In a new episode of the Financial Planning Podcast, a coach for high net worth families and their financial advisors explained how to discuss generational wealth transfers with clients.
San Clemente, California-based firm The Williams Group has worked with more than 800 high net worth families over more than 50 years in business, and CEO Amy Castoro joined the firm about a decade ago after earlier tenures with firms such as The Walt Disney Company and Grant Thornton Management Consulting.
High net worth clients represent a coveted base requiring more resources
In the podcast, FP Senior Editor Tobias Salinger asked Castoro the following five questions about some of the most complex issues involved with generational planning among high net worth and ultrahigh net worth clients:
1. What is the effect when ultrahigh net worth families don't successfully transfer their wealth to the next generation? And how realistic is the popular HBO show Succession?
2. What are the family dynamics that determine success, and how can advisors ensure they have a full grasp of all of the relevant family dynamics when working with ultrahigh net worth families?
3. What anecdotes can you share about some of the best practices you've seen among advisors and some of the worst?
4. What, if anything, has changed about transferring generational wealth among ultrahigh net worth clients during the coronavirus, and to what extent, in your opinion, would the Biden administration's Build Back Better plan prompt changes to ultrahigh net worth estate plans?
5. Advisors often covet ultrahigh net worth clients, but experts say that many practices aren't equipped for the complexities involved with serving that base. How would you recommend they assess whether or not they should be targeting ultrahigh net worth clients?
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Transcription below:
Tobias Salinger: (
Welcome back to the financial planning podcast. My name is Tobias Salinger, and I am your chief correspondent for financial planning. And we're very pleased today to have as our guest Amy Castoro, the CEO of the Williams group. Thank you so much for joining us.
Amy Castoro: (
My pleasure to be here. Thanks for having me Toby.
Tobias Salinger: (
Absolutely. And the Williams group is a San Clemente, California based firm that coaches financial advisors and ultra high net worth families on wealth transitions to succeeding generations. The firm has 20 coaches across the country. It's worked with more than 800 families over more than 50 years in business castor joined the Williams group about 10 years ago, after earlier 10 years with firms such as the Walt Disney company and grant Thornton management consulting. And we have five questions, uh, for you today about wealth transitions among ultra high net worth families. And I'll just jump in, uh, with a vital, uh, pop culture reference to this topic. When I ask you, what is the effect when ultra high net worth families don't successfully transfer their wealth to the next generation? I E how real is the popular HBO show succession?
Amy Castoro: (
I can tell you when I meet with my clients, they tell me it's very hard to watch. So I think it hits the nerve, um, while that is heavily dramatized the threads on which that whole plot is built are pretty familiar. You know, kids jocking for position on who's gonna run the company. Who's got the best relationship with dad, the side conversations with dad, not having the big conversations about when is he going to retire all pretty close to home, very close, too close.
Tobias Salinger: (
Well, and it does seem very, uh, it does come off as very realistic when, when you have so many conflicts within that, that family, and, and it gets to a point that, that you made when, when we spoke last week, um, in advance of this episode about family dynamics, I was really interested in that, that term, um, because really evoked a lot of, a lot of different things in my mind when I just hear that term family dynamics. And you, you say they're very integral. Um, what are the family dynamics that determine success and how can advisors ensure they have a full grasp of all of the relevant family dynamics when working with ultra high network of families,
Amy Castoro: (
You know, it's almost impossible for advisors to have a full grasp of all the financial or the family dynamics. I think the useful question for advisors is how can I lift the lid on some of those conversations decide, which of those can I handle? And which of those do I need to bring in an expert? And so finding that level of comfort for each financial advisor is important. The biggest question we get from advisors is how do I start the conversation? And usually what we say is get really good at noticing the stress fractures that are starting to happen. And it might be that you find yourself as the advisor caught in the middle. Maybe mom and dad don't wanna have direct conversations with the kids. And you're the one that gets to help hand the hot potato off. So that's, that's a clear indication that might open the door to a convers.
