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How to Communicate Investment Values & Drive Long-Term Success for the Next Generation

November 15, 2011
by Jack Reynolds

Families that have considerable financial resources and hope to perpetuate their legacy with future generations face two age-old questions:

  1. How do I talk to future generations about investment values?
  2. When should I approach future generations about investment values?

Often times, these families agree with Warren Buffet in thinking that future generations should have enough money to do and be anything they want; but not enough resources to do nothing. If you agree with Warren Buffet, then you understand that getting it right, that is passing along sound investment values to future generations, is a considerable challenge.

To help get you on your path, I suggest that you start by pondering these five simple guidelines in a speech given by Lynn Halpern Lederman, Associate Fiduciary Counsel at Bessemer Trust:

  1. The next generation already knows a lot more than your think, don’t kid yourself.
  2. Let them hear it from you – frame the conversation, don’t have them learn from friends and from the internet — and start early.
  3. Start small and build – the next generation will not comfortably absorb all there is to know at one time (the big bang theory is not a good one in this arena).
  4. Use family philanthropy as a tool, which can foster intergenerational integration around wealth planning and management.
  5. Don’t go it alone, work with advisors to facilitate the process.

If you are looking for a deeper dive, then I recommend reading Silver Spoon Kids: How Successful Parents Raise Responsible Children, by Eileen & Jon Gallo. Both Gallos are credentialed (Eileen has a Ph.D. and Jon has a J.D.) and their book is straightforward, easy to read and neither pedantic nor gratuitously scholarly.

Silver Spoon Kids will help you think about intergenerational integration, which the Gallos define as:

  1. Communicating about money in healthy ways.
  2. Teaching strong values and compassion.
  3. Preventing a feeling of entitlement.

I particularly like the goal for the book that the Gallos articulate in their introduction:

“Ultimately, what we want you take away from this book are the knowledge and tools to help your child live a happy and meaningful life – a life that is facilitated rather than hurt by her money relationships.”

A final bit that I’ll quote from their introduction:

“What it all boils down to is this: being an affluent parent comes with responsibilities. It’s not just the responsibility of preventing money from harming your child, but the responsibility of using that money to parent in positive ways.”

Does their book accomplish what it sets out to do? I think that it does. It is salted with real life examples, easy to grasp constructs, simple exercises, and a structure that draws readers in rather than put them off. I also wish that I had read Silver Spoon Kids when my daughter was 27 months old, instead of when she was 27 years old! As I have found, the sooner you think and communicate thoughtfully and deliberately about the matter of intergenerational integration the better, and Silver Spoon Kids is a tool that I believe can help you.

Is my enthusiasm for these two resources colored by any personal relationship? It is not. I have no financial relationship with Bessemer Trust and I have never met the Gallos. If you have read any interesting books about communicating investment values to children and would like to share them with my readers, please call me at 617.945.5157, shoot me a letter to the editor at my email address or post a comment on my blog now.

On behalf of me and my readers, thank you for sharing your thoughts.