Rich can be poor financial planners

Your Money

February 13, 2005|By JANET KIDD STEWART

Rich people can be great role models for amassing fortunes, but they apparently are falling down on the job when it comes to managing them.

Of the Americans with $10 million or more, more than a third - 37 percent - don't have a will, trust or health-care proxy, according to a survey of affluent adults by PNC Advisors.

Could it be that the rich have figured out those financial planning tools aren't really that vital? It's heresy akin to shouting in a roomful of dentists that six-month checkups aren't necessary, but I found myself rooting for evidence that estate planning was, indeed, a waste of time and money.

But the January survey of 792 affluent adults also asked for the reasons why the people hadn't planned. The overwhelming response was procrastination and not wanting to confront their mortality.

Having a lot of money apparently doesn't improve families' communication skills, either.

About six out of 10 respondents said they have never discussed inheritance issues with their families, and a quarter of people who have estate plans feel no need to discuss them with loved ones.

"Money continues to be a taboo subject, and the messages being sent and the messages received are not the same," said Thomas Melcher, chief investment officer for Hawthorn, a PNC division that advises clients with more than $20 million in assets.

Wealthy-family dysfunction was hurting philanthropic causes so much that Charles Collier, Harvard University's senior philanthropy adviser and an expert in planned charitable giving, began taking courses in family therapy. His book, Wealth in Families, urges families to educate and support one another, tell and retell important family stories and think about success in the very long term. Also, strategies such as recognizing potentially lethal relationship triangles are important for all families, not just the rich ones, he said.

Triangles in this sense result when a third party enters a troubled relationship between two people. Think married couples and a meddling in-law. Multiply that by millions of dollars in the bank and you've got a nasty problem, he said.

When Melcher counsels clients, he asks couples to take a blank sheet of paper and list their most important financial goals. "I tell them to forget about commitments and taxes, and just focus on what's important," he said. "We get to the core of what the money means to them."

Later, when the discussion finally turns to current spending allocations, it becomes easier to bring up any disconnections between the goals and spending patterns, Melcher said.

Are you looking to unpack some family money baggage but can't afford high-priced financial advisers-turned-psychologists? Collier recommends four books, depending on your relationship issues.

Worried your kids aren't grasping much in the way of good financial principles just by watching you? Try Raising Financially Fit Kids, by Joline Godfrey or Big Questions, Worthy Dreams: Mentoring Young Adults In Their Search For Meaning, Purpose and Faith, by Sharon Daloz Parks.

Need some advice as you contemplate the emotional issues surrounding retirement? Look for Aging Well: Surprising Guideposts to a Happier Life from the Landmark Harvard Study of Adult Development, by George Vaillant.

Want to overhaul all your relationships? Consider Extraordinary Relationships: A New Way of Thinking About Human Interactions, by Roberta Gilbert, a Georgetown University psychiatrist.

"All these issues don't come spilling out of clients in our first meeting, and yet it's very likely they're all there somewhere," said Melcher. "Every year, a greater amount of our time is being devoted to these multi- generational issues."

E-mail Janet Kidd Stewart at

Top reasons for not having a will

56%: Procrastination

12%: Fear of confronting one's mortality

10%: Confusion about the process

6%: I believe I'm too young to have a will

6%: I don't care what happens after I'm gone

5%: I don't have enough money to have a will Source: PNC Advisors survey on attitudes about wealth

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