The Human Side of Wealth Transfer

Last year a large insurance and investment company invited me to travel around the country delivering a presentation to financial consultants I call, “The Human Side of Wealth Transfer”.  After one of the seminars an attendee stopped me in the hallway and said, “You know everyone in the room was listening to you talk, but they were all churning inside because many of them are dealing with this subject in their own lives, not just in their clients’ lives.”

During the next session I was much more aware of this dynamic.  I’d been talking to prior audiences from the perspective of their consultant’s brain, but really it was more delicate a matter than that since it deals with an issue that is up close and personal to them.

Many of these men and women have done very well for themselves, despite the recent downturn.  Several of them spoke to me about situations with their own children.  One man who obviously had spent a lot of time thinking about it said to me that passing money to his only daughter was very difficult because of the life she was living.  From his perspective, and probably rightly so, he knew that whatever he gave his daughter was going to be money badly used, leading to an even unhappier life in her future.

As my father used to say about running a business, compensation is the hardest issue.  So it often is in family wealth, bestowing unearned wealth of children or anyone not prepared for it is a heavy burden on both sides of the equation.  Here is what I advocate for individuals with wealth to pass on:

Seek professional help as you think through the emotional, psychological and relational issues that arise, hand-in-hand, with the process.  Find someone you can trust and who is experienced in coaching the preparation and execution of the transfer.  An attorney or financial advisor, a psychologist or a member of the Family Firm Institute might be a good resource for your needs.

There are 4 primary things I suggest you seek in an advisor to help during the process:

o   Someone to help develop a rational, workable transfer process that suits you,

o   Someone to keep the process moving, even when you want to delay or postpone,

o   Someone to keep important issues on the table; there will be a tendency to take them off,

o   Some to help keep you practicing what you preach, until you legitimately say you want to try another approach.

You wouldn’t think of making a major legal, real estate or investment decision without professional help, and so it should be with wealth transfer.  There is a substantial risk in making people too rich, too soon.

Realize that wealth transfer, and succession of any kind, is hopefully a process, not an event.  Assets and wealth are transferred by design or by accident.  Most of those done by accident are not very successful.  Take the time and initiative to:

o   Set goals and objectives of what you want to occur,

o   Clarify the roles and responsibilities of heirs and advisors well in advance,

o   Foster an atmosphere of trust and communication,

o   Be open about your intentions and seek necessary input to create more desirable outcomes.

Most wealth transfers fail in the next generation.  The money is dissipated, diluted or disappears for over 70% of these transfers within the life of the heirs.  By doing the proper preparation you can increase the odds that yours will be among the minority that can provide security and stability for their family for years to come.

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