Managing Wealth Through Generations: 3 Stories
For more than six decades, Glenmede has served the needs of families over multiple generations—from the personal holdings of first generation wealth builders to the complex network of estates, trusts and philanthropic initiatives that develop within families over decades. While every client experience is unique, the three case studies that follow touch upon shared challenges and illustrate how we partner with clients to create individually tailored solutions to meet specific legacy, planning and investment objectives.
THE FOUNDING GENERATION: CREATING A LEGACY
The transition from building wealth to preserving that wealth for future generations is always a challenge. One of the cornerstones of successful wealth transfer is establishing a clear legacy for the next generation. Without explicit statements of intent, even the best-laid plans can have unintended consequences.
That was the case for one client, a couple who had given their children stock in their privately held company. They had worked hard over the course of their lives to build a successful business. Their assets were invested with a growth orientation, taking well-considered risks, so their portfolio was largely equity weighted and included private investments selected by Glenmede. Secure in their own future, they took comfort in the belief that, when the time came to take their company public, the proceeds would provide their children with sufficient wealth to secure their financial independence.
That day came several years later. During a meeting with their Glenmede Wealth Advisor, the couple shared their frustration with the way their children were handling their proceeds. Each had invested their assets so conservatively, they were barely keeping pace with inflation. Although they had been encouraged to use their wealth to make their lives easier, the children were instead pursuing a risk-averse investment approach that had its roots in their understanding of the family’s core values of hard work and self-determination.
After listening to the couple and speaking with their children, Glenmede determined the family would be best served by a formal letter of intent from the grantors. Their Wealth Advisory team worked with the couple to develop a document that described how they built the family business, the risks they took along the way and the decisions that contributed to their success. It concluded with an explicit statement of intent that the heirs use their money to take prudent risks and enjoy life. Reading the document was a defining experience for the children. Our Wealth Advisory and Investment teams then worked with each to develop more aspirational goals and investment strategies for their assets. As a result, the couple was able to take great satisfaction in knowing their legacy was positioned to enhance the lives of their children and grandchildren.
THE SECOND GENERATION: RESPONSIBLE STEWARDSHIP
As the previous case study shows, inheriting wealth can present distinct challenges. We have also worked with siblings who, in addition to managing their own assets, have had to learn to work together to effectively co-steward a family trust, foundation or other philanthropic endeavor. These responsibilities often converge when circumstances arise that can test the resilience of the best sibling relationships and extended family dynamics. Sometimes the key to a successful outcome depends on reaching consensus when interfamily communication breaks down.
One of our families faced this situation upon the death of their parents. Two siblings and their respective families became deadlocked over who should assume leadership of the family foundation. During this time, key administrative, investment and grant-making decisions were suspended and the work of the foundation was at a standstill.
As a trusted and impartial advisor, Glenmede mediated a solution that gave both families a path forward by developing dual-leadership roles. We worked closely with the families to map out clear lines of responsibility and establish new grant-making and governance procedures. This allowed all parties to feel they had a seat at the table and a clear roadmap for working together to advance their parents’ charitable mission.
THE NEXT GENERATION: BECOMING THEIR OWN CFOS
Young adults face many new responsibilities, including preparing for financial independence. Being born into wealth does not, of course, confer the basic financial management skills necessary to ensure long-term security. The biggest challenge for a young person in this situation is often learning to be his or her own chief financial officer.
With that in mind, one client couple brought their 17-year-old son to the family’s annual review meeting with Glenmede. The parents wanted to prepare him to assume responsibility for his assets upon turning 21 and asked us to develop a tutorial for him as part of the agenda. But as the meeting got underway, the son became uncomfortable being the focus of the discussion.
With deft perception, a member of the Wealth Advisory team, herself a millennial, asked him if he wanted to look at the family’s investment portfolio online, away from the group. That led to an hour-long exploration of WealthView, our interactive financial planning and investment platform.
After the meeting, the son and our Wealth Advisor maintained an ongoing dialogue that led to subsequent sessions on topics ranging from impact investing to Glenmede’s investment decision-making process. When it was time for the family’s next annual meeting, the son was a highly engaged participant, fully invested in his and his family’s financial future.
GENERATIONS TO COME: THE NEXT CHAPTER
One of the great privileges of our work at Glenmede is being a trusted advisor to multiple generations of a family. Our independence and organizational stability, as well as a culture that attracts and nurtures exceptionally talented professionals, allow us to deliver tailored advice and services to clients wherever they are on their generational journey. We will maintain our ongoing commitment to thoughtful, innovative family wealth and investment management as we continue to serve individuals and families into the future.
This material is intended to be a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and it is not personalized investment, estate planning, tax or legal advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. This material may contain Glenmede’s opinions, which may change without notice after date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. This publication may not be used as legal or tax advice.