How to Help UHNW Clients Pass On Their Fortunes

Q&A September 01, 2023 at 10:38 AM

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"Money magnifies whatever is in you: Whether the good, the bad or the ugly, it expands," argues Jill Shipley, managing director and head of governance and education at AlTi Tiedemann Global, in an interview with ThinkAdvisor.

Helping ultra-wealthy clients — with an average $50 million in investible assets — wisely spend and bequeath their money, Shipley's main focus is the impact that wealth has on identity, relationships, the community and the world.

Working in collaboration with financial advisors, she helps not only families but family businesses, family offices and foundations.

"My job is essentially asking people to talk about money and to prepare for the unexpected and for their death," she says.

In the interview, the 2023 ThinkAdvisor LUMINARIES award finalist in the category of Thought Leadership, explains why a family governance plan should be in place "before you need one."

And she points out how the challenges to wealth creators and to inheritors differ. Most wealth creators "don't come from money," she says. So once they're spectacularly successful, they "feel like immigrants in this land of wealth."

As for the inheritors, they carry guilt "if they did nothing to earn the money" and have the feeling of "not fitting in," particularly because of "the stigma of being part of the 1%," Shipley says.

She also discusses families' need for a conflict-management policy, a "just-in-case" plan, and of course a succession plan for business owners.

What's her take on the TV series, "Succession"? She brands it "a sensationalized drama of what not to do," then goes on to say why.

Denver-based, Shipley, who has worked in the governance arena for more than 20 years, has taught courses in the University of Pennsylvania's Wharton Executive Education Wealth Management Program.

Before joining AlTi Tiedemann, she was with Cresset Capital and the Institute for Family Culture at Abbot Downing.

ThinkAdvisor recently held a phone interview with Shipley, who was speaking from Denver.

Indeed, she knows plenty about money's multiple facets and effects, including that, much to the dismay of many, "Money doesn't create happiness. If you have a gaping hole in your happiness, money doesn't fill it," the money expert maintains.

Here are highlights of our interview:

THINKADVISOR: What are the challenges of multigenerational wealth to families and advisors?

JILL SHIPLEY: The challenges are different for the wealth creators versus the inheritors.

The majority of wealth creators grew up with little resources. They worked extremely hard and sacrificed to give their kids a better life and reached financial success.

But now the creators feel like immigrants in this land of wealth. They feel lost. The challenges are: What is my identity? Especially if you sold your business that you spent your whole life building.

What do I do with this wealth? Am I going to become a different person?

And what are the challenges for the inheritors?

They carry so much guilt, especially today, when the stigma of being part of the 1% is extremely negative.

If they did nothing to earn the money, the feeling of guilt, of having more than those around them, of not fitting in, can be very challenging.

They can activate their resources to create positive change in the world, but [inheriting that wealth] weighs heavily on them.

You write that "money is a magnifier." How so?

We're taught to believe that success and happiness are tied to money.

But people realize that if you reach the pinnacle of success, it's not all that it's cracked up to be. Money doesn't create happiness.

If you have a gaping hole in your happiness, money doesn't fill it.

Money magnifies whatever is in you. Whether the good, the bad or the ugly, it expands.

Why is family governance critically important?

It's necessary to have a plan in place before you need one. It's so much easier to determine how you're going to deal with challenges and issues while you're all getting along — to have agreed upon a plan in peacetime.

So, if there's a health crisis, such as injury, dementia, incapacitation, having a plan before you need it can really help sustain relationships, as well as whatever the enterprise [business] is that the family wants to preserve.

So much of your work is about the future, but people mostly live for the moment or in the moment. How do you reconcile that with planning for dire things?

My job is essentially asking people to talk about money, which is hard, and to prepare for the unexpected and for their death.

As uncomfortable as that is to discuss, we need to plan for it. That's what I help our clients do.

Where and when do financial advisors enter the scenario?

They're a key part of the team. I've spent my whole career working in an integrated model. The financial, technical, risk management all have overlaps and implications. This is an interconnected system.

So looking at it in a holistic way is in service of the family.

Working in collaboration with the folks that are focusing on the financial, the legal, technical is critical for success.

Are you part of advisor-client meetings?

Always. I'm brought in by the advisor. They support the family. The advisor is doing education around the technical.

Sometimes I'm "translating" it into the language the family speaks because it's very complicated for them to understand.

As managing director and head of governance and education, what specifically do you focus on?

Our clients have more money than they will spend in their lifetime.

