Wednesday, August 01, 2007
The next generation: Inheritance is child's play
By Sharlene Goff
Friday Mar 23 2007, FT
Having more wealth than you can possibly spend in one lifetime might not sound like too much of a chore. But the financial issues that the extremely affluent grapple with are complex and far-reaching.
Most private banks offer "next generation" courses that clients can send their children on to learn the fundamentals of investment and the likely impact of a significant inheritance. Offerings range from week-long courses in luxury European and Asian resorts, to more discreet personal meetings in at banks' private offices.
Amanda Wallis, who heads American Express' private bank in London, says: "A universal truth is that children tend to listen to almost anyone but their parents."
American Express has been running courses for the next generation since 2001. Like many private banks, the group gears its programme towards fairly broad subjects such as analysis of the different asset classes, trusts and estate planning, investment philosophies and the global economy.
It says its courses are completely objective – it does not talk about American Express products and even goes as far as educating participants about choosing a wealth manager.
Ms Wallis says: “When you look at the national curriculum for educating children, it does not generally involve money matters. But when you have young people straight out of education who are set to inherit millions of dollars, they clearly need some training.”
Generally private banks aim their courses at people in their early 20s and older. Chris Hancock, senior banker at JPMorgan Private Bank, says: “We are looking to take people who are going to inherit substantial wealth and who recognise that this brings a significant responsibility.”
Each bank has its own boundaries for the level of wealth clients need to qualify. American Express says that typically the families of participants would be worth at least $1m. At the very high end, Coutts runs personalised programmes for “ultra high net worth individuals”, which translates as those with at least £10m to invest or a total wealth of £30m plus.
The main objective from the parents' point of view is to arm the next generation with the knowledge they need to decipher any investment advice they are given and make the right and the responsible choices.
Some parents expect their sons or daughters to take a very hands-on role in running the family's business or assets, while some might just want their children to understand how the portfolio is structured.
Ms Wallis says: “In many cases parents have built the wealth themselves and want to make sure it is managed responsibly. Children gaining the knowledge to form their own opinions is very valuable.”
Typically banks mix up more theoretical classroom-based lessons with some interactive teaching, which might, for instance, see the participants split into teams to build and manage their own virtual investment portfolios.
Each course has a slightly different focus. Credit Suisse runs courses that focus on investment issues. Its courses look at major asset classes – bonds, equities, derivatives – and also spend time on hedge funds, real estate, venture capital trusts and philanthropy.
JPMorgan Private Bank runs courses that look closely at family-owned businesses and family offices. Coutts offers more bespoke discussions for clients who have typically had a sudden injection of wealth by selling out of a business, for example. The bank organises personal sessions for clients at its London head office.
“We find clients want concentrated bursts of information and are often uncomfortable discussing their situation with other people around,” says Duncan MacIntyre, head of Coutts' private office.
One of the main areas of focus of the Coutts' programme is philanthropy. “Charity provides a great way for the family to stay united around a common purpose,” says Mr MacIntyre.
He believes philanthropy is also a powerful tool for teaching the next generation the value of money and how effectively they can use it.
Mr Hancock says the level of wealth some children are set to inherit can leave them feeling under significant pressure. “People can feel a bit isolated and different,” he says. “They are concerned whether they will have what it takes when they are empowered.”
He says one reason clients send their children on these courses is to meet people in similar situations. These courses can provide excellent networking opportunities, as people come from all over the world. “There is an extraordinary melting pot,” says Mr Hancock.
Banks also tend to run the courses in glamorous locations. American Express's courses take place in London and Singapore. JPMorgan runs courses in places such as Rome, St Tropez, Geneva and New York. Credit Suisse runs an annual course in Switzerland.
Mr Hancock says: “The courses are demanding intellectually and emotionally but they are also meant to be fun. We find the attendees mix well and spend a lot of time in the bar as well as the classroom.”
Credit Suisse screens its participants to ensure they want to take an active interest in the family's wealth and are willing and able to engage in discussions. “It's not exactly financial bootcamp,” says Tom Slocock, head of international for Credit Suisse's private banking business in the UK, “but there is a lot of experience being provided by very senior managers.” ¶ 4:02 AM
Friday Mar 23 2007, FT
Having more wealth than you can possibly spend in one lifetime might not sound like too much of a chore. But the financial issues that the extremely affluent grapple with are complex and far-reaching.
