President's Blog - With Great Wealth Comes Great Concern - Advisors Can Help


Significant wealth does not eliminate all problems. It often creates new ones. Many of those new problems center on the great wealth that is supposed to solve all the issues which bewitch those with much less wealth.

Spectrem’s new study about extremely wealthy investors – The Wealthiest Americans - reveals the perhaps surprising fact that investors with a net worth over $25 million have problems related to their wealth, and not just because they fear someone nefarious will get their hands on it.

These investors often turn to their advisors to help them solve their problems. Because of their wealth level, the solutions can often be complicated and demanding.  But solving the problem can be rewarding in many ways for the advisor who comes through with the solution.

Many of the issues these very wealthy investors have relate to wealth transfer. Although no one has been able to confirm this, it is standard operating theory that you can’t take it with you when you die, and most investors want to make sure their assets are transferred without difficulty to the next generation, or even two generations removed.

The nuts and bolts of wealth transfer are procedures most advisors can perform for these investors. Although many wealthy investors turn to others to create a trust, some do use financial advisors for that purpose, and most advisors know how to make the most of the opportunity for the investor and his or her offspring.

But the factor surrounding wealth transfer that can actually frighten investors is their concern over how their children and grandchildren will handle the wealth that will someday be dumped upon them.

Thanks to entertainment media, horror stories abound about the children of famous (and wealthy) entertainers whose lives are turned upside-down by their wealth status. These children or grandchildren are often characterized as aimless social misfits, using their fortune along with their fame to lead a life of decadence and eventually despair.

Most wealthy investors do not have the pull of great fame to steer their kids in the wrong direction, but they do have the wealth. And they have plans in place to make certain most of that wealth ends up in the hands of their offspring someday.

Spectrem’s report notes that a whopping 83 percent of the investors with a net worth over $25 million worry that their wealth will be detrimental to the financial, educational and professional lives of their children and grandchildren. Great wealth can erode motivation, and investors want to safeguard their children against just such an occurrence.

The same percentage reported the desire to raise financially responsible children. But parents can only do so much, and children often do not listen to their parents the same way they do to others.

That’s where the advisors can come in.

Most wealthy investors want their primary advisor to have a relationship with their family. They differ, perhaps, in when to introduce their advisor to their children, but most of them believe there is a benefit to creating a relationship between the advisor and the children.

Part of that relationship, in the eyes of two-thirds of wealthy investors, is a process that provides a financial education for the children. A majority of investors consider educating their children and grandchildren on the complexities of great wealth as a major contribution their advisors should provide.

Investors may have a different approach for that education to take place. They can want advisors to school the children themselves through one-on-one meetings, or they can want the advisors to find and provide the kind of reading material that can present the facts in a way that the children can understand.

But these investors want advisors to play a role in the financial literacy education of their children. They are not waiving their own responsibility; they hold themselves ultimately responsible, but they do want advisors to play a role.

When dealing with extremely wealthy investors, advisors should be prepared to explain how they could best education the investor’s offspring. Being proactive in discussing the topic will serve to indicate a desire to help, which the investors will prefer over being forced to ask for help in dealing with this delicate subject.

Providing this assistance will not only please the investor in question, it can very probably create an atmosphere in which new relationships can be built. If those aforementioned children or grandchildren appreciate the way the advisor “teaches’’ them about their upcoming financial situation, they might just turn around and ask those advisors to be their own investment professional.