The rich are different than they used to be. As the number of ultrawealthy explodes -- in 2006 households with more than $30 million in Þnancial assets grew by 11.3 percent, besting the previous year’s 10.2 percent gain -- merely having a lot of money doesn’t set someone apart from the crowd the way it once did. One result: The superrich are increasingly interested in how they can use their assets to leave their mark on the world. And wealth managers are rushing to help them, with what they like to call legacy management services.
The deÞnition of legacy varies widely among the wealthy. Some want their names on buildings or charitable foundations, in the tradition of Gilded Age robber barons. But many of today’s high achievers are also mindful of political, social and environmental causes, as well as how they can ensure that their values are passed on to heirs along with their assets. Essentially, they want to be known for more than just their wealth.
“There is a growing urge among these individuals to think about the way their wealth will have an impact,” says Susan Turnbull, founder of Personal Legacy Advisors, a Charleston, West Virginia, Þrm that helps wealthy people manage legacy issues. “They are searching for a more intangible, and yet more meaningful, legacy than simply the assets themselves.”
Nuts-and-bolts services like managing investments and structuring estate plans are no longer enough to satisfy these ultrarich investors. Financial advisers who work with affluent clients are Þnding themselves handling an unusual array of tasks that fall well outside the traditional deÞnition of private banking.
Consider some of the assignments that superwealthy families have recently thrown at Tim Maloney, a senior vice president at Bank of America’s U.S. Trust wealth management unit: One politically active family asked for help setting up a private foundation to support its efforts against nuclear proliferation; another client sought a solution for keeping the family winery in the hands of subsequent generations; still another wanted him to Þnd a way to protect several thousand acres of South Carolina woodland from developers. A few months ago, Maloney organized a client seminar in Texas focusing on acquiring recreational property like ranches. U.S. Trust expected about three dozen people to show up. Instead it had to stop taking reservations when the number of respondents hit 250.
“The clients wanted to know more than just how to buy or manage a ranch,” he says. “They were very interested in issues like conservation, preservation and even how to reintroduce species of wildlife to the area.”
Legacy can also mean continuing to have an influence on one’s heirs after death. Some clients are crafting so-called ethical wills -- essentially statements of purpose that they expect family members to live by. These wills, however, stop short of separating intransigent heirs from their inheritances.
“Managing money and passing it on from one generation to the next is the easy part; it’s a pretty mechanical process,” says Mary Duke, who heads HSBC’s Family Wealth Advisory Services business in the Americas. “The resounding message that we hear over and over again is that if you pass on the money without aspects that will help heirs deal with that wealth -- core values, ideals, the competency to manage the wealth -- then the client’s broader goals are doomed to failure.”
Mary Dickens, a managing director for JPMorgan Chase & Co.'s private bank, concurs: “Clients are thinking of the money more as a way to state or reinforce personal or family values that are important to them, rather than as something they are obliged to preserve and pass on intact to the next generation.”
That can make for some delicate communications between Þnancial advisers and their wealthy clients’ heirs -- whom they typically want to keep serving. Members of younger generations don’t always have the same values as their parents and often want to leave their own mark on the world instead of simply perpetuating their elders’ influence.
But dealing with situations like these is fast becoming the new meat and potatoes of the wealth management business. “One thing
I have realized from our educational seminars involving heirs is that they feel tremendous pressure to carry on the dreams of their parents,” says Duke. “These issues may be tricky, but they are the ones our clients need us to help with.”