Amy Castoro: (
It says, you know, if family unity is part of your succession plan or stake plan, what steps are you taking to make sure everybody's gonna still be talking to each other when you're not here to pull the strings anymore? Just a great question. Another great question that might be worth asking is what impact would you like the, to have on your kids? And what steps are you taking to set that up? I can promise advisors that if they're not enter into these conversations, someone else is. As a matter of fact, I have a, a dear client of ours, a financial advisor we've worked with for many years. He had what he, he thought was his best friend, somewhere around the 18th hole. That person says, Hey, by the way, I'm transferring my 30 million to this other firm, brutal to hear the guy was just shocked and said why?
Amy Castoro: (
And they said, well, they tell me they've got a plan to take care of the next generation. So if you're not having these conversations, figure out how to start having them because the value proposition today is on the holistic care of the client, not just taking care of their assets. And sometimes that's a great way to open the conversation too, to say, you know, we've done a great job, preparing the assets for the family. Now we'd like to start preparing the family for the assets. Do you mind if we start having a conversation on that level and see what happens?
Tobias Salinger: (
Well, it's excellent advice. Uh, don't wait until it's too late and get that terrible news on the 18th. Whole listeners were speaking with Amy Castro, the CEO of, of the Williams group. We're going to take a very short break and we'll be right back with more after this. And we're back, we're speaking with Amy castor the CEO of the Williams group, and you just, uh, shared an, an excellent story from among the advisors that your firm works with. What other anecdotes can you, you share about some of the best practices you've seen among advisors and some of the worst,
Amy Castoro: (
Some of the worst is thinking they can be the family therapist and you don't wanna go down that rabbit hole, leave that to Allison Wonderland. That there's no good way out of that. So if you start to see things that look like they're a little beyond your competence, then say that and, and put it in what we call a parking lot. Say, you know what? That's an area that probably is outside my level of comfort. Let me see if I can do make some referrals for you. And that might be to a psycho psychotherapist, or it might be someone else. We are not therapists we're coaches. So our commitment is to teach the skills of language and action and communication because legacies are really built on relationships and relationships are on communication. So if a family can just draw a line in the sand and say, that's where we wanna get to what are the skills we need to get there suddenly you're dealing with the future and not caught in the past.
Amy Castoro: (
So I would, I would say, stay out of the rabbit holes as best as you can. And, and the way you back out of it is you just say, you know, is this is a conversation above my pay grade. Another really good practice that I've heard is to go ahead and ask for a family meeting. And we have 10 questions, 10 questions on our website that you can actually use as the bulk of the content for the family meeting. These are questions like we have a mission statement, or we don't have a mission statement. And if we had one, what would be the usefulness of it? Another one is, are the entire family participates in the most important decisions, such as defining a mission statement for the wealth. So what are some of the other big decisions that the family wants to make? So I would look just taking the big leap and invite the family to a family meeting so that you are showing up, not just as the guy, who's limited to the conversation within the numbers, but really beyond that, because we all know the likelihood of a successful transition is pretty slim.
Amy Castoro: (
That's that whole shorts sleeves to shirt sleeve about 30%. So of that 70% failure rate, 60% of that 70% has to do with trust and communication. So we suggest start having that conversation with the family about how do we wanna work together to make sure this wealth is a force for good in our lives. The second big reason the William groups, the Williams group works with families is to take care of air preparedness. We did some research about 20 years, and what we learned is that there were three core drivers behind that breakdown that most families face the biggest was trust in communication. The second was air preparedness and the third had to do with values and mission, but, you know, air preparedness wasn't can they read a portfolio, air preparedness was, do they have a good role model? Do they know how to be wealthy in a responsible way? Do they know how to ask you questions? The advisor questions, there's just been too many examples that we have where the first time the advisor is meeting the kids is really at a pretty inopportune time, like a funeral or after the funeral when they're hearing about the will. So go ahead and take the leap and have a family meeting.
