Advisers should educate clients’ children

Wealthy clients have children. Wealthy clients die. Children inherit the wealth.

Wealthy clients have children. Wealthy clients die. Children inherit the wealth. The question for advisers is: How do you help your client so that the children will grow up being good stewards of that wealth, and develop a relationship with them?

Doing so will increase your chances of retaining the client as the next generation takes over.

Parents want their children to be able to deal with the twists and turns of life with healthy life skills — common sense and intelligence, with an understanding of the issues and appropriate priorities.

As advisers, we have a number of opportunities to help our clients bring up their children, particularly in matters of money. We can help them learn about personal finances, and become their trusted adviser.

If we ignore the children or don’t take the initiative with the parents to help them with their children, as the wealth passes, so shall our relationship with the family.

Here are some actions you can take to provide additional value to clients and their families:

• Seminars for children: Offer a program for clients’ children or grandchildren to teach them the importance of saving and investing. Give them a head start in dealing with this critical subject. Help clients to empower their children to make good choices and create their own financial freedom.

• Workshops for college students: Your clients are giving their children the benefits of a college education, and you can help ensure that these students also get an education in managing their financial future. You might offer a workshop during winter or spring breaks to teach the basics of saving and investing.

• Family meetings: Regular meetings can be a wonderful way to help support the family mission. The agenda could include philanthropic decision making and financial-education opportunities, as well as family business concerns, if applicable. If the family is having regular family meetings, suggest that you, as the family financial adviser, be a part of the meetings so that the children begin to see you in your advisory role, and appreciate your skills and services. If the family does not have regular family meetings, you could position yourself to help them do so.

• Practice accounts: Money skills take practice to develop and hone. Starting financial education early gives children the opportunity to observe and model responsible behavior, and learn the values that matter to adult clients. Some financial services that are available to kids, including checking accounts, debit cards, credit cards and even co-signed loans, can provide that practice. For these to be the best possible learning opportunities, it’s important to work with the parents to identify what they want their children to learn — not just the skills but also the discipline, the choices and the values.

• Ethical wills: An ethical will is a non-legal document that bequeaths life’s lessons and values. Because good financial planning is built on a foundation of the client’s values, dreams and a sense of what’s important in life, it is logical to facilitate the communication of these values to one’s children and grandchildren. An ethical will, either written or captured electronically, offers the client an opportunity to provide a treasured keepsake for his or her heirs, generating a greater understanding of self, and often a sense of completion and renewed life purpose.

• Donor-advised funds: For many wealthy families, philanthropy is a key element of their financial strategy. Many experts believe that an early-childhood experience in philanthropy will have a strong influence on how charitable an individual will be later in life. Donor-advised funds can help clients provide this experience for their children and grandchildren.

• Investment policy statements: Wealth needs to be thoughtfully managed if it is to be preserved and increased. For this to be done effectively, principles need to be established and followed. For example, “rules of the road” identify goals to be pursued, roles of family members and their advisers, and general procedures. One tool is the investment policy statement, a written document that represents the family’s desires with regard to how and why their money should be managed.

If you use these ideas to deepen relationships with your clients and their families, you will increase the value you provide and further develop your position as trusted adviser to the family.

Norman M. Boone is the founder and president of Mosaic Financial Partners Inc., a San Francisco- based fee-only financial planning and investment firm. He is co-creator of IPS AdvisorPro, a web-based investment policy statement solution.

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