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jerryking : wealth_transfers   7

Steven Brill's "Tailspin": How My Generation Broke America
May 17, 2018 | | Time | By STEVEN BRILL.

From matters small – there are an average of 657 water-main breaks a day, for example – to large, it is clear that the country has gone into a tailspin over the last half-century, when John F. Kennedy’s New Frontier was about seizing the future, not trying to survive the present..............The Meritocracy’s ascent was about more than personal profit. As my generation of achievers graduated from elite universities and moved into the professional world, their personal successes often had serious societal consequences. They upended corporate America and Wall Street with inventions in law and finance that created an economy built on deals that moved assets around instead of building new ones. They created exotic, and risky, financial instruments, including derivatives and credit default swaps, that produced sugar highs of immediate profits but separated those taking the risk from those who would bear the consequences. They organized hedge funds that turned owning stock into a minute-by-minute bet rather than a long-term investment. They invented proxy fights, leveraged buyouts and stock buybacks that gave lawyers and bankers a bonanza of new fees and maximized short-term profits for increasingly unsentimental shareholders, but deadened incentives for the long-term growth of the rest of the economy.....[We need 'guardrails' against legal and financial excesses.]......Forty-eight years after Inky Clark gave me my ticket on the meritocracy express in 1967, a professor at Yale Law School jarred the school’s graduation celebration. Daniel Markovits, who specializes in the intersection of law and behavioral economics, told the class of 2015 that their success getting accepted into, and getting a degree from, the country’s most selective law school actually marked their entry into a newly entrenched aristocracy that had been snuffing out the American Dream for almost everyone else. Elites, he explained, can spend what they need to in order to send their children to the best schools, provide tutors for standardized testing and otherwise ensure that their kids can outcompete their peers to secure the same spots at the top that their parents achieved.

“American meritocracy has thus become precisely what it was invented to combat,” Markovits concluded, “a mechanism for the dynastic transmission of wealth and privilege across generations. Meritocracy now constitutes a modern-day aristocracy.”.....
Daniel_Markovits  baby_boomers  entrepreneur  income_inequality  politics  revenge_effects  Steven_Brill  political_polarization  fractured_internally  books  meritocratic  America_in_Decline?  elitism  lawyers  self-perpetuation  upper-income  inequality  privilege  the_best_and_brightest  tailspins  guardrails  the_American_dream  cultural_transmission  wealth_transfers  partisan_politics 
may 2018 by jerryking
How the Superwealthy Plan to Make Sure Their Kids Stay Superwealthy -
October 1, 2015 | Bloomberg Business | Peter Robison.

The first clue that this is no ordinary crowd of sulky teenagers comes when the instructor asks those who’ve invested in the market to raise their hands. Most hands go up. As a financial planner explains the benefits of investing, one boy interrupts. “What do you suggest investing in right now?” asks Liam Whitfield, 18, a senior at a private Seattle high school, with swooping bangs and a shaggy sweater. The speaker, from a local investment firm, suggests a standard mix of 60 percent stocks and 40 percent bonds. Whitfield looks disappointed. He already owns shares of Apple, Facebook, and Starbucks. “I was kind of looking for an actual stock tip,” he says.

It’s a Saturday morning in March, and Whitfield is sitting with two dozen teens in an antiseptic meeting room for a lesson on money management arranged by their well-to-do parents. The lecturers have broken the ice with a Saturday Night Live ad for a book of financial advice called Don’t Buy Stuff You Cannot Afford. (It’s one page long.) They show photos of cars that go from humble to glamorous and ask the kids to pick one—but only after calculating how long it would take to afford by saving $2,000 a year. An instructor praises a girl who chooses a Volks wagen Jetta over a $90,000 Range Rover. “You followed all the rules—it’s exciting, guys, right?” says John Gage, a 6-foot-9-inch recent Stanford graduate who roams the front of the room. Gage works for Cornerstone Advisors, a wealth management firm in Bellevue, Wash., that’s hosting the class for children of clients and prospects. During an exercise in monthly budgeting drawn from real-life salaries, someone notes how difficult it can be. “Especially if you’re a teacher,” one kid cracks.

