“Keep the Money Together”: Preparing the Next Generation for Financial Leadership

The story is often told that some of the last words spoken by Cornelius Vanderbilt to his heirs were, “Keep the money together.” The wealthy industrialist was urging his children to take the steps necessary to preserve and expand the fortune he had built, securing a financial legacy that could support not only the family, but the many worthy causes—such as Vanderbilt University—that he had funded during his lifetime. Unfortunately, Vanderbilt’s advice was not heeded. Within three or four generations, one of the largest fortunes in America was largely dissipated.

By contrast, John D. Rockefeller spent years carefully assembling a plan to secure the legacy of the wealth he had amassed by investing in the early oil industry. The plan included educating his heirs, establishing a solid governance structure, and designing legal structures that could ensure that the estate was managed for both tax efficiency and continual wealth creation. As a result, even though Rockefeller himself gave over $500 million to charitable causes during his lifetime, the Rockefeller estate today is still valued at some $10 billion and continues to generously support charitable efforts in medicine, education, global health initiatives, and others.

In a previous article, we discussed the importance of preparing the next generation of leaders to assume responsibility for maintaining the financial legacy entrusted to them. In fact, preparing these future leaders properly is perhaps the most important factor determining whether the outcome will resemble that of the Rockefellers or the Vanderbilts. Especially in families with significant wealth that has been passed along to multiple generations, the desire to strengthen and perpetuate a philanthropic legacy is often a core value that requires not only careful planning, but nurturing with those who will become custodians of the legacy in future years.

This topic is especially timely now, when some $124 trillion in wealth is expected to pass from one generation to another over the next two to three decades—in the United States alone. How will family stewards and other trustees ensure that the next generation of family leaders has both the vision and the knowledge to further the philanthropic values of those who created the wealth and established the original conception?

Perhaps the most important factor is good communication practices. Family stewards should begin conversations with younger generations well before they assume leadership roles. These conversations should revolve around the family organization’s core philanthropic values and priorities, but they should also encompass younger members’ ideas and values. It’s important to remember that while the traditional objectives of family philanthropy may have revolved around faith-based organizations and traditional nonprofit organizations that might be part of the local United Way, Millennials and even GenXers are likely to bring their own social and ethical priorities to bear on their views toward philanthropy; this may include organizations and efforts that are unfamiliar to their elders. It will be important for the older generations to listen carefully to what their heirs are saying if they want to foster the type of deep commitment that guarantees perpetuation of a legacy. Some families even develop “pitch” sessions, where members bring information about a charity or cause they are passionate about, seeking to demonstrate why it should benefit from the family’s generosity. The matter is then carefully considered and discussed before any decision is made.

Another important topic revolves around communication from the older family members to the younger ones about expectations, responsibilities, and resources. Learning that you are responsible for making decisions about a multi-million-dollar trust should not happen when the will is read. Instead, you should be able to learn the ins and outs of the family organization over time, with the ability to thoroughly absorb the information and incorporate it into your future planning. Those with more experience should begin the mentoring and advising process early, ideally allowing a number of years for the concepts of responsibility, stewardship, and decision making to “sink in.” And where special assets are concerned—such as art works and other collectibles, certain types of real estate holdings, and other holdings that may be either illiquid or require sensitive handling in order to realize their maximum value—communication should be purposeful and specific. Stories abound of priceless paintings ending up at the local Goodwill instead of being auctioned and the proceeds used for worthy ends, because the inheritors had no idea of their value.

It should be obvious, then, that the type of planning and strategy needed for ensuring a durable family financial and philanthropic legacy requires considerable forethought, careful planning, and an overarching strategy that goes beyond the limits of “normal” estate planning. Such planning may involve the use of various kinds of trusts, funding that may involve structured life insurance products, and, above all, effective education of the next generations that inculcates the core values and vision of the founders.

As a fiduciary financial advisor, Aspen Wealth Management specializes in helping family stewards utilize donor-advised funds, trusts, and other estate planning tools to maximize their philanthropic efforts. To learn more and to check the depth of your estate planning knowledge, visit our website and view our video, “Test Your Estate Strategy Knowledge.”