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How historians, psychologists may help the ultrarich avoid squandering fortunes

McClatchy-Tribune Information Services

June 6, 2016


MINNEAPOLIS — A new breed of wealth consultant to America’s richest families is doing more than pore over financial reports.

They’re digging into genealogy records and pulling out the therapy couch to help families avoid frittering away their fortunes.

With baby boomers set to power an unprecedented wealth transfer in the coming decades, financial firms that cater to the uber-rich are hiring teams of historians, psychologists and experts in family dynamics as an unconventional business strategy.

They’re producing family history books that tell the story of how the family fortune was made and hosting retreats to help millennials and Gen Xers discuss the emotional toll of inherited wealth. Skilled coaches tackle personality clashes and unreasonable expectations that so often fracture families with bitter infighting.

"Most of the families we deal with realize that the generation that created the money was so busy creating wealth through the company that they didn’t have time to sit down and talk with the children or grandchildren and have those value-based conversations," said Andy Anderson, chief historian with Minneapolis-based Abbot Downing, a division of Wells Fargo that works with those whose investable assets exceed $50 million.

Money managers know all too well the truth behind the proverb, "Shirtsleeves to shirtsleeves in three generations." Research shows that affluent families lose 70 percent of their wealth in the second generation and a stunning 90 percent by the time the grandchildren die.

While some blow inheritances on bad investments and lavish lifestyles, experts say family fortunes most often get destroyed because wealth creators fail to teach successive generations how to build on their successes or why a lasting legacy is important.

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Much is at stake for banks, estate planners and others in the financial services industry.

Baby boomers are expected to hand down an estimated $30 trillion to their children and grandchildren over the next three decades. This inheritance boom will build sharply in the coming years and peak around 2031, according to research from Accenture.

An estimated 10 percent of America’s wealth is expected to change hands every five years through inheritances and gifts, continuing through the year 2045.

Financial services firms are vying for these trillions, keenly aware that at least two-thirds of children fire their parents’ financial advisers after receiving an inheritance. That reality brings urgency to the maxim that it is much easier to retain assets than find new clients. Understanding the different needs of each generation can build loyalty along with financial skills, wealth managers believe.

"Younger generations may think it’s hip to have a family foundation, but they view it in a different way," said Jill Shipley, a family dynamics consultant with Abbot Downing. "They don’t just want to write a check. They want to be engaged and actively involved."

Tailor-made books and multimedia presentations on family history are more than just a fun free perk for the well-to-do, wealth historians believe. The stories put family members at the kitchen table during the Great Depression, document the first sales receipt or bring to light a harrowing passage to America. The narrative helps affluent families develop a mission statement as they pass the torch.

"Family history can help the future generation see a grander narrative, to see the institutions the family has helped develop and the impact that it has had on the community as a whole," said Karen McNeill, director of family history at Ascent Private Capital Management, a division of Minneapolis-based U.S. Bank that works with ultra-high-net-worth individuals and families.

"It’s entirely meant to touch personally and emotionally on who you are, where you came from and where you are going," said Anderson, who holds a Ph.D. in history and in a four-decade career at Wells Fargo has built up the bank’s archives, created several museums and helped the bank acquire a modern fleet of stagecoaches.

While histories can connect the generations to a common theme, "wealth therapy" can tackle generational conflicts, such as what is keeping Dad from stepping aside from the family business.

"I guide families through tricky ground," said Kristen Armstrong, a psychologist and strategic wealth coach with Ascent.

Despite their pedigrees in psychology, practitioners such as Armstrong insist they act more as coaches than shrinks.

"I’m able to facilitate difficult conversations around spending, around loaning money, about borrowing money," she said. "For most families, it’s a tremendous relief to deal with issues they’ve only been stuck on before and not been able to see their differences."

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Abbot Downing’s Anderson and his history team research census data and burrow into family scrapbooks, old diaries and tall tales. They record oral histories and produce books and multimedia CDs that trace a family’s roots back multiple generations if possible, often to when the earliest members first set foot in America.

The end result often includes a presentation at annual business meetings or family gatherings at the old homestead in far-flung and remote locales.

Period maps, genealogy tables, family trinkets, photos and documents are spread across giant tables "like a church buffet of colorful dishes," Anderson said.

The impact can be profound.

"It’s an object lesson in the present about how the fortune was built on the shoulders of a lot of people who worked extremely hard — and don’t blow it going into the future," he said.

Histories can help families arrive at what Anderson calls a "collective stewardship." By helping the family rally around a common purpose, upcoming generations are more likely to see the value of preserving wealth for the future.

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McNeill advocates bringing even shameful secrets to light — children born out of wedlock, riches gained through slave ownership or family dynasties derived from clear-cutting forests. An unvarnished history helps current generations accept the skeletons in the closet and move on.

Histories also can clear up family myths.

McNeill, who earned a Ph.D. in history from the University of California at Berkeley, shared the story of an environmentally minded fourth-generation family member who became enamored of a river in Alaska named after his great-grandfather. The family had long believed the naming was a trade for permission to open the area to mining rights.

"Turns out the great-grandfather had gone on a six-week journey in remote regions and roughed it using traditional ways," McNeill said about her research. "The indigenous Alaskans were so impressed they named the river after him."

The discovery thrilled her client and further anchored his desire to support efforts to protect the environment around the river.

"Wealth is more than money," McNeill said. "It can help families do great things."