This is the most gilded age since the Gilded Age, with 5 percent of American households controlling 63 percent of the country’s wealth. Decades of stagnant income growth for the middle class contrasts with family dynasties such as the Waltons of Wal-Mart, wealthier than the poorest 40 percent of households combined. Some $59 trillion—the largest intergenerational transfer of wealth in U.S. history—will flow down from estates through 2061, according to Boston College’s Center on Wealth and Philanthropy.

None of that’s made the rich any less anxious, at least when it comes to keeping their money. The number of family offices for the ultrawealthy has doubled since 1998, branching into areas far beyond portfolio and tax planning. The advisory firms reach deep into their clients’ family lives, aiming to prevent squabbles among heirs and head off early signs of wastrelism. Some teach classes like this one near Seattle or organize family retreats. Others use board games and flashcards to drill sound money concepts into children as young as 5. One firm, Ascent Private Capital Management, employs an historian and two psychologists to help clients put their fortunes and family dynamics into perspective. “We didn’t just want to help clients manage wealth, we wanted to help clients manage the impact of wealth,” says Michael Cole, the firm’s president.

Like others in the business, he brings up an adage—shirtsleeves to shirtsleeves in three generations—and says, “It’s real.” Thought to be a variation on a saying from Lancashire, England, about families going from clogs to clogs, the idea resonates in many cultures. Japan’s version is rice bowl to rice bowl. In Italy, from stars to stall. Or, as the striving executive Jack Donaghy put it on 30 Rock: “The first generation works their fingers to the bone making things; the next generation goes to college and innovates new ideas; the third generation snowboards and takes improv classes.”

Adviser Roy Williams says he was recently approached by a representative for wealthy Asian families in the Pacific Northwest, each with more than $200 million. “They said, ‘The kids are consuming our wealth, buying Lamborghinis and Bentleys, and we don’t know how to change the pattern,’ ” he recalls.

Williams is the co-author of the ur-text of the field: Preparing Heirs, a compact, green-jacketed 2003 book written with Vic Preisser that followed 3,250 families from 1975 to 1995. Their research found that 70 percent of inheritors failed in passing their fortunes on to the next generation. The book defined a failure as “involuntary loss of control of the assets.” The overwhelming reason, they found, was either a breakdown in family communication or unprepared heirs. Just 3 percent of failures were attributed to such issues as taxes or legal challenges. While the book’s data are now decades old and largely precede the inheritance tax cuts that led to such critiques as Thomas Piketty’s Capital in the Twenty-First Century, the 70 percent failure rate is still commonly cited by advisers as a reason to engage their services.

“In our experience, there’s no amount of money that can’t be lost,” says Sheila Stinson, until recently director of family education at GenSpring Family Offices in Jupiter, Fla., a hamlet north of Palm Beach that’s been home to Michael Jordan, golfer Rory McIlroy, and Celine Dion. The firm, whose clients are worth at least $50 million each, created the Innovation & Learning Center in 2006 to lead workshops and teach classes.

One of its innovations is a board game called Shirtsleeves to Shirtsleeves that Stinson has played with clients and their children over cocktails or lunch, depending on their ages. Players get money in $1 million, $5 million, and $10 million denominations. They navigate a Chutes & Ladders-like board through obstacles such as: “Your beach house in Malibu has become the place to be for your kids. Even though they’re in their mid-thirties and can’t show up for a family meeting, they never miss the afternoon set. Wipe out! LOSE $9 million.”

For younger kids, Stinson has used a game called Money Matters, which features flashcards showing pictures of material goods. She asks the children to tell her if the item is a “need” or a “want,” something they can do without. She recently showed a picture of a purse to four girls aged 9 to 11. One girl called it a want. Another said no, a Tory Burch handbag is essential.

Ascent, a division of U.S. Bancorp, chose a youthful look for its offices, in Cincinnati, Denver, Minneapolis, San Francisco, and Seattle. The décor is all white, inspired by Apple stores and Virgin America aircraft cabins. In San Francisco, in a 21st-floor suite overlooking the bay, there’s a room where kids can relax while their parents talk to the staff. It has a couch, a white beanbag chair, and an Xbox.

Ascent’s craft has a lofty history. Family offices trace their lineage to 6th century royal stewards and, in the 19th century, advisers who managed art, collectibles, and homes for J.P. Morgan and other tycoons of the era. There are now some 3,000 such firms worldwide, at least half set up in the last 15 years, according to a 2013 Ernst & Young report.

