This time we hear from Nicole Perkins, managing executive at Hawthorn PNC Family Wealth in Philadelphia, Pa. She recalls a situation that taught her the importance of focusing on fundamental goals before making any investment decisions for newly wealthy clients.
I had a client in his mid-40s who was a successful entrepreneur in the food industry. He had flipped multiple businesses throughout his career. His most recent business was extraordinarily successful in a short period of time. When he came to me, he had just sold his company for hundreds of millions of dollars in a cash deal. Although this family was always upper middle class, they were now solidly part of the 1 percent.
Usually when I see clients with significant assets like this they’re older, they’ve established their goals and vision for life, and they’re more focused on enjoying their newfound liquidity. This couple, however, was still raising young children and had kids in college.
During the first meeting with the couple, I asked a lot of questions and allowed them to answer openly and elaborately. It was a deep discovery process, and I was listening for clues that would point me toward their hidden challenges or goals. Not everyone is able to clearly articulate those things right away – particularly when they’ve suddenly come into significant wealth that transforms their family.
With this couple, I noticed every new discussion would trigger a conversation about their kids, even when the topic was seemingly unrelated. That showed me that their major concern was about how their finances would affect their family.
I followed my hunch and asked them more about their kids. I discovered that the couple had different concerns for each child. They wanted to make sure the college kids would still be motivated despite their new wealth. For the school-aged child, the concern was how this money could change how their peers and classmates treated them, since the company’s and family’s names were publicly known.
The parents did not want their kids to learn about the family’s financial situation from friends, social media or the news. And they wondered where to start with the youngest, who may not have even really grasped any of the changes.
Above all, the couple wanted to proactively teach their children about privilege, responsibility and philanthropy.
Despite their eagerness to get into the market, it was clear the primary focus of our work together needed to start with acclimating the family to their new financial situation. I have worked with many families in which significant wealth was passed down through multiple generations, but I had never had a client come into this much money so quickly. I realized that before I could even begin to present them with solutions, we needed to work on the family unit.
For the next four meetings, I helped them tailor their wealth education to each child, depending on the age and nature of the relationship they had with the child. They decided to establish a private family foundation to serve as a tool to teach their children about investments and philanthropy, and it was funded with just enough money to demonstrate significant value and responsibility, without exposing the children to the entire picture of wealth before they were ready.
In the fifth meeting, we met with the whole family and were able to start discussing their investment plan, bringing the kids in through their desires for the foundation and what type of nonprofit work they wanted to support.
In situations like this, when a family comes into significant wealth, things can become complex very quickly. This situation helped me realize how important it is to understand the clients — who they are and what they want — before making any decisions about investments. With sudden wealth, there are so many choices to make, and clients can get overwhelmed. That’s why it’s crucial for advisors to slow down, listen for the clients’ priorities, and address those first.