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Kids, Wealth, and Consequences: a book review

A few years ago we were confronted with a situation in which a father left $60 million to his two children upon his death. His very unprepared son felt that his father had done him a terrible disservice, essentially burdening and ultimately ruining his life with the money. Hard to believe? Certainly not, at least in that situation.

Our notes have not typically focused on bringing up children or even on developing responsible adults; however, we believe that Kids, Wealth, and Consequences, the new book by Richard Morris and Jayne Pearl, is worth bringing to your attention.

While the book focuses mainly on how high net worth parents can provide children with both financial acumen and life coping capabilities, many of the ideas raised are relevant to all people, be they wealthy or not, who are trying to deal with parenting issues.

Whether the wealth in question has been created by the current generation or was built up over many generations, the questions of how to make sure the wealth is a blessing rather than a curse are handled in interesting ways.

Morris and Pearl have divided their book into four main sections: Financial Choices, Intellectual Choices, Spiritual/Emotional Choices, and Integrating Your Choices. In the first, as well as on their website, they describe a model for calculating the effects of financial choices made now and their impact on anticipated intergenerational wealth transfer. They further address different models of portfolio asset allocation as well as questions to be raised when creating trusts for future generations.

The section on intellectual choices deals with questions relating to financial literacy, from the basics of the differences between equities and bonds to more complex financial instruments. Also discussed are questions relating to the children’s role (if any) in the family business. They even explore whether the children should be encouraged to work. Irrespective of the outcome, the authors counsel families to approach these decisions with purpose and passion.

In the section on spiritual/emotional choices, Pearl and Morris endeavor to define “success” and “happiness.” They also consider communication, covering how and when to discuss your wealth, values, and the legacy you wish to build. Ultimately, the concept of navigating a “high net worth environment” is raised.

The first three sections are prelude to the final section which provides an interesting and highly relevant consideration of the effects that open discourse and purposeful planning can have on keeping the family united despite its wealth and success.

While the book focuses on work/life tensions within high net worth families, we believe many of the issues raised are relevant for any business leaders attempting to create an appropriate work/life balance, ensure their families understand the deeper reasons behind their commitment to their business, and pass on their values (not just the spoils of success) to succeeding generations.

In short, Kids, Wealth, and Consequences is well worth reading by anyone managing a business and raising a family at the same time.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.