In these uncertain times, your clients may be feeling profoundly vulnerable deep down. Questions about what their lives mean, what will survive beyond them, and what legacy they will pass on to their loved ones–and in the world around them–can seem more pressing than ever.
As a result, clients who receive an inheritance, or plan to leave one, may present you with intensified dilemmas. Here’s a look at several different situations, with suggested ways to handle them.
A client whose $2 million inheritance I manage has fallen in love with a young fellow she met at a party. He wants her to provide capital for a new venture that has something to do with cloning racehorses. This lady has been looking for Mr. Right for a long time, and she’s thinking seriously of funding his idea. Needless to say, I fear he’s a con artist. How can I get her to see reality before she loses her fortune? Many heirs and heiresses have conscious or unconscious guilt about wealth they haven’t worked for. In various ways, they may try to sabotage their own best financial interests.
Combined with the fact that love is blind (particularly in the honeymoon stage), it’s likely that your client won’t respond well to rational arguments against this investment–at least not initially. She certainly doesn’t want to hear that you fear her boyfriend is dishonest and plans to use her. If you take this approach, she’ll only push you and your advice away, to her own detriment.
Instead, encourage her to help you figure how much money she may need for her future financial security. Then you can estimate how much will be left for her to share with loved ones and charities, invest in high-risk opportunities, and otherwise play around with.
If she is willing to discuss this cloning scheme with you, ask her to consider whether it will help her reach her long-term goals. Remind her that before recommending an investment, you always try to estimate the downside risk as well as the upside potential. What does she think the worst-case scenario might be if she invests in this deal? If her answer echoes your own fears, you might try to help her see the risk more clearly by telling her about someone else’s emotionally motivated investment that had disastrous results.
If your client is willing to lose the money despite all these cautions, you need to let go. Just be there to catch her if and when she falls, without saying smugly, “I told you so.”
An older couple I work with are finally getting their estate in order. They want to leave a substantial sum to their grandson, now 15, who seems to have no ambitions beyond hot music and cool clothes. They worry that it’s too late to begin educating him about the responsibilities of wealth. How should I advise them? It’s never too late to start this learning process. If you feel comfortable serving as a mentor for their grandson, you might volunteer to teach him about investing, borrowing, and so on. Or you may be able to recommend a good personal finance book or video to begin educating him about ways to grow money and put it to work.
In any event, I’d suggest that the grandparents discuss their plans and their philosophy with the young man. They could also talk to him about his goals and potential uses for his inheritance. This may be a meeting you’d like to be involved in, if everyone is willing (yourself included!).
A toe-in-the-water tactic would be for them to give him an advance on his inheritance, and have him work with you to choose stocks or funds in categories he’s interested in. Once he begins tracking these stocks, he’ll be on the road to understanding what money can do for him, other than simply satisfying his immediate needs and appetites. The grandparents could also get his input on earmarking some of his money for a charity of his choice.
I must say, your clients are truly enlightened. By devoting time and effort to educating the next generation, wealthy families are much likelier to raise young people who use money wisely to benefit themselves and the community.
My client, a widow, wants most of her money to go to a local community foundation after her death, but her adult children are pressuring her to leave it all to them instead. She wants my help to restore peace in the family. SOS! This is never an easy situation. However, I’m glad your client wants to resolve this issue now, rather than surprising her expectant children with a fait accompli after she is gone. Their shock, distress, and disappointment at that point could forever color their memories of their mother.
If you’re willing to assist your client, I would meet with her to be sure you know exactly why and how she wishes to pass on her wealth. Get a detailed sense of the family financial history. How well-off is each of her children at present? Are they feeling unloved or unsupported in some way? Perhaps she hasn’t made it clear to them that she is not withholding her love, just her money. Can she show them love and support in other ways?
Assuming you are in accord with her preferences, you can then choose to get together with her and the children. Be aware that intense emotions may surface in this meeting. If you feel uncomfortable being put in the position of a bridge between dissenting family members, you might consider asking a trusted therapist or counselor to sit in with you.