It is one of the single most asked questions, as we work with our clients to pass wealth on to their next generation. 

It seems like there should be a simple answer. Unfortunately, I always follow that question up with the ever so frustrating, “Well, it depends….” The biggest thing I stress to our families, is that the number is not what’s important. It’s the context around the number. What is the level of transparency? What is the child’s level of responsibility? What are the parent’s expectations? When we solve for these factors, we can then begin to explore specific amounts.

Numbers given out of context, have very little relevance to whether your next generation wealth planning will be effective or not. A parent can transfer $1,000,000 to their child and believe (for good reason) that this tremendous gesture will be greatly appreciated. However, if the child believes that their parents are worth $500 million, this .2% transfer of wealth might be perceived as a tremendous slap in the face, especially if the child was in the midst of trying to start a business and a family at the same time. Forget for a moment that the basis of this analysis was a simple internet search and personal observation. Adding another perceived insult, the parents want to transfer the assets in trust, to provide some level of asset and creditor protection, but the child thinks that it is “in trust” because his parents don’t “trust” him. To further muddy the waters, the parents have not told the child that there is an even bigger amount of wealth that is in the process of being transferred, but is pending the “break” of additional planning techniques. All of these compounding misunderstandings can be avoided with a simple sit down. We are big believers in facilitating a meeting that details and explains the amount of money that is being transferred now, and in the future, the method used for the transfer, why the money is being transferred, and what can prevent or cause any of the above to change. We believe this transparency is crucial to averting any miscommunication, or perceived ulterior motives.

Often times, these transfers are meant to support a parent’s legacy goal, but that goal is obscured by legal language, and neither generation really understands the other’s intentions or expectations. It is critical that the parents lay out the responsibilities being placed on the next generation. If the money is meant to help supplement income from employment, it should be stated. If the money is meant to create a charitable legacy within the community, it needs to be made clear. We often find ourselves mediating emotional conversations at points in the future, because of poor communication about expectations and responsibility at the outset. Families should set aside time once, twice, or three times a year, to discuss everyone’s responsibility, and set an agenda with follow-up action items, so that these important discussions are conducted, and contained within dedicated meetings. Otherwise you will run the risk of every family interaction turning into an unexpected and potentially messy exchange about the responsibilities of money, perceived insults and disappointment under the guise of “transparency.” Use these dedicated forums, with set formats your family agrees upon, so that every wedding or holiday doesn’t turn into a money session.

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Larger “lifestyle” purchases typically come with a myriad decisions beyond determining, “What should I be paying for this?”

Take a home purchase, how should it be purchased – cash or cash and debt? Should it be purchased in trust? If so, what kind of trust? Who’s trust? If not in trust, should the home receive private debt from the trust to finance the purchase? Should the debt be structured as a mid-term note or a long-term mortgage, which would require filing? Have all of the insurance and carrying costs of the purchase been factored into cash flow? This is where things get complex. While a little nuanced, these are just some of the decisions one should consider when preparing to purchase a home.

And beyond questions of ownership lies perhaps the bigger question of integration – how will the ownership and debt payment structure fit into the family’s overall financial plan? Whatever the purpose of the home, be it a vacation property, a gift for a child, or a downsized residence for retirement, the impact of the purchase will be felt across many other areas of the family’s financial life. In the realm of estate planning, whether the home is owned by the parent, a child, a trust or another entity, the purchase will have an immediate impact on cash flow, and a long term impact on the legacy assets to be passed along to their next generation as part of the transfer of wealth. Parents must also consider the long term prospects for the home itself – is it likely that any of the children will want to remain in the house after their parents’ passing, or is it more likely that it will be sold, and the proceeds divided among the heirs? If a future sale is expected, the potential ownership or liquidation contingencies should be clearly addressed in the parents’ wills to avert costly legal disputes. The sale of or transferred ownership of the home may also have tax implications.

