Archive for trust

The 70/80/90 Metaphor

by Mark Hartnett, President, Argent Family Wealth ServicesHT Mark Hartnett

What is the significance of these three numbers?

The 70/80/90 Story is a statistical one that many financially successful fami- lies either don’t want to hear or have chosen to ignore. They tell a story of harm and suffering when the intention is usually the opposite. Let’s take a closer look:

70: The percentage of all generational transfers that fail (defined as, follow- ing the transition, the beneficiaries lose control of their wealth through foolish expenditures, bad investments, mismanagement, inattention, in- competence, family feuding or other causes within their control).

80: The percentage of trust beneficiaries that believe their trust is more of a burden than a blessing. 90: Of the generational financial transfers that are successful, 90% of assets are transferred into trusts by the third generation.

These numbers explain in great simplicity why the “shirtsleeves to shirtsleeves in three genera- tions” proverb is a reality for so many families. In other words: 1) most transfers fail; 2) of those financial transfers that are successful, almost all assets are transferred into trusts whereby; 3) the vast majority of beneficiaries are unsatisfied with their role as a beneficiary. So the answer to the question,“What comes next?” is usually… shirtsleeves for the third generation.

My first introduction to the 70/80/90 phenomena was early in my journey as a professional trustee. I was introduced to a third generation beneficiary who had recently dropped out of high school when she found out she was a beneficiary of her grandfather’s trust. She was “set for life” and didn’t need to waste her time getting an education. While $500,000 may have seemed like a lot of money to a bright-eyed teenager, neither my counsel nor her quickly decreasing trust ac- count balance convinced her to change her course and results of her foolish decisions.

So what do families who beat those odds do differently?

  • Recognize their assets are not only financial, but also human, intellectual, spiritual and social – the families also work very hard at being intentional in growing all forms;
  • Create a shared vision (their “why”) and mission (their “how”) for the family’s wealth;
  • Communicate on a consistent basis in both structured and non-structured settings;
  • Learn how to become mindful givers as well as receivers;
  • Create trust cultures that seek to grow excellent beneficiaries;
  • Tell and retell the family’s stories.

    As you can guess, this requires great effort for the families that seek to defeat the 70/80/90 Story. However, the families that are intentional and committed to the process are much more likely to be successful and leave a lasting legacy for generations to come. Let that be our guiding thoughts as we enter a new year in our lives.

    Roy Williams and Vic Preisser, Preparing Heirs (San Francisco: Robert D. Reed Publishers, 2003).
    Hartley Goldstone, James E. Hughes, Jr. and Keith Whitaker, Family Trusts (Hoboken: John Wiley & Sons, Inc, 2015)

Takeaway: 10 Money Tips Millennials Need To Survive In 2016

A new regular feature on our Heritage blog is Takeaway, our perspective on articles recently published that we found interesting or of note to share with our readers. While our commentary is in no way an endorsement of the whole piece, our aim is to increase the dialogue around money, investing and family legacies. 

Article:

10 Money Tips Millennials Need To Survive In 2016

Article by Jennifer Colonia, Forbes.com

Takeaway by Kenny Brown, Heritage Trust

The most important takeaway from my perspective is Money Tip #9 “Never Lose Money — flameYou Can’t Afford It.”  It is not uncommon for me to get asked, “Any hot stock tips?”  Yet when I ask, “What is the plan with the money they would like to invest?”  I often hear, “I just want to make money.”  The most successful business owners and investors I know have an obsession with not losing money. In fact, Warren Buffett’s investment rules are quite simple, “Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1.”

To read the full piece with more tips like “Make your Dollars Do Pilates” and “A Plan B is Absolutely Necessary”, click on the article link above.

Fiduciary Duty: Know your Trustee

by Kevin Karpe, Senior Vice President, Trust Officer

fi·du·ci·ar·y: “ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

 “Fiduciary”, “fiduciary duty” or “fiduciary standard” are terms we hear from time to time. We all recognize that a Board of Directors has a duty to its shareholders.  We know an executive has an obligation to act solely in the interests of his employer.  And we know elected officials have the sworn duty to prudently administer public resources.   In each example, the board member, the executive, and the elected official are all considered fiduciaries.   Common Law says fiduciaries are bound by equity to suppress their own interest in favor of a client, shareholder, employer or even taxpayers. At Heritage Trust Company, our fiduciary obligation results from an appointment as a trustee, an agent, a guardian or a personal representative.Kevin Karpe

All too often we hear in the news about how a member of a corporate board somehow places himself in a position of conflict by trading company stock based on information exclusive to the board. We read about investigations into why a politician has appointed a colleague to a post for which they are not the most qualified, or a stock broker receiving compensation for a transaction which is obviously contrary to the needs of his client. It is apparent many of those occupying fiduciary positions do not fully understand their obligation, an obligation to act with total loyalty at all times for the sole benefit and interest of another.

It’s difficult to know if our culture has experienced a measurable change in the application of fiduciary standards over time, but I’ve heard many in the investment industry attempt to explain the various degrees of duty and suggest if a conflict exists, it is simply remedied by a disclosure buried in the fine print of an account agreement.   It’s truly a shame an organization may be inclined to take the path of least resistance in the case of disclosure rather than recognize an opportunity to build loyalty with a client. Avoiding breaches of fiduciary duty or conflicts of interest might sound simple.   Breaches or conflicts are most typical in situations where a broker or agent is compensated in manner that is an incentive for him to recommend an investment or transaction that obviously ignores the best interest of the client. A variable annuity sold to a ninety year old woman is a good example of a fiduciary breach in the investment industry.

It’s refreshing to know that consumers are hearing more about fiduciary duty and as a result, the investment industry is now focused on formalizing internal standards. I find it interesting that their best examples are the policies of the old fashioned trust companies.

At Heritage Trust, we believe our experience counts. Our approach to our duty reveals solid relationships with our clients, their kids and grand kids will always contribute to successfully transitioning a legacy.

 Originally published by Heritage Trust in 2011.

The Greatest Gifts

by Phil Buchanan, Argent Financial Group

My mother was born just prior to the stock market crash of 1929 and the ensuing Great Depression. Although only a child during this period, she quickly learned to be a good steward of finances. It was a trait that followed her for the rest of her life. It was also something that she sought to instill in my sister and me. I can now look back and realize that her teachings with regard to the honor and value of work, of the necessity of saving and investing, and of the nobility of philanthropy, were among the most important and greatest gifts she gave to me.

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In a society where financial information is more readily accessible than ever, I observe many families who are not engaging their rising generations in meaningful conversations with regards to wealth, its purpose, its capacity and its stewardship. While the immediate risks of not engaging in such dialogue are limited, the longer term impacts can be quite negative.

At an appropriate age (most professionals tend to suggest between 14 and 17), children of families with means need to be brought into discussions as to the foundational beliefs and values that the family shares with regards to wealth. A basic primer on the structure (not value) of the family’s wealth situation (business interests, core portfolio holdings, royalty interests, etc.) is usually advisable at this time as well.

As children continue to demonstrate interest and maturity towards learning more, these discussions and teachings should continue. One of the greatest risks a family can take with regard to wealth is failing to educate and prepare future generations. With a bit of effort and patience along the way, you can ensure proper stewardship of wealth for generations to come.