The five [services] I provide are:

Helping clients plan what they want to do with their money, for their family and for those in the community.
Facilitating conversations about money with couples, families, family offices, foundations, beneficiaries and trustees.
Educating individuals on how to manage day-to-day finances, investing, estate planning and trusts, as well as the social and emotional implications of inheriting wealth and growing up in the shadow of someone else's success and having more [money] than others, which you didn't earn.
Governance: How to make effective and fair decisions about a business, investments, philanthropy, property [such as real estate].
Philanthropy: Helping clients focus on their mission and how they can [accomplish] that in a strategic way either by themselves or with their family.

You say that your job is "rare." But family governance for the wealthy is so important. Why aren't more firms doing what you're doing?

It's a growing [part of the] industry, where there are more folks that have my background being hired into financial firms, family offices and multi-family offices.

However, there's still a focus at the firms on the technical, the financial and the legal.

But when you ask our clients what they really care about, most say it's the impact of the money on themselves, their family and the community.

What can we learn from the highly popular TV series, "Succession," which ended this past spring?

It's a sensationalized drama of what not to do: the secrecy, the control, the strings [attached] to every one of [patriarch] Logan's children. There were no boundaries between family and business.

There were no clear agreements, no proactive plan.

So these are the lessons you should take away: Communicate. Do not parent with your wallet. Avoid the strings. Put boundaries in place and manage them. Have clear, proactive governance.

If you own a business, a succession plan is essential, then?

Yes. But it can't only be about passing the baton. If there's a health crisis, for instance, you need to have a plan that's proactively communicated, so the business can continue and there are no hurt feelings and disappointments.

You're just setting yourself up for family infighting when you haven't defined and communicated your plan.

Why else is a succession plan beneficial?

Ideally, it includes mentorship, with both the leader and the successor holding the baton. That takes time.

Why should super-rich families — or any family with a business — have a "just-in-case" plan, as you call it?

That's, say, if the leader suddenly becomes incapacitated or starts to decline mentally or simply wants to take a month off.

Every business should have such a contingency plan in place. That way, you have a spelled-out, agreed-upon plan on how to deal with [various potentialities] so relationships and the business aren't destroyed.

Many wealthy parents don't want to talk to their kids about how much money the family has. Why is it important, though, to get that out in the open?

Because how do the [inheritors] prepare if they don't know? Actually, these children already know they have more than most. Yet there are parents that think they're doing them a favor by not having an authentic conversation and being transparent.

But they aren't preparing them for the life that they're likely to need to be prepared for.

Another reason is there's so much heartbreak when parents have passed away and haven't talked to their kids about why they structured their estate plan the way they did.

There can be a lot of resentment and [eroded] self-esteem. The inheritors may think: "Why did you give my sister $X and me $Y? Did you love her more?

"Wasn't I good enough to be told the truth about our family's financial situation?"

[Parents need to] open the [books] over time and give young adults an opportunity to practice. I'd much rather that they give them an opportunity to learn and stumble with $50,000 versus $50 million [eventual full inheritance].

Without establishing proactive governance, what's the incidence of inheritors who are left less than a sibling and sue them for, at least, the difference?

The siblings can take action, but I haven't seen one situation where a lawsuit has been won. People litigate. It doesn't work.

It's not just the legal battle and how much money is wasted; it's more the heartache, the sadness, the anger.

Why should ultra-high-net-worth families have a conflict-management policy?

They need to have a plan for how they're committed to communicate in order to navigate misunderstandings and disagreements.

The benefit of a governance structure like a conflict management policy is that you talk about it when you're not in conflict.

You put it in writing. It's not a legal document. You can't create — in my experience — a legal document that manages for family dynamics.

This document isn't designed to help you in a lawsuit. It's to help you avoid a lawsuit.

How can ultra-wealthy families have a positive impact on society?

Every investment that we make has an impact, whether we call it impact investing or not. Every decision our clients are making — spending decisions, investment decisions, philanthropic decisions, how they use their time to volunteer, to serve on boards, how they think about careers — have impact.

All those are related to the impact they have on society.

When you're an inheritor of wealth, you have choices. There are so many ways to have a positive impact that go beyond philanthropy and investments.

At what point in your career did you step into a role related to family governance?

At the very beginning of my life, I saw the damage that money could cause to relationships. It was around me.

I knew there had to be a better way. I wanted to try to help families. I knew that this was going to be my career from a very early age.

Pictured: Jill Shipley