Want to fly private? There are a number of choices available, from ride sharing to fractional ownership to chartering to jet cards. All of these options have their strengths and weaknesses based upon where you are going, how often you are going, and who you are going with. Our team has extensive experience working with clients to navigate these decisions, and to make the best choice, it’s really important to understand the context of the acquisition. One of the first questions to be answered is will the potential flights be for personal use, part of a business enterprise or for philanthropic purposes? Plane ownership will never be an investment, but depending on the use, there may be opportunities to realize some tax benefits. Another important consideration is will the expense of the purchase impact your contributions to either your lifestyle or legacy investment portfolios, or can you make adjustments in other areas of your finances to maintain current contribution levels?Other aspects of the purchase, such as whether an individual, entity or trust will be the owner, will have tax and liability implications. Additionally, the ownership structure, along with the plane’s configuration and the number of guests you will be transporting, may trip you into FAA chartering rules.

With any complex acquisition, you must have a full understanding of how the diversion of funds will impact both your current cash flow needs and the growth of your long term assets, as well as how the acquisition will be transferred to your heirs and what the tax implications are. The decision to make a complex purchase is never made in a vacuum, far from it, but with the right team in place, it can be conducted in a way that minimizes the impact on the other areas of your family’s wealth.

Disclaimer

Each member of the diversely talented team at Waldron leverages his or her own specific areas of expertise and experience to help our clients achieve their long term goals.

Our team members are what make our firm so unique, and in an effort to help you get to know our team a little better, from a professional and personal standpoint, we’re publishing a series of Team Member Spotlights.

This quarter, we turn the Spotlight on Kevin Searfoss, CFP®, CDFA, Wealth Counselor. Kevin specializes in risk and liability management, cash flow and debt management, and comprehensive planning. With more than 20 years of experience in wealth planning, and over 15 years at Waldron, Kevin brings an extraordinary amount of knowledge and perspective to his clients and to the firm.

Why did you join Waldron? In late 2001, I was working at another firm, when a colleague encouraged me to meet John for lunch. By the end of lunch, after hearing John speak about how critical a comprehensive perspective was to simplifying the complexity his clients were facing, I knew this was someone I wanted to work with.

What is the best advice you have ever received? “It’s much more important to listen during a meeting, than to try and demonstrate how valuable your services are.” – John Waldron.

If you could have dinner with anyone, who would it be? My two grandparents who passed away while I was very young – my grandfather on my mother’s side and my grandmother on my father’s side. I was fortunate to be able to spend time with two of my grandparents, but I wish I had the chance to get to know the two who passed on before I was old enough to remember them.

What is something people would be surprised to learn about you? That I am a pilot and worked as an air traffic controller. Right out of high school, I went to flight school to become a commercial pilot, and got my pilot’s license and a control tower operator degree.

What is the next item you plan to knock off your bucket list?  I would like to learn the Heimlich maneuver and CPR. A few years ago, a dining companion was choking on a piece of chicken. No one at the restauramt knew the Heimlich, so I made an amateur attempt to apply it, and luckily it worked. But I would like to take luck out of the equation should I ever end up in that situation again.

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On February 23^rd, Waldron hosted a Family Legacy Event at the Hotel Monaco, focused on addressing the sensitive issues parents face when talking to their children about family wealth. The event was moderated by the founding members of The Telos Group, Michael McGrann and Jonathan Habbershon, acclaimed specialists on the issues of communication and family wealth dynamics. The goal of the evening was to foster a constructive dialogue among the peers in attendance about the common challenges they face, and to provide actionable takeaways to facilitate the important conversations families of wealth must have to ensure the successful transition of wealth. The theme for the evening was: How, and when, to talk with your children about your family’s wealth?

