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Why You Should Consider Your Parents’ Financial Advisor
It Might Just Be What You’re Looking For
By Michael Loizzi
Learn more about Michael Loizzi by visiting his bio page.
There are many wonderful things about growing up in an affluent household. The creature comforts are great. You don’t have to worry about money. Your parents typically can afford to invest in all sorts of things that help you achieve your potential, like private schools, personal tutors, music lessons, travel and even college tuition.
But there is a challenge I’ve come to recognize after working with several children of affluent parents. Successful parents often cast a very long shadow. It can be quite difficult for the children of affluent parents to step out and chart their own course, to stand on their own two feet, so to speak. The measuring rod of anything they accomplish will always be their parents’ success. That can be a very long rod indeed.
This is one of the major reasons that I believe children of affluent parents decide not to partner with their parents’ financial advisor. They often have concerns about privacy and control. I’d like to give you an alternative perspective. I believe you absolutely should consider your parents’ financial advisor. Here are my reasons for saying this. Here are also my suggestions about how to realize all of the benefits your parents have experienced from a close working relationship with a financial advisor, while mitigating those things that concern you.
Concerns That May Hold You Back
In my experience, there are two primary reasons that affluent children prefer not to work with their parents’ financial advisor: privacy and control. However it is my belief that the benefits of working with your parents’ financial advisor far outweigh any concerns. Let me first address the confidentiality and control concerns before we jump into all the benefits.
The privacy issue stems from a concern about confidentiality. All of our clients want to know that if they tell us something in confidence, that it will remain in confidence. This in no different when it comes to the second or third generations of our clients. At Whitnell, this is our policy hands down. We value the trust our clients show in us and have a strong history of building confidential relationships with clients, including multi-generational families.
The second concern is control – who controls decision-making about what to do? Who gets to, and who does not get to, make financial decisions? At Whitnell, our approach is to practice transparency around the policies that families want us to enact. We believe families and finances are healthiest when everyone understands how decisions are made.
5 reasons you should work with your parents’ financial advisor
Having addressed the privacy and control issues, I’d now like to turn my attention to why you should consider working with your parents’ financial advisor. I want to put forward here five propositions that I believe build a very strong case for this decision:
- You want to repeat the good decisions, not the poor decisions, that your parents made.
- You benefit greatly from the continuity of working with an advisor who knows your family well.
- You need guidance and customized solutions in today’s complex financial world.
- You need someone who is in tune with your family values and will act accordingly.
- You need a comprehensive financial strategy.
Let’s explore each of these.
You want to repeat the good decisions your parents made
Creating wealth and managing wealth are two very different skills. Wealth creation is usually accomplished through hard work and risk-taking. But the very skills that give rise to wealth creation are often counter-productive to wealth management. First generation affluent wealth creators often learn this lesson the hard way – through some type of financial loss.
But children of affluent parents don’t have to experience loss to benefit from all of the lessons that their parents learned the hard way. That wisdom exists, in an uncontestable form, with your parents’ financial advisor. Your parents’ success is proof that the right relationship, with the right advisory team, produces the right results.
You benefit greatly from continuity
Continuity is very important to Whitnell. It’s mentioned right in our tagline. But we often discover that children of affluent parents really don’t understand the value of continuity. So I’d like to put this in really simple and concrete terms that I think will make a lot of sense to you.
I want you to think for a moment about all of the documents that relate to your parent’s financial situation. Picture them in your mind right now. Here is a short list to help you get started:
- Bank statements.
- Investment account statements.
- Trust documents or wills.
- Insurance policies: property, life, casualty.
- Legal documents.
Do you know where all of these exist? Could you find them if you needed to within a matter of minutes? Could you find them in hours? Could you find them in days? How long would it take? Given your busy schedule and life today, do you have the time to do this?
Once you found the documents, would you know which professionals to consult about the documents? Do you know their phone numbers – for the attorney, the insurance agent, the financial advisor? How long would it take you to contact all of these professionals? Would you know what questions to ask them?
One of the major benefits of continuity is this. We save you a tremendous amount of time. We know your parents’ entire financial situation, all of their documents, their advisors and the questions to ask. If we can save them that much time, imagine what we can do for your family.
You need guidance in today’s complex financial world
A number of younger people today are enticed by the promise of what technology can do for investing. So-called robo-advisors make the process of investing seem very simple. Answer a few questions and the computer spits out your investment plan. My colleague wrote an article about this topic.
While computer systems might be able to provide you an easy way to get started with your investments, they won’t be able to talk to you and give you guidance about some of the more intimate decisions you’ll need to make in your life. Here is a scenario I’ve seen more than once. Within a 12-to-24-month period, some families will need to decide:
- How to work towards purchasing their first home and who to trust to guide them through that process when it is time.
- How to financially prepare to help their children with today’s large college expenses.
- Whether or not to buy that second home and how that may affect their future goals such as retirement.
These important milestones require more than a short survey of questions to define the best possible course of action.
You need someone who understands your family values
One of the benefits of working with your parents’ financial advisor is that you entrust your wealth to someone who already understands your family history and values. This should not be underestimated. I see this as impacting two situations.
Here is the first situation. We discover that our clients need guidance and support at critical moments in their life. Often times those moments pop up suddenly with no advance notice. My colleague David Peckenpaugh encountered such a moment when his daughter was unexpectedly hospitalized with a traumatic head injury.
In these moments, you don’t have the time or energy to explain your family history and values to someone who may be called upon to help you make decisions that could have far-reaching financial implications. You need that person to already know you. Our clients take great comfort in knowing that they can call upon us in life’s unexpected moments and we can be there to guide them.
Here is the second situation. Children of affluent parents often inherit substantial wealth. Usually that wealth was created due to certain family values. It is much easier to create a comprehensive financial plan with someone who already understands your family values and history than it is to start from scratch with someone who doesn’t know you.
This ultimately comes down to trust. Who do you trust more to help you make some of the most important decisions you will face in life – a stranger or someone who already knows a great deal about your family and values?
You need a comprehensive financial strategy
Some people are confused about the difference between investment advice and comprehensive financial planning. To put it simply, this could very well be the difference between achieving your lifetime financial goals or completely missing the mark.
Investments are an important part of the overall financial plan. But they are only one part. For you to achieve your goals, you need a strategy that encompasses budgeting, retirement planning, insurance planning and estate planning.
While you may be able to find another advisor who can offer all of these services, how long will it take them to come to understand you, your situation, your values and goals? How confident are you that they can achieve what you already know your parents have realized by partnering with us?
What are you looking for?
I’m not sure what you might be looking for in a relationship with a financial advisor. What I do know is that we work, every day, with the children of affluent parents to bring them peace of mind about their future. If what I’ve said here resonates with you, let’s have a conversation.
The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.