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Financial Planning > UHNW Client Services

Morgan Stanley Takes On UHNW Challenges Beyond Tax Planning

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Morgan Stanley was a 2022 ThinkAdvisor LUMINARIES finalist in the “Thought Leadership — Firms” category for its Family Legacy and Governance (FLAG) Institute program, designed to help solve the specific challenges of ultra-high-net-worth clients.

Elizabeth Chand, head of Morgan Stanley’s Family Office Resources Generalists, came up with the idea for the program while attending an event put on by a traditional estate planning institute. She realized, “There really is a gap here,” according to Glenn Kurlander, managing director at Morgan Stanley Wealth Management.

“There really was a void and an opportunity for us to step into the void and fill it,” he said during a recent interview. “And that’s what we did with the Family Legacy and Governance Institute.”

During the interview, Kurlander and Chand discussed what the program has achieved so far and what is planned for this year and beyond.

THINKADVISOR: What is the FLAG Institute, and what needs does it specifically address in the UHNW sector?

GLENN KURLANDER: There are many programs that focus on what we think of as traditional estate planning: programs that are focused on the advisor community, on estate planning professionals and address the challenges that ultra-high-net-worth clients face from the perspective of traditional estate planning, which is typically about tax-driven matters: managing estate tax, gift tax, generation-skipping transfer tax, income tax and the like.

Obviously those are very important, very significant challenges, but there are very few, if any, programs that focus on the more qualitative challenges that ultra-high-net-worth families face, and those challenges come under the umbrella of family governance: a term admittedly that is somewhat amorphous but is meant to encompass challenges that are more qualitative in nature that relate to the impact that financial capital has on the family.

And so we saw a need for helping wealth-planning professionals deal with those challenges, develop greater understanding and expertise in that area so that they can help their clients, not just with the tax-driven challenges, the more traditional estate planning challenges that all of these other institutes address, but instead focus on these more qualitative challenges as well. And that was the impetus behind the Family Legacy and Governance Institute.

How does the institute benefit financial professionals with UHNW clients?

By providing education in this space. We think it’s something that is desperately needed because there aren’t really other vehicles for getting this form of education.

We think it’s very much needed in the space, and also we think that this is an area that has tremendous impact in the lives of ultra-high-net-worth clients, as important as managing these quantitative challenges are, as important as it is to our clients to manage estate tax and gift tax exposure.

Clearly, those are important undertakings. Nevertheless, when one thinks about the long-term success of families, we think it’s undeniable that managing these qualitative challenges has the far greater impact.

When you think about the long-term success of families over two, three, four generations or more, the things that have the greatest impact are not the extent to which they manage estate and gift tax. It’s the extent to which they manage the human capital challenges, the challenges that affect whether wealth will destroy initiative and ambition. Whether the family will be destroyed over devastating family conflict. Those are the areas that we address in the Family Legacy and Governance Institute.

Those are the things that make the difference over two, three, four generations or more.

As important as minimizing estate and gift tax is, that’s not what makes the difference in the long haul.

How fast is the UHNW sector and business growing today overall in the industry?

Global wealth is growing at a phenomenal pace. At the end of 2020, there were about 218,000 individuals worldwide who had [a] net worth of $50 million or more.

At the end of 2021, that number had grown to 264,000. That’s a growth of over 20%. Interestingly, 66% of that growth was in the United States. So wealth is growing at an astronomical pace, and a lot of it is in the United States.

What are the first steps advisors need to take to get into serving UHNW clients?

We think it’s important for advisors to expand their focus.

Clearly, the advisors who attend the Family Legacy and Governance Institute are expert advisors. They’re expert in helping clients manage transfer tax regimes, in managing estate and gift tax exposure, and generation-skipping transfer tax exposure.

But many of them recognize that they’re not yet expert in helping clients address these more qualitative challenges in dealing with family conflict, in finding ways to empower the younger generation.

And that’s an area where they themselves recognize there’s more work to do. And so that’s why this institute has been so successful.

What’s next for FLAG in the coming years, and how do you see these efforts strategically helping Morgan Stanley, its advisors and their UHNW clients?

ELIZABETH CHAND: Our plans are to continue to grow FLAG to be a preeminent institute in the space for attorneys, CPAs, family office executives, and to be a place where they can come and learn and develop their practice and bring it to their clients in a way that really serves their clientele and helps to grow their ultra-high-net-worth clientele.

KURLANDER: Our strategy has changed a bit from the time we undertook the institute. In our first year we had one program. We had a three-hour program. It consisted of three sessions, and it was extremely successful. We were very pleased with the results in the first year.

For the second year, we decided it was important to institutionalize the institute to a greater degree. And what I mean by that is we wanted to have a more ongoing presence and so rather than have one large program, we decided to have a continuing presence over the course of the year and offered three programs, and that’s our plan for 2023 as well, which will be the third year of the institute.

For 2023, our theme is going to be decision making. How do families make decisions together in ways that make it more likely that those decisions will be respected over time rather than devolve into devastating family conflict?


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