A growing number of parents are realizing there could be a considerable estate left after they die. And they are worried about how their children will handle these eventual inheritances. But talking to children about money can be a difficult hurdle for clients. You can help clear the path.

Helping your clients cope with intergenerational wealth transfer means that you have to change your focus as an advisor, says Arthur Fish, a partner with national law firm Borden Ladner Gervais LLP in Toronto.

“We tend to look only at the person sitting across the desk,” he says. “But that’s not how people think of their wealth.”

Inevitably, when you ask your clients what really matters to them, one concern will be ensuring that their children are cared for and will be able to take care of themselves, says Shannon Sabey, the Magrath, Alta.-based branch manager for Portfolio Strategies Corp.

The first and often the most difficult step for clients is to initiate a conversation about money with their teenage children.

“The baby boomers were on their own when it came to learning about money,” says Sabey. They carry the expectation that their children will be open to learning, too. But it’s not easy to start if a child has already reached 18, she says.

Instead, both Sabey and Jeff Wachman, a senior financial planner with Assante Financial Management Ltd. in Mississauga, Ont., believe it’s better to start younger. To help clients instruct their children, both advisors have developed Saturday learning sessions.

“When children are five, 10 and 15, there are all kinds of money-learning experiences they can have at home. So, when the parents are seniors, their money values are in place,” says Sabey. “Handling an inheritance will come back to the basics.”

In 1999, Sabey started offering sessions that involve interactive discussions and games designed to teach children about making and spending money, credit cards, investing and setting financial goals. She runs Moe Money Camps for 11- to 15-year-olds, and 14- to 17-year-olds. (Children aged 14 and 15 can go to either camp, depending on their level of maturity.)

One camp event involves kids using foam-dart guns to shoot toward their chosen financial goals. If they fall short, Sabey says, they learn steps they can take to get closer to their goals.

Wachman more recently introduced his sessions for clients’ children. In his program (as well as in Sabey’s), children are given money to invest. Then they chart their investing progress.

OPEN TO LEARNING

The children learn about their own risk profiles, says Wachman. “Afterward,” he says, “a lot of parents have told me their kids are now interested in money management. They look in the newspaper for what’s happening. The session opens them up.”

Some clients will be comfortable talking about money with their children. They just need a little coaching. First, says Fish, the parents visit his office to discuss technicalities and prepare for their children’s questions.

“Then, they sit down with their children to go over what role they expect their children to play in managing the family’s wealth as the parents age and die.”

The children need to understand technical basics. He notes that studies show “about one-third of inherited wealth is gone within two years, so the process of estate planning has to involve preparing the children to manage money.”

Some common concerns regarding wealth transfer include:

> making a will with proper beneficiary designations and ensuring clients have named powers of attorney for property and health;

> anticipating liability for capital gains on vacation properties;

> anticipating U.S. estate tax liability for U.S. properties;

> succession planning for family businesses;

> planning for probate fees in high probate-fee jurisdictions such as Ontario and British Columbia.

The second element involved in helping your clients is instilling in the children what Fish calls an “ethos of stewardship.”

Initially, that means the children are taught that the money they inherit is not just for them to spend. Many parents are worried that their children will lose ambition and simply wait to inherit, he says.

Therefore, developing that ethos may mean learning about preserving the family business — the proverbial golden goose — for the generations to come.

This involves looking at the role of the family’s wealth in the wider world, says Fish. For example, the family may participate in planned charitable giving, which, he says, “allows the children to see that wealth can be used to do good in the world.”

@page_break@One of the ways to create this ethos of stewardship is to have the family set their investment objectives by writing a “family mission statement.”

While this approach may sound “touchy-feely,” says Fish, it helps advisors to understand their clients better and, therefore, serve them better.

“Families that cultivate an ethos of stewardship introduce wealth management and the ability to live happy lives,” he says.

If you, as an advisor, are aware of a client’s intergenerational goals, you can establish a practice that makes you the advisor to successive generations. IE