Debunking the Myth of the Silver Spoon

A wealthy young man sits on a sun lounger over the water.

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Children of wealthy families are often thought of as being born with a “silver spoon” in their mouths. While it is true that wealth can assist with specific problems, it also comes with unique challenges. Often, the next generation of family members may struggle with difficult family dynamics that commonly accompany a multigenerational wealth transfer. Parents are usually aware of the privilege their children have as it pertains to wealth but can overlook the complex challenges their kids may face.

I frequently encounter instances where clients’ children experience a disconnect regarding decisions about their financial legacy. Below are a few ideas to avoid this feeling through productive discussions and how working with the right advisor can help overcome these biases.

How next-gen may feel disconnected

Because they likely aren’t the originators of the wealth, second-generation clients can often feel detached from their own family's wealth. This gap can result from various reasons, including age differences, a lack of understanding of family assets or even financial literacy.

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In a hypothetical situation, let’s consider a family, the Greys. Bill Grey (67) owns a lucrative tech company that provides important software to hospitals. Bill and his wife, Diana, have two daughters and a son — Jessica (40), Mandy (24) and David (36).

Although the company has been around for 30 years, Bill's business has reached high-net-worth status only in the last seven years. Jessica and David are employees in the business. The two have had many opportunities to learn the ins and outs of the business, build unique relationships with their father, explore the world and decide on a path for their lives.
Mandy, on the other hand, is a recent college graduate. She experienced a drastic change during her 20s due to her family's newly acquired wealth. Her family has become increasingly busy during the last few years as everyone has adopted new responsibilities within the company. She is not involved in the family business and doesn’t want to be. Mandy tells her father that she is sorting out life and wants to focus on answering the hard questions like, “What do I want to do professionally, and where do I want to live?”
Bill’s goal is to have all his children work in the family business. He has expressed to his family that he would like them all to eventually run it, with the hope that they will pass the baton from generation to generation. All are on board — except Mandy. She is uncertain about her role within the new family dynamic and commonly makes irresponsible decisions when it comes to money. Bill is unimpressed by her lack of proactivity and often excludes her from family discussions. As a result, Mandy feels alienated, resulting in her focusing on other things, causing the cycle to repeat and the disconnect to grow further.

Empowering next-gen in a family legacy

We often see the above scenario, and it’s essential to break the cycle that causes alienation between family members and instead foster a sense of belonging to increase involvement. Here are a few tactics you can use to empower your child.

Foster open communication. Hold structured and informational family meetings and encourage all parties to voice their thoughts, ideas and concerns. By holding these open forums, you’re not only acknowledging and celebrating your child’s contributions to the family or family business, you’re providing the opportunity for them to speak to their interests and passions to foster a sense of autonomy and self-worth. Even opening the conversation up to feedback, such as asking about their own experiences and perceptions of their roles in the family, can improve communication within the family and its members.
Educate to empower. Conversations about wealth can be uncomfortable, and sometimes the best approach is to engage someone from outside the family. An outside consultant can provide the opportunity for further education around financial literacy. Similarly, accessing online courses with your existing financial advisor or through educational materials like books and podcasts can educate and empower the family members. Providing an open forum that removes familial pressure and welcomes any and all questions can foster a sense of self-growth and understanding for teens and young adults.
Build a family governance structure. Including your children in conversations with your advisor, even if they don’t feel comfortable having a speaking role yet, can ensure they feel involved and listened to when it comes to wealth. The advisor should help create a consistent schedule, whether that be quarterly or annually, to ensure they understand where their wealth is and the implications of that wealth. These regular meetings can also discuss succession plans and will help ensure the children feel included in all decision-making.

Employing these tactics will help your child overcome any barriers that may keep them from feeling autonomous or involved in their family's legacy.

Your financial advisor’s role in unique family dynamics

A financial advisor’s role in your family's specific dynamic begins with discernment. Financial advisors should understand the values that guide the behavior of your particular estate plan. When working with your financial advisor, you can expect them to not only listen and ask questions but also guide an engaging discussion to ensure your actions and documents are aligned to your expressed values.

Your financial advisor is there to help you navigate complex decisions and clarify important distinctions in delicate family financial situations.

Take the Grey scenario, where Bill is ready to implement ways to solidify his children’s role within the company and wants to offer them all positions in the C-suite. Giving each child a C-suite role puts them on a similar playing field; however, since only Jessica and David have been employees for years and have developed their professional skills, they will be more prepared to thrive in their roles. Meanwhile, Mandy would have a learning curve that may take years to level out as she hasn’t even begun to carve out a lane to develop her skills.

Parents should lean on their financial advisors to further ensure children have a carefully crafted seat at the table when it comes to financial decision-making based on your unique family dynamic and circumstances.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters. CRC 3859006 09/24

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Elizabeth Chand is a Family Office Resources Generalist for Morgan Stanley’s Family Office Resources. Elizabeth provides specialized expertise to Financial Advisors and their UHNW clients, educating and advising across a broad spectrum of family wealth management concerns, including customized asset allocation and portfolio construction, strategic estate and financial planning, philanthropy management, family governance, wealth education and lifestyle advisory.