For some children of the extremely affluent, vacation will mean taking part in special programs designed to help them deal with issues surrounding wealth
School is out, or soon will be.
But for some children of the extremely affluent, summer will mean taking part in special programs designed to help them deal with issues surrounding wealth.
Camp Start Up in the Berkshire Mountains of Massachusetts is one such program.
“It's an entrepreneurship camp for teenagers that is as relevant to the poet and the actor as to the aspiring businessperson,” said Joline Godfrey, chief executive of Independent Means Inc., the company that runs the 10-day summer program.
At the camp, the kids learn about investments and finance through workshops, presentations from business leaders and field trips to local businesses.
Bank of America Merrill Lynch offers a more rigorous three-day “boot camp” for wealthy young adults at the University of Chicago.
'IT'S INTENSE'
“Our Next Generation financial boot camp starts in June,” said Stacey Allred, a wealth strategist in the firm's private-banking and investment group. “It's intense.”
Participants 21 to 35 learn the fundamentals of investing and financial management, covering subjects such as maximizing an investment portfolio, working with financial advisers, budgeting, cash management and prenuptial agreements. Although the program includes nice dinners and a baseball game or some other form of entertainment, it covers a lot of ground and is quite demanding.
Programs such as Merrill Lynch's and Camp Start Up do more than just provide important information and insights, they often help young people establish a more productive mindset with which to deal with the complications inherent in great wealth.
“For some people, the program is a life-changing experience,” Ms. Allred said. “Extreme wealth can be isolating for people. Some feel guilty about it; others feel entitled because of it.”
“Neither emotion is productive,” she said. “We want them to feel empowered by their wealth, and having open discussions about it with their peers can really help.”
Prestigious institutions such as Stanford University, the University of Chicago's Booth School of Business and the Wharton School of the University of Pennsylvania offer similar financial education programs for the affluent.
Stuart Lucas, chairman of consultant Wealth Strategist Partners, is a leader in the four-day University of Chicago program, which covers, among other topics, the defining of financial and family objectives, investment strategies, and evaluating and picking advisers. The material isn't exactly the kind of stuff that kids can or want to get from their parents, and families are encouraged to get members from multiple generations to participate, he said.
INDEPENDENT SOURCE
“It's often easier to hear these types of things from someone else's mothers and fathers,”Mr. Lucas said.
Covie Edwards-Pitt, an adviser with Ballentine Partners LLC, also thinks that younger members of wealthy families are better off receiving training about finances and financial responsibility from an independent source.
“It's important to disaggregate their experience with money from their relationships with their parents,” she said. “They need to experience an independent sense of ownership of money.”
Many advisers to ultrahigh-net-worth families even extend the financial education effort to grade schoolers.
Jill Shipley, director of Next Generation Education at GenSpring Family Offices LLC, specializes in reaching out to young members of the high-net-worth families that GenSpring serves. She organizes financial education events for children as young as kindergartners. While she doesn't throw the capital-asset pricing model at them, she does set up game-oriented activities designed to teach them the rudiments of saving, spending, investing and giving.
“I believe financial responsibility is about getting into good habits, and we start working on that with family members as young as five,” Ms. Shipley said.
For financial advisers with high-net-worth clients, engaging younger family members is not only crucial for the preservation of the family legacy, it's also good business. Generations X and Y children of wealthy families stand to inherit trillions of dollars from their retiring baby boomer parents over the next two decades, and as with most children, they often don't see eye to eye with their parents.
A study by asset manager BlackRock Inc. showed that 92% of Gen Y children (generally, those born between 1980 and 2000, an age cohort about three times as large as Gen Xers, who were born between 1964 and 1980) switch financial advisers soon after receiving their inheritances. Not surprisingly, family offices and high-net-worth advisers are trying to figure out ways to develop independent relationships with these younger people and to motivate them to get involved in the family's finances.
“The aging of patriarchs and matriarchs of wealthy families is a frightening fact that advisers must deal with,” said Charlotte B. Beyer, founder and chief executive of the Institute for Private Investors.
To some extent, advisers are simply meeting the increased demand for financial guidance from young members of wealthy families. One consequence of the financial crisis is that wealthy members of Gen Y are taking more interest in financial matters these days, said Dune Thorne, a 35-year-old adviser with Silver Bridge Advisors.
ASKING QUESTIONS
“College-age children are asking a lot more about their family finances,” she said. “Many were really scared by the financial crisis and worried not just about their family finances but their ability to find good jobs in this environment.”
The boot camps, workshops and special programs that seek to educate younger members of wealthy families in financial matters are designed to foster these connections. Advisers also are encouraging younger family members to get involved in family giving initiatives.
Philanthropy can be a particularly effective way for advisers to engage Gen Y clients, said Melanie Schnoll Begun, a managing director at Morgan Stanley Private Wealth Management.
“It can be a beginning of their journey toward understanding philanthropic stewardship, financial responsibility and what it means to be a leader,” she said.
Ms. Begun organizes programs to guide younger family members in exploring philanthropic interests and works with Morgan Stanley advisers to help them open dialogue with younger family members on the subject.
“Philanthropy can be where they find their voice and can give them the ability to make an impact. It can also teach them discipline and financial responsibility,” she said.
Ms. Begun also helps families organize governance structures such as junior advisory boards to family foundations that enable younger family members to participate in the family's philanthropy. The experience, Ms. Begun said, is valuable for young members of wealthy families and provides a taste of some of the responsibilities they'll face later in life.
For the adviser who facilitates the experience, the various training sessions and summer programs also can be the beginning of a lifelong relationship.
E-mail Andrew Osterland at aosterland@investmentnews.com.
