Financial Planning Wealth Meeting

February 25, 2020

Five Topics to Cover at a Family Wealth Planning Meeting

Wealthy individuals often do crucial planning for their financial futures with key family members missing from the table - their adult children.

This is a major miss, according to Paul DeLauro, manager of wealth planning for City National Bank. But it's not completely surprising.

“A great many wealthy people in the U.S. are self-made and never inherited anything from their parents, so it doesn't occur to them to schedule a meeting with their kids and their wealth planner," he said.

DeLauro recommends that someone on the team – a wealth planner, a financial advisor, a banker, a lawyer or an attorney – step into the role of “quarterback" to encourage the family to set up an intergenerational meeting.

“It's up to that quarterback to tell the clients they have a duty of stewardship to teach their kids how to manage an inheritance," said DeLauro.

Parents should introduce the subject of a wealth planner by comparing the role to other professionals, he said.

Joline Godfrey, author of Raising Financially Fit Kids and founder of The Unexpected Table, a real and virtual gathering place for exploring issues of thriving families, agrees.

“You can say to your kids, 'In our family, we have doctors for our healfinth. Now we want you to get to know our family financial advisor, who takes care of our financial health'," she said.

“If the second generation doesn't understand the details of their inheritance, they may be afraid of the responsibility. On the flip side, they may fantasize that there is way more money than you're admitting," Godfrey said. "The sad part is that $250,000 can be spent down to $25,000 by the time they're 35 and they don't believe that there won't be any more money."

When to introduce your wealth planner to your kids

Some parents bring their kids to the wealth advisor's office only when it's time to sign paperwork, said Godfrey, and don't give them an opportunity to ask questions about what they're signing.

“It's best to be mindful of the different responsibilities kids may have as they become adults and to provide information about the consequences of signing the paperwork they're given," said Godfrey.

DeLauro recommends that young adults meet their family banker or accountant when they're 16 to 18. That person can help them set up an account, form an independent relationship and learn basic money skills.

“Parents need to learn not to be secretive about their money," said DeLauro. “It's not doing your kids a favor to try to hide your wealth."

Topics to cover at an intergenerational meeting

These are some of the topics to put on your agenda at a first comprehensive meeting with a wealth planner that includes your kids:

1. An ethical conversation: Wealth planners should explain that they work for the parents or grandparents and have a fiduciary responsibility to their clients. In addition, the meeting offers an opportunity to reinforce the family's values.

“The values come from the family, not the wealth planner, so it's important for the wealth planner to say, 'your family has instructed me' when talking about trusts, savings, cash flow and charitable giving," said Godfrey. “Fundamentally, you don't want new messages from the wealth planner. If your values are to give generously and save extremely, that's what your wealth planner should discuss, too."

2. A 'getting-to-know you' conversation: Wealth planners may know a little about the kids or grandkids from their relatives or previous interactions, but this first meeting is a good time to get to know their interests, concerns and priorities as they become adults. It's also an opportunity to evaluate how responsible they may be with money, which can inform the advice given to the parents.

3. An open Q&A session: Wealth planners should offer the opportunity for the kids to ask questions, particularly if they're signing papers.

“Wealth advisors should always say 'good question' but admit it if they don't have an answer to give right away," said Godfrey. “They may want to suggest talking about that topic in the future, so they have time to find out what the kids are really asking and the reaction of the parents to the questions."

4. An educational conversation: Using financial language and explaining it to kids prepares them for future financial responsibilities. The first meeting should address baseline financial planning, recommends DeLauro.

“You want kids to understand financial vocabulary," Godfrey agreed. “If there's an expectation that you'll want your kids to have a prenuptial agreement, then bring that into the conversation as early as possible, so it becomes part of the family practice and not about an individual."

5. A realistic conversation about the future. Kids need to understand how much money is set aside for them in a trust and the restrictions on how and when they can use the money, such as for their education or a down payment on a house.

“You need to be extremely explicit about your plans for the money, so their fantasy doesn't amplify reality," said Godfrey.

At any intergenerational meeting with a wealth planner, and particularly at the first one, the goal is to make sure that the kids understand how wealth may be transferred and why.

“Sometimes decisions are made for tax reasons or for asset protection," said DeLauro. “Trusts are meant to protect family members as well as to preserve wealth, so any discussion that can help kids understand that is valuable."

Including the next generation in meetings with a wealth advisor and having open conversations about values and money management can provide a foundation for future financial success.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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