Good help doesn’t come cheap. Ascent charges clients a minimum of $200,000 a year. Some don’t keep any money with the firm and only use its ancillary services, Cole says. The firm’s Center for Wealth Impact offers a director of family history and two “wealth dynamics” coaches trained in organizational psychology. The idea is to focus on the breakdowns in trust, communication, and education spotlighted in Williams and Preisser’s book.

Demons lurk for the wealthy, to the point that some researchers suggest that affluence creates a greater risk of depression, anxiety, and substance abuse. In one 1999 study of wealthy high school girls in a suburb in the Northeast, 1 in 5 reported clinically significant levels of depression, three times higher than the national average. Wealthy boys showed more anxiety than average in a study by Suniya Luthar, a professor emerita at Columbia. Later research across the country has produced similar results. Rich kids have to navigate a complicated psychological stew, including guilt over inherited wealth and stress from the pressures of living up to a family legacy.

Ascent tries to head off problems by getting families to think about their mission and purpose, much as corporations do. Amy Zehnder, a senior wealth dynamics coach, says she asked one family’s three boys, ages 15, 19, and 21, to create a visual representation of the clan’s core values. The boys returned with a drawing of a custom Jeep, each part corresponding to a different value. The antenna represented communication; the snowboard rack was work-life balance; the windshield, integrity; the engine, loyalty; the steering wheel, drive; the headlights, respect; the massive tires, ambition; and the lift kit, growth. Their dad was touched, Zehnder recalls. “As a family they made a decision that they were going to go and build this Jeep,” she says.

Cornerstone, the advisory firm in Belle vue, manages more than $3 billion. It taught its first class to three sets of siblings in 2006, after a client asked for financial instruction for her sons. Managing Director Sue Peterson went to a Barnes & Noble and found books for toddlers about quarters and dimes, some Suze Orman financial titles, and little else. Peterson developed her own curriculum, eventually expanding it to a half-day of lessons on budgeting, credit cards, and investments. Parents spend the time in their own session, comparing notes. “How do you teach your kids about how fortunate they are?” Peterson says. “If you drive past Bellevue High, most of the cars pulling into the parking lot are nicer than mine.”

Liam Whitfield’s mother, Diane, heard about the class through a friend of her husband, Bill, a real estate investor. The family lives in Broad-moor, a gated enclave with a private golf course where the median home lists for $2.1 million. The Whitfields have three sons: Liam, Stanley, 16, and Trammell, 8. They’d been thinking it was time for their older … [more]
children  family_office  generational_wealth  heirs  high_net_worth  inheritances  inheritors  parenting  wealth_management  wealth_transfers 
october 2015 by jerryking
Pity the high cost of being a Canadian millionaire
February 11, 2005 | Globe & Mail Pg. B13 | ANDREW WILLIS.
Here's the good news: The ranks of Canadian millionaires are swelling.
Unfortunately, the rising cost of being rich is taking a lot of the fun
out of it. Survey this country from coast to coast, as consulting firm
Capgemini just did, and you'll find Canada is home to 450,000 folks with
more than a million bucks of invested assets. The $5-million club has
just over 54,000 members and the seriously wealthy, with more than
$20-million, number about 7,000. Most of these millionaires are
grey-haired -- 72 % are over the age of 50....Aging boomers are an
enormous opportunity for wealth management companies...In 10 years time,
Capgemini estimates the number of millionaires in Canada will soar
20-fold, to more than eight million people. This will take place in step
with an unprecedented intergenerational transfer of wealth, as 32 % of
our millionaires are over age 70..
Andrew_Willis  high_net_worth  statistics  surveys  Canadian  income_distribution  generational_wealth  high-cost  wealth_management  wealth_transfers 
october 2010 by jerryking
The small saviours of Canada's economy -
Aug. 18, 2009 | Globe & Mail | KEVIN CARMICHAEL. While
the slogan of the Ottawa conference was "Changing the World Through EO,"
the real mantra was voiced by Peter Thomas, founder of the Canadian
unit of real estate firm Century 21, in an address that attendees
couldn't stop talking about: Recessions are when money is transferred to
smart people from dumb people.
small_business  entrepreneur  economic_downturn  real_estate  recessions  smart_people  Century_21  Kevin_Carmichael  Carpe_diem  wealth_transfers 
august 2009 by jerryking

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