Preparing the Next Generation of Beneficiaries

Date: Jan 16 2018

Richard Joyner, President & Jeff Strese, Chief Talent and Learning Officer, Tolleson Wealth Management

Preparing the next generation, especially wealthy children or trust beneficiaries, is one of the hottest topics in the high net worth world. Quite frankly, the consequences of not addressing this are enormous and impact future generations. Resources are squandered, cracks form in family relationships, and in the case of trusts, adversarial relationships may develop and fester – triggering dysfunction that manifests for generations. The possibility of a next-generation family member polarizing either to overspending and self-indulgence or burdensome guilt and shame is increased greatly without purposeful guidance and coaching. 

Even when we know “getting it right” is so important, why is it such a struggle for families, trustees, or advisors? Here are some questions and responses based on industry best practices:

  1. What age should we begin teaching our kids and at what level?
    • Consider three major steps of development and the most important values and behaviors needed at each phase: 
      • Primary – understanding the worth of things; giving away with no expectation of getting anything in return.
      • Adolescence – early stages of volunteerism and philanthropy; how family governance works; managing a personal budget; low-risk monetary investment.
      • Young Adulthood – steps toward independent decision-making with natural consequences; parents letting go; courageous coaching.
  2. What and how should we teach them? Everyone’s minds race directly to financial literacy, but what does that mean? 
    • Assessment is one of the critical steps that is often overlooked. To understand what to teach and how to guide younger family members, it is imperative to know what skills are needed to handle the enormity of financial decision-making, handling social pressure, and living out the family’s values. 
    • Communications skills, handling conflict, and learning early on the importance of self-awareness and awareness of others (emotional intelligence) are cornerstones to bring responsibility and independence to the reality of their upbringing. Otherwise, they are prone to becoming consumers of wealth without the guardrails of discernment, temperance, and gratitude.
    • Be creative and incorporate experiences. There are no limits to what you can do or how you can do it, so look for non-traditional options. Don’t just pull out the “financial accounting” books and teach budgeting. 
  3. Who should teach them? Should they just watch other family members and emulate (or avoid) the behaviors they observe, or should they attend organized classes to look for opportunities to interact with peers and make their own mistakes?
    • Parents, teachers, and other family members are some examples of important influences early in a child’s development. Parents are the primary influence, and children learn most through experiences – what they see, hear, and how people behave in the family system. As the child moves through adolescence other centers of influence come more into focus like peers, youth leaders, and coaches. 
    • In early adulthood, professors and other influencers like trusted advisors and adult role models become increasingly important as the next-generation member moves through independence and aspires toward interdependence within the family enterprise. A well-rounded, values-based, fiscally responsible adult – that’s a home run!
    • Each one of these phases plays an important role when you, as the parent, are involved in creating “a village” perspective of raising your child to have a healthy money narrative about their family’s wealth. 
  4. How do you know whether the process is working?
    • Set goals. Are there specific skills that are more important than others (serving on a board, managing an operating business, making financial decisions, making joint decisions among family members, working with advisors, etc.)? 
    • Develop foundational skills which are as important as more advanced financial skills. Beneficiaries need to make decisions, have conversations about emotional topics, communicate effectively, etc. 
    • Measure progress at each stage of development based on objective criteria.
    • Understand that engagement is as important as education, maybe more important. Without it, nothing else works. Spend as much time on engagement as on education. 
    • Think longer term. Patience is critical because growth/learning occurs at a different pace for everyone. Update assessments periodically. Sometimes it’s hard to see progress unless you revisit your original developmental or learning goals. 

Remember why you do this. Better educated beneficiaries, who tend to have better relationships with trustees that educate and mentor them, seem to intuitively have a lower risk of making poor decisions, using family resources inappropriately, or creating conflict from either of those two things. Start early, widen your circle, and include skilled, trusted advisors who can influence a positive and healthy “money narrative.”


Join Richard Joyner and Jeff Strese at the FOX PFTC Workshop, February 21-22 in Fort Lauderdale, as they share some of the major considerations when establishing education for beneficiaries and how families can move beyond operational requirements to fulfill the full potential of a PFTC.