Most private banks offer "next generation" courses that clients can send their children on to learn the fundamentals of investment and the likely impact of a significant inheritance. Offerings range from week-long courses in luxury European and Asian resorts, to more discreet personal meetings in at banks' private offices.
Amanda Wallis, who heads American Express' private bank in London, says: "A universal truth is that children tend to listen to almost anyone but their parents."
American Express has been running courses for the next generation since 2001. Like many private banks, the group gears its programme towards fairly broad subjects such as analysis of the different asset classes, trusts and estate planning, investment philosophies and the global economy.
It says its courses are completely objective – it does not talk about American Express products and even goes as far as educating participants about choosing a wealth manager.
Ms Wallis says: “When you look at the national curriculum for educating children, it does not generally involve money matters. But when you have young people straight out of education who are set to inherit millions of dollars, they clearly need some training.”
Generally private banks aim their courses at people in their early 20s and older. Chris Hancock, senior banker at JPMorgan Private Bank, says: “We are looking to take people who are going to inherit substantial wealth and who recognise that this brings a significant responsibility.”
Each bank has its own boundaries for the level of wealth clients need to qualify. American Express says that typically the families of participants would be worth at least $1m. At the very high end, Coutts runs personalised programmes for “ultra high net worth individuals”, which translates as those with at least £10m to invest or a total wealth of £30m plus.
The main objective from the parents' point of view is to arm the next generation with the knowledge they need to decipher any investment advice they are given and make the right and the responsible choices.
Some parents expect their sons or daughters to take a very hands-on role in running the family's business or assets, while some might just want their children to understand how the portfolio is structured.
Ms Wallis says: “In many cases parents have built the wealth themselves and want to make sure it is managed responsibly. Children gaining the knowledge to form their own opinions is very valuable.”
Typically banks mix up more theoretical classroom-based lessons with some interactive teaching, which might, for instance, see the participants split into teams to build and manage their own virtual investment portfolios.
Each course has a slightly different focus. Credit Suisse runs courses that focus on investment issues. Its courses look at major asset classes – bonds, equities, derivatives – and also spend time on hedge funds, real estate, venture capital trusts and philanthropy.
JPMorgan Private Bank runs courses that look closely at family-owned businesses and family offices. Coutts offers more bespoke discussions for clients who have typically had a sudden injection of wealth by selling out of a business, for example. The bank organises personal sessions for clients at its London head office.
“We find clients want concentrated bursts of information and are often uncomfortable discussing their situation with other people around,” says Duncan MacIntyre, head of Coutts' private office.
One of the main areas of focus of the Coutts' programme is philanthropy. “Charity provides a great way for the family to stay united around a common purpose,” says Mr MacIntyre.
He believes philanthropy is also a powerful tool for teaching the next generation the value of money and how effectively they can use it.
Mr Hancock says the level of wealth some children are set to inherit can leave them feeling under significant pressure. “People can feel a bit isolated and different,” he says. “They are concerned whether they will have what it takes when they are empowered.”
He says one reason clients send their children on these courses is to meet people in similar situations. These courses can provide excellent networking opportunities, as people come from all over the world. “There is an extraordinary melting pot,” says Mr Hancock.
Banks also tend to run the courses in glamorous locations. American Express's courses take place in London and Singapore. JPMorgan runs courses in places such as Rome, St Tropez, Geneva and New York. Credit Suisse runs an annual course in Switzerland.
Mr Hancock says: “The courses are demanding intellectually and emotionally but they are also meant to be fun. We find the attendees mix well and spend a lot of time in the bar as well as the classroom.”
Credit Suisse screens its participants to ensure they want to take an active interest in the family's wealth and are willing and able to engage in discussions. “It's not exactly financial bootcamp,” says Tom Slocock, head of international for Credit Suisse's private banking business in the UK, “but there is a lot of experience being provided by very senior managers.” ¶ 4:02 AM