To successfully integrate your wealth and your family, the moderators recommend as a first step, that parents take the time to understand what they really think about money and their wealth. People work their entire lives, and make many sacrifices to build up their family’s wealth, but few stop to think about why it is so important to them. Wealth can provide a variety of benefits and opportunities: A feeling of security for the family, the ability to live a particular lifestyle or to support a philanthropic cause, or perhaps the freedom to pursue what you are truly passionate about. Whatever your personal perspective is on the importance of wealth, you need to understand your feelings first, before you can impart your vision to your children. Once you have an understanding of how you view the value of money, you should identify opportunities to share your perspective with your kids. Young children, even as young as four or five, can benefit from discussing basic elements of money, such as the many different ways people earn their money, or the equally diverse manner in which they spend it. Simple discussions can open their eyes to bigger concepts like responsibility and independence, and can afford you an opportunity to define your feelings about these concepts. As kids get older, doors will open for other discussion opportunities, such as what it costs to attend private school, or how large purchases, such as a new vehicle, are evaluated and conducted. When they near the end of high school, you can broach more sophisticated topics, such as housing options and budgets. A crucial component for the success of all these discussions is honesty. If you have spent years expounding on the virtues of saving, but have filled up your garage with a collection of largely ignored exotic cars, you may have accidentally undermined your message. On the other hand, if you regularly demonstrate the consideration and prudence you extol, your words will have more meaning, and stand a far greater chance of influencing your children’s perspectives.

The determination of when to discuss the details of your wealth with your children should be made based on the relationships you have established with them. If you feel they have demonstrated a thoughtful, careful approach to financial responsibility, you may be comfortable discussing the details of your wealth at a younger age, perhaps right after college, or if you feel that a more incremental approach is appropriate, you might wait a bit longer. But wherever you are along this comfort continuum, a crucial component to engaging your children in these discussions, is asking them what they feel about your family’s wealth, and learning what their goals and expectations are. Asking these types of question may make a parent feel apprehensive or vulnerable, as the answers may not align with their own vision for the family’s wealth, but by listening to your children, and learning what they are passionate about, and what their goals are, you will deepen your relationship with them. And in the long run, that closeness and honesty will build and develop the trust and understanding you both seek, and which is necessary for a successful transition of wealth.

Disclaimer

We don’t boast about many things at Waldron – it’s simply not part of our personality. But if we had to choose one facet of our firm that’s deserving of praise, it would be our diversely talented staff.

We are boutique by choice, and have built our company with the client in mind at every step. From our concierge approach to customer service, to our comprehensive planning strategies, Waldron aims to create the most tailored, personalized client experience possible – and that begins with our diversely talented team. Among the titles and certifications of our financial advisors are CFP®, CPA, CFA, graduate of the Institute for Preparing Heirs, and Certified Divorce Financial Planner. And integral to our high touch service offering, is maintaining an exceptionally low client to staff ratio (currently better than 5 to 1), which allows us to build a customized, accessible team, for each and every client. Our low client to staff ratio, and our high touch, concierge approach, has set us apart from other firms over the years, because we’ve created a service offering that is conscientiously crafted based on the needs of the customer, not the needs of the firm.

When we onboard new clients, we spend a significant amount of time analyzing the intricacies that make up their financial life – what their goals are, how they created their wealth, what the family dynamics are, what their investment profile is, and what their service needs are. We then take that information and use it to form their Waldron team. Typically, a team consists of a lead advisor, and a specialist from the wealth planning group, the investment management group, and the client service team, and often includes additional team members, whose experience and skills are suited to support specific aspects of that client’s particular situation. Also key to our comprehensive approach, is that when we address client issues, we do so in a collaborative manner, and always with a focus on supporting that client’s specific wealth planning goals.

As an experienced, comprehensive wealth management firm, we know that every choice a client makes impacts several decisions down the line – complexity breeds more complexity when it comes to planning for the future. However, a holistic approach, undertaken by a multi-disciplined team of experts, can help simplify any situation. By clearly identifying all the relationships created by extraordinary wealth, we make the complex more manageable.

Disclaimer

Each member of the Waldron team leverages his or her own specific areas of expertise and experience to help our clients achieve what’s important in their lives.

Our team members are what make our firm so unique, and in an effort to help you get to know our team a little better from a professional and personal standpoint, we’re publishing a series of Team Member Spotlights.

This quarter, our Spotlight features Eric Vogt, CFP®, Wealth Counselor. Eric works with corporate executives, highly compensated professionals, and inheritors of wealth to identify and assess lifestyle and legacy goals, and develops customized planning strategies to help achieve them. Eric is also a key member of Waldron’s next generation wealth planning group, providing education and counsel for families transitioning wealth to their next generation.

