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Preparing the Next Generation to Steward Wealth: It’s a marathon, not a sprint.

By Jessica Andrews, Pacific Trust Company President


New Year’s is the perfect time to reflect on the past and set intentions for the future. As you set goals for the next year, I’d encourage you to start preparing the next generation of your family to effectively steward wealth.


Over the last 15 years, I have had the unique opportunity to teach the next generation of wealthy families about money and stewardship. I’ve worked with some of the wealthiest families in the world with people ages seven through fifty. I’ve seen a large variety of transitions of wealth from one generation to the next.


Through this work, we cover the financial literacy basics such as spending, debt, and investing. But we also explore more complex topics like: what does it mean to be a responsible steward of wealth? How should you react when asked about how wealthy you are? What’s it like to feel really lost about what to do with your life even though you have every option in the world.



After 15 years, I’m still learning every day, but this is what I know for sure about preparing the next generation:


START TALKING AND TALK A LOT: Every family needs to talk about money. But the need is vastly more important when there is significant wealth. Be honest, clear, and specific. Proactively answer questions like: What does it mean to have significant resources? How was the wealth created? What are our family values and how does money fit into that? How do we use our money and why? It’s like teaching a child a foreign language. The earlier you start, the more fluent they’ll be as an adult.


The topic of wealth, money basics, and stewardship is a topic that should be covered in thousands of small conversations over the course of decades. It’s about reducing the mystery of wealth and shaping the next generation’s attitudes and confidence. So many parents put off the conversation until they “can say the right thing” or wait until they think their child is ready. But this can be a damaging strategy because the child will create their own narrative. If the communication isn’t there, the next generation will fill in the gaps with their imaginations and will gather fragments of information from what other family, friends, and peers tell them. Saying things awkwardly is better than not saying anything at all.


EMPOWER GROWTH: When parents do too much for their kids, they prevent growth. Many parents are used to stepping in and taking care of the problems their kids face. This tendency is even stronger in wealthy families where there are resources to help solve problems. Instead, teach your kids that they are capable and empower them to solve problems on their own. Move from the role of “fixer” to “consultant.”


Dr. Harold Koplewicz, President of the Child Mind Institute, says it best, “Even with the best intentions, parents who do too much for their kids are flooding them with negative reinforcement, to believe in their own incompetence. If you want to raise future, independent adults who aren’t afraid to take on challenges, do less for them as children. Step back, encourage them to try, allow them to fail, and guide them to look at what happened so they don’t repeat mistakes. Failure is a given in life. You can’t protect your children from the trials of life, but you can teach them how to advocate for themselves, take failure in stride, and develop [the] grit they need to survive and succeed.”


I worked with one family where the father decided that at age 18, each of his children should form and manage their own LLC and he gifted a few million dollars of real estate into each entity. In the early years, I would meet with each teen to help them think through important management decisions such as the cash flow of their LLC and when it was appropriate to make a distribution to themselves or plan for a capital contribution. As the years passed, they became proficient at this process, and I was needed less and less. This strategy paid off. The teens are now adults who successfully manage much larger portfolios, understand the family businesses, and exemplify great stewardship of their family wealth.


SHOW THEM THE WAY: No one is born with the innate ability to steward money. It’s a learned skill. The first generation learned through their experiences with success and failure as they generated and grew their wealth. The second generation was born into wealth. This can create a gap in understanding between the experiences of each generation. Too often, I’ve seen parents expect their children to just know this information. But they don’t.


In my experience, the next generation wants to preserve their family’s legacy and be good stewards of their wealth, but they are often lost and overwhelmed about where to begin. When working with wealthy families, I often quote Brene Brown, “clear is kind.” What does this mean for wealthy families? It means that the next generation needs a clear, specific road map to follow. At Pacific Trust Company, we call these Next Generation Development Plans. They are specific, actionable, and achievable.


For example, a Next Generation Development Plan for 2022 could include:

  • Meeting the family’s tax CPA and understanding the basics of the family’s tax return;

  • Shadowing the VP of HR in the family company for a day to gain a better understanding of employees in the family business;

  • Taking a financial literacy course on investing in non-liquid assets;

  • Attending a family business conference where other members of multi-generational wealth are wrestling with the same issues.

Once the path is clear, learning from parents, employees, and advisors can be a very fulfilling and empowering journey for the next generation.


ENLIST OUTSIDE HELP: Introducing a third-party financial coach can be incredibly helpful. Often teens and adult children are far more inclined to listen to an outside advisor than a parent, even if they are delivering the same message.


Parents should continue to model desirable behavior but can outsource a fair amount of the education and the opportunities for the next generation to practice their stewardship skills. Get creative on how an outside advisor can help.


Over the last few years, I have coached a group of siblings in collaborative decision making. In the future, the siblings will own a large operating company together. As a group, generation two needed practice making decisions together. Our Pacific Trust Company team hosts private workshops educating them on effective decision-making theory and emotional intelligence. Every six months, we facilitate an exercise where the siblings practice making group decisions by selecting a charity to receive a $50,000 donation. Each sibling is responsible for researching and nominating a charity for the group to consider and the final decision must be unanimous. The sibling decision making practice is paying off. They have grown from bickering to constructive discussions where each sibling actively listens to the others.


Preparing the next generation to steward wealth is a marathon, not a sprint. But when done thoughtfully and consistently, it can produce amazing results. The Pacific Trust Company team is here to help.



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