Oscarlyn Elder: What's your family's wealth story? Maybe it started a generation or two ago with family members who forged a path through their hard work and determination. Maybe it started with you. No matter how your family wealth story began, it's important to consider how you'll enable it to continue through generations to come. One of the most important components to sustaining family wealth is building a family culture that can be your guidepost. I'm Oscarlyn Elder, Co-Chief Investment Officer for Truist Wealth. And this is I've Been Meaning To Do That, a podcast from Truist Wealth, a purpose-driven financial services company. We appreciate you listening. This episode is the third and final one in our series on generational wealth. In our first episode, we spoke with Trista Shigley, Fiduciary Division Director at Truist Wealth's Trust and Estate Planning Group about trusts and how they can be used as a vehicle to help protect your wealth. In our second episode, we discussed educating and preparing the next generation on how to manage wealth with Emily Hanselman, Director of Family Education at the Truist Wealth Center for Family Legacy. And today I'll talk with David Herritt, Head of the Center for Family Legacy about the importance of family culture. If you want to take notes on today's episode, we have a worksheet that you can download and print. You can find it by selecting this episode at truist.com/dothat. As I mentioned, I'm very excited to have David Herritt, Head of the Truist Wealth Center for Family Legacy as my guest today. Welcome back to the podcast, David.
David Herritt: Oh, it's great to be back with you, Oscarlyn. It's always a pleasure to have the opportunity to spend time with you, and I'm really excited to build on what Trista and Emily have been discussing in the previous podcast and provide some additional context and tips about how to sustain wealth over multiple generations.
Oscarlyn Elder: David, you mentioned building off of what Trista and Emily discussed in our first two episodes on sustaining family wealth. And a key theme that I've heard from them is developing a plan based on your values and your goals. I imagine that's a significant part of building a family culture too.
David Herritt: Yeah, absolutely Oscarlyn, I think that really is the starting point. It's very important to understand the shared values and goals of all of the adult family members. If the values and goals are dictated by the senior generation, without the input from the next generation, it can be very difficult to get the buy-in from all of the parties. So one of the first steps is to create a family mission statement which defines the family's vision and purpose for the future. Creating that family mission statement can provide a clear path for future decision-making. Jay Hughes, who's one of the real thought leaders in the area of family wealth, says that a family without a mission statement is like a sailboat without a rudder. The mission statement becomes that rudder to the sailboat that allows you to stay on course and not just get blown around at the whims of the wind.
Oscarlyn Elder: David, that's a very powerful visual that you've given us, a very powerful metaphor. What should a mission statement include and how does a family go about developing one?
David Herritt: So as we talked about, with everything we like to start with the idea of the values of the family and understanding their shared values. If you think about your values and your belief set, it's how you make every decision in your life. It's how you pick your significant other, your friends, the community you live in, your job. It all goes back to those values and belief sets, and it's the same within the family. Their values are core to how they communicate, how they interact, and how they make decisions together. So we have a values assessment that was designed based on the research of two of the leading value theorists in the world at the time, Benjamin Tawna and Brian Hall. And we use this assessment to uncover the shared values of the family, and those values become the springboard for creating the family mission statement to identify that vision and purpose for the family. And this purpose, vision, and