‘Finance 101’ courses target the wealthy

NEW YORK — The booming wealth management business has spawned a thriving cottage industry: financial-literacy courses for wealthy families and their children.
“There’s tremendous interest out there,” said Steve Lockshin, chief executive of Rockville, Md.-based Lydian Wealth Management Co. LLC, which hosted a well-received three-day Wealth and Happiness Forum for affluent families in September that will be repeated again this year. “All the major players are putting together programs.”
New York-based Lenox Advisors Inc., for example, is offering clients a Smart Kids financial-literacy program as part of its fee-based-wealth-management service. That service includes seminars, newsletters and “age-specific lesson plans,” as well as consultations with Joline Godfrey, author of “Raising Financially Fit Kids” (Ten Speed Press, 2003) and a white paper, “Preparing the Next Generation for Responsibility of Ownership,” for the Chicago-based Family Office Exchange.
The program has been a big hit with clients, said Thomas Henske, a Lenox partner. “No one has opted out of it yet,” he said. “No one has said, ‘Yeah, I got that covered.’”
What’s more, the program has generated a “ton of referrals,” Mr. Henske added.

High-priced program
In May, the New York-based Institute for Private Investors is sponsoring its annual weeklong Private Wealth Management Program for wealthy families at the Wharton School of the University of Pennsylvania in Philadelphia. Despite a price tag of nearly $9,000 for tuition, room and board, the event is sold out, with a long waiting list, said IPI founder and chief executive Charlotte B. Beyer.
The “enormous interest” in such programs, according to Ms. Beyer, springs in part from a continuing trend of financial services clients wanting to “know more,” as well as a desire by wealth management firms to reach out to an information-hungry younger generation.
Otherwise, she said, “they know they could lose the account” if their first-generation client dies.
Indeed, New York-based JPMorgan Private Bank puts on NextGen Leadership financial-literacy seminars for clients ages 21 through 30 whose families have more than $100 million in investible assets. Blue-chip competitors, such as Citigroup Private Bank, Lehman Brothers Holdings Inc., Northern Trust Corp. and U.S. Trust Corp., offer similar training and tutorial programs for the children of their ultrawealthy clients.
Results of a survey released last week by U.S. Trust underscore the trend.
The bank’s annual Survey of Affluent Americans found that 96% of high-net-worth parents felt that it was important to teach children to manage wealth, and more than half (53%) were concerned about the negative effect of wealth on children.
According to the survey, respondents reported 27.4 years old as the average age when their children assume responsibility for managing their own money.
For financial-literacy specialists catering to the wealthy, business is booming.
Judy Barber, founder and president of San Francisco-based Family Money Consultants LLC, said that her calendar is booked solid with seminars, customized workshops and consulting sessions to wealth management firms, family offices and wealthy families.
“We’re trying to teach children strong financial skills and have them take responsibility for their money,” she said. “It can be as simple as helping children learn how to wait for things and set a ceiling on how much money they can spend.”
Ms. Barber and her colleagues also emphasize basics such as investing and budgeting, wealth preservation and wealth transfer, including issues such as defining a wealthy family’s legacy, and stewardship of its fortune through philanthropy.
“Creating wealth is not the same as managing wealth,” said Lee Hausner, co-founder and principal of Irvine, Calif.-based IFF Advisors LLC and author of “Children of Paradise: Successful Parenting for Prosperous Families” (Jeremy P. Tarcher Inc., 1990).
“There’s a growing awareness that you can’t transfer wealth properly without preparing somebody for it,” she said.
In addition to counseling wealthy families, Ms. Hausner trains employees of large financial services firms such as Merrill Lynch & Co. Inc. and Citigroup Inc. on financial-literacy and life skill issues that affect their wealthy clients.
Wealth management firms and financial-literacy professionals emphasize the need among wealthy offspring for social skills such as being able to communicate and negotiate with others, in addition to greater money management awareness.
Happy? Who’s happy?
“Many children of wealthy families are miserable,” said Thayer Willis, a financial trainer in Lake Oswego, Ore., who also is a member of a wealthy Fortune 100 family.
“They are given so much, they don’t earn money, and they don’t understand the importance of making money. You can inherit all kinds of things, but you can’t inherit a meaningful life,” said Ms. Willis, author of “Navigating the Dark Side of Wealth” (New Concord Press, 2005). Her clients include wealthy families and firms such as Morgan Stanley and Presidio Financial Partners LLC.
“It’s not just about money,” said Dr. Robert Zeitlin, a Bala Cynwyd, Pa.-based psychologist who counsels wealthy families on issues related to what he describes as “human, intellectual and social capital.”
Wealth management firms offering such counseling in addition to their conventional financial-literacy services view the broader package as a tool to attract and retain clients.
“Firms do it for business reasons,” said Lydian’s Mr. Lock-
shin. “They want to differentiate themselves.”
When Lydian begins re-branding itself as Convergent Wealth Advisers LLC this month to reflect its new ownership by Chicago-based Convergent Capital Management Inc., it plans to incorporate the “wealth and happiness” theme “into the fabric of our company,” Mr. Lockshin added.
“Firms realize that building relationships with the second and third generation of wealthy families solidifies their role as trusted adviser,” Ms. Hausner said.
But there can be resistance among firms and clients to advisers’ spending time and resources on such “soft side” programs as financial literacy, according to involved professionals.
“You do see resistance internally at firms, especially from those taking a short-term point of view,” said Ms. Godfrey. “Companies who embrace this must be willing to see it as a long-term commitment.”
In fact, one financial services professional, who asked not to be identified, said that she’s heard concern that such programs will be the first to be cut during a prolonged market downturn.
Getting a younger generation interested in financial literacy is also critical, executives say.
“How do you engage them? That’s the $64,000 question,” the IPI’s Ms. Beyer said.
Older clients also can be problematic, Mr. Lockshin said.
“It’s like the movie ‘The Matrix,’” he said. “You can either deal with reality or live in the Matrix, and a lot of wealthy clients prefer to live in the Matrix.”