Why did you join Waldron? I have been interested in the wealth management field since college, and I wanted to join Waldron because it was boutique firm, and afforded me the versatility to really make a difference in clients’ lives. I feel very fortunate that as I’ve grown with the company, I am now able to build out the firm’s direction as well.

What is the best advice you have ever received? “Every morning, you can decide how your day will go.  It’s all about tackling the day with the proper mindset.” – My father.

If you could have dinner with anyone, who would it be? Frederick Russell Burnham.  He was the ‘real’ most interesting man in the world, and lived a life that few people could imagine.  He grew up on an Indian reservation, struck gold out west, fought in multiple wars, prevented the assassination of President Taft, and explored territories and countries around the world, among many other things. I couldn’t imagine a more fascinating dinner than listening to all of the stories he would have to tell.

What is something people would be surprised to learn about you? I am a big fan of adventure travel, so in 2012, four friends and I went on an eight day trek through the jungle in Tanzania to climb the tallest mountain in Africa, Mt. Kilimanjaro.

What is the next item you plan to knock off your bucket list? I am hoping to backpack Southeast Asia and trek to Everest base camp in the next couple of years.

Disclaimer

Mark Twain has been credited with saying, “History does not repeat itself, but it often rhymes.”

That quote has stuck with me over the years, as I’ve always enjoyed finding patterns in seemingly unrelated fields. They’re everywhere, often in unexpected places.

In this case, I’m exploring the connection between a few occupations which (on the surface) appear to be dissimilar, but actually have a tremendous amount in common. With that, let’s take a moment to examine the attributes of artful jazz music, successful cooking and goal-based wealth management.

Integrated

Jazz relies on the integration of musicians and their instruments into a blended group. If the collaboration isn’t perfect, each musician might otherwise standout too strongly on his or her own, and overwhelm the others on stage. During the performance, different players have the opportunity to shine at various points, but the underlying foundation is a close-knit group, that performs with balance.

Similarly, the preparation of meals in fine dining often entails combining and layering ingredients that have varying flavor profiles, potencies and textures of their own, into sublime harmony. At different times in the meal, a variety of ingredients can be the “star of the show,” but successfully transforming unique components into fine cuisine requires creative and skillful integration.

So, how do Jazz and preparing great food relate to wealth management? Sometimes along the continuum of client service, investment management is the focal point. Other times it can be tax planning or business succession planning. Each component of wealth management may be the central focus at one moment or another in a client’s life, but all aspects of a client’s financial life require integration and coordination, so that no single facet overwhelms the rest.

Balance

Most musicians will tell you that their most important contribution to a performance is their ability to listen. No one wants to overshadow the other performers. Most chefs will tell you that they strive for balance among a dish’s flavors and textures. Too much salt? No. Too much heat? I hope not. Most wealth managers will tell you that their job is about balancing goals to achieve the appropriate results. What are your goals vs. the goals of the rest of the family? Is this estate plan passing the right amount to my next generation vs. my charitable intentions? Is this portfolio generating the proper amount of return for the risk I am assuming?

Ability to Adapt

Circumstances are always changing. How do you adapt?  When is the right time to make adjustments? In jazz, there are structured times for “improvising” and moments allowing for a soloist to shine.  The chords change, and flexibility on the part of the other musicians is paramount. Communication is key for others to know where they are in a performance. In cooking, circumstances also require adaptability. A dish needs an ingredient, but you’ve run out for the night, the dinner rush started early and the sous chef called off – the chef has to adjust. With wealth management, markets change, tax laws change and emotions change. It is critical that the wealth management group recognize these circumstances, and modify the plan for their family accordingly.

The common pattern among all three occupations is that to achieve success, you must be in tune with fluctuating and challenging environments, and be able to recognize which piece in your ensemble is best suited to take center stage at any given moment. At Waldron Private Wealth, we practice goal-based wealth management, with a long term outlook, because while we can’t eliminate the roadblocks which inevitably occur in a client’s financial life, we can rebalance our resources to ensure that we are always advancing towards our client’s goals.

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