Tobias Salinger: (
Well, it's such important advice about internal family dynamics, but if we have learned anything from the past couple of years, we've learned again about life being, what happens while you're making other plans, um, because of external events in the, the impact they can have on everything, including wealth transfers. So what, if anything has changed about transferring generational wealth among ultra high net worth clients during the coronavirus? And in your opinion, are any of the Biden administration, uh, plans, uh, currently under consideration in Congress, would they have an impact, uh, on ultra high net worth, uh, estate plans? Um, at this time
Amy Castoro: (
I can only say that there is a huge commitment to wanting to get a lot of things wrapped up by the end of the year. Um, I also see is more and more conversation out there about how do we start distributing this wealth sooner than later. Uh, so I see that as far as the coronavirus impact, it was a huge wake up call. So many of our clients just keep kicking that can down the road of how do we talk to our kids about money? It's as hard as talking about drugs or sex for families, and they just don't do it. And that can just gains mask before it's too late. So the, the gift of the coronavirus has been an urgency, a real wake up to say, all right, let's start talking about what's important here. And that doesn't mean they're talking about amounts because we saw mounts change drastically either in a positive direction or a negative direction.
Amy Castoro: (
But what we did see was more and more people saying, okay, here's my plan. Here's the estate plan without the numbers. And we want you to know here's who the executor is. Here's how the distributions are gonna work. This is why we made that decision. The worst thing I think parents can do and advisors can support is the gift of a surprise. And so by not talking about the wealth, all I can say is conflict is expensive. And the likelihood of conflict, if this is a surprise is pretty high. So the coronavirus was great in that it really woke people up. It also really helped people figure out how to have meaningful conversations remotely. And so what's been great on different platform. Zoom in particular for us is families can get together at the drop of a hat, talk about an important decision. They need to make, even learn new skills.
Amy Castoro: (
Like we did a lot of work virtually, and they're no longer stuck in that perpetual planning because they couldn't all get together or childcare was an issue. So I found that it would, it just made things a lot easier. And then the other thing that I saw was people we're actually more willing to be open and honest remotely, I guess that meant because they didn't all have to go to dinner after the meeting. I'm not sure, but from the comfort of their own home, they could say what was on their mind that worked out really well for us.
Tobias Salinger: (
Well, luckily succession is not filmed remotely, um, or there might not be as much tension in every episode, but all very, uh, very interesting points to, to keep in mind. I, I have one more question before I, I do let you go. Um, we're so appreciative of you taking time to share your expertise with our audience. And, and this is something that I, that I often add ask experts about, um, because I hear ultra high net worth clients discussed as kind of a coveted client base yet at other times, I've, I've been told that a lot of practices just don't have the resources, you know, to, to really serve that, that base of clients. How would you, you recommend that listeners kind of assess whether or not they should be in that mix and, and trying to, to target ultra high net worth clients and, and work with them over the long term?
Amy Castoro: (
Well, obviously the advantage to ultra high net worth clients is you've got more assets under management. This conversation about taking care of families, does a couple things for advisors, whether they're ultra high net worth or not one, it gives them access to the next generation, which allows them to retain assets even more for a longer period of time. The second is it really does allow them to differentiate themselves. So even if they're working in a lower mark versus a higher market, the idea that they can say, look, I'm a full service advisor that cares more about your family and its wellbeing than just managing your money. That's a value proposition. That's a differentiator. I think what's important for advisors that want to work at that higher level. This conversation about families and, and taking care of them is essential. They are more sophisticated. I wanna, I don't wanna say they're more sophisticated. Their estate plans are more sophisticated and more complex. I would suggest that there's more to lose when there's a higher degree of wealth on the line. And so they're more willing to have these conversations about the impact of wealth on their families and their relationships. So for some advisors, they've actually quadrupled the number of assets they have under management by bringing in experts or even us in particular, to help them expand their business and, and bring this as an added benefit to their conversations.
Tobias Salinger: (
And you have been such a benefit to our conversation with our listeners on the financial planning podcast, Amy castor of the Williams group. Thank you so much for joining us today. Totally.
Amy Castoro: (
My pleasure. Thanks for having me, Toby.
Tobias Salinger: (
Absolutely. And thank you for listening to the Financial Planning podcast. This episode was produced by Arizent with audio production by Kellie Malone. Specia thanks this week to Amy castoro of the Williams group, rate us, review us and subscribe to our content www.financial-planning.com/subscribe. From Financial Planning, I'm Tobias Salinger. Thanks for listening.