All in the family

All in the family

Winter 2008

It’s not unusual for clients to ask their T.E. Wealth consultants to work with their children. Parents like the fact that their children are getting expert guidance from someone whom they trust. And the kids benefit from getting sound financial advice when they need it most. Here are some examples of how T.E. Wealth is helping the next generation of clients start off on the right track.

Managing expectations

Parents with substantial wealth frequently worry about how it will affect their children. They want their children to be productive and although they have a lifetime of financial knowledge to pass along, trying to educate or influence grown children in financial matters can be seen as interfering or controlling by the adult children. When his clients ask what to do, Sam Chinniah, Senior Vice-President at T.E. Wealth in Toronto, says to bring the children to him.

About 15% of Sam’s client base is made up of multiple generations of wealthy families – grandparents, parents and adult children. He cautions parents to refrain from disclosing their true net worth to their adult children, instead preferring that they manage their children’s expectations for future wealth and train them how to manage money today so they will be well-prepared when they eventually inherit the money.

“Money changes everything,” remarks Sam. “When children know how much their parents have, they may no longer be content with how their parents handle the money and this can bring unwanted tension to family relationships.” Gifts from parents that in the past seemed generous can suddenly appear inadequate when children know the extent of their parent’s overall wealth. Children may pressure parents to invest in inappropriate or risky business ventures. Siblings (and their partners) can become overly concerned about getting their fair share. And some children may demand part of their inheritance now. Parents always need to be clear with their children about their estate intentions, regardless of how much money is involved, but, according to Sam, they can avoid problems in their relationships if they stay quiet about the amounts involved.

Getting the basics right

There are several triggers that highlight a young adult’s need for financial education – when children start earning an income, receive an inheritance or windfall, or start asking questions about financial matters and don’t know where to turn for advice. Parents want to make sure the child receives sound financial advice that isn’t clouded by the need to sell products.

“I usually begin working with the children of my clients when they start their first job. We meet to go over what I call ‘Financial Planning 101’,” explains Sam. He talks to the child about setting goals, managing cash flow, investing, RRSPs and estate planning. Through this initial introduction, the child now has a trusted resource to call if he or she has any questions about financial issues – something that gives both the child and the parents peace of mind.

Educating about investments

Unless children have pursued a business degree, they don’t get much of an education in money management and investing. “Either through lack of knowledge or lack of interest, many adult children don’t know too much about investing and, unless they have significant assets to invest, few investment professionals will spend the time educating them,” says Judith Fulton, Senior Consultant, at T. E. Wealth in Calgary. Clients who want to help their children learn about saving and investing recognize that often the best approach is hands-on experience. One approach that Judith has had success with is having clients set up a training portfolio for their adult children – possibly advancing part of their inheritance or simply giving the children the money to invest.

“Even though the child’s portfolio may be less than our minimums, I follow the same process that I use for their parents. Through the development of their investment policy statement and construction of their portfolio there is plenty of opportunity to teach about what’s important for successful investing,” explains Judith. At ongoing annual meetings Judith will discuss how the investments are performing and how to respond to market events and personal situations, going beyond theory. Because the parents invest through T.E. Wealth, they have confidence in the process, appreciate that the money will be invested conservatively for the long term and realize a level of comfort knowing that someone they trust is taking care of their children.

Acting as a mentor

For Lynne Triffon, Vice President at T.E. Wealth in Vancouver, working with adult children of her clients has resulted in long-term relationships that go well beyond the traditional notion of wealth management. In one case, Lynne was asked to help the child of a client invest a significant windfall. Initially, the relationship centred on investment advice but as the individual came to know and respect Lynne’s knowledge and guidance, she has looked to Lynne for advice in other areas. “You could say my role has evolved into one of a mentor,” explains Lynne. “When the client set up her own business, she asked me to sit on an advisory board to assist with developing the business. More recently, I’ve signed on to act as an advisor for Run for One Planet, the non-profit society that she has established.”

Coaching and mentoring are often a by-product of these relationships with the children of clients as the kids soon recognize that they have an expert resource with whom they can discuss a variety of concerns – purchase of first home, making a career move or starting a business, for example. Regardless of what is discussed, both parents and their adult children can rest assured that their financial affairs are treated with complete confidentiality.

Continuity and consistency

The work that consultants such as Sam, Judith and Lynne do with the children of clients forms the basis of a new long-term relationship, providing continuity of service and consistency of advice after the parents are gone. As Sam Chinniah points out, “The parents have experienced the benefits of our approach to wealth management first hand and they know the value of our advice. They simply don’t want anything less for their children.”

Lynne Triffon concurrs, “Clients who have referred their children to me are pleased that their children are benefiting from the same level of advice they themselves receive – something that’s not generally available until individuals have significant assets and income.”

And Judith Fulton adds, “Parents worry that their children will get involved with an advisor who is too aggressive or too interested in his or her own gain. They don’t have that concern with us – they know their children are in good hands.”

If you are interested in learning more about how T.E. Wealth can help your adult children, be sure to talk to your T.E. Wealth consultant.

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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