parents or grandparents. And why would they?

Still, parents can communicate their values and wishes—and hope for best after they are gone. It’s been said that the greatest gift one can give is not money, it’s the family values that can endure for generations to come.

“It feels like we’re at an inflection point in financial planning and wealth management,” says LPL’s Kulik. “The great wealth transfer to the next generation has begun and those advisors who can use their empathy skills to create and nurture deeper connections with their clients will see the greatest gains. If you’re working with clients who run a family business, it’s critical that G2 knows that as their advisor, you are looking out for the family business—an asset that may both store the legacy of the family’s values as well as provide employment and income for future generations,” adds Kulik.

Seeking Support From The Advisor Community
Over the next year, Next Chapter*, an industry-wide group of leaders and innovators from the financial services community, seeks ways to incorporate family conversation and empathy trainings, tools and resources into everyday activities for advisors to better serve their clients.

If you or others at your advisory firm can provide details on any of the above scenarios based on your work with existing clients, please contact Steve Gresham at [email protected].

David Conti is a NH-based writer and editor. His work on personal finance and retirement topics has appeared in FORBES, MarketWatch, Financial Advisor and Fidelity.com. Contact him on LinkedIn.

*Working for the greater good, a group of more than 30 industry leaders built Next Chapter—a think tank/take action team focused on retirement. It’s sponsored by the Execution Project, Financial Advisor and the Money Management Institute, and we are working on behalf of the MMI’s 180+ member companies and FA’s 200,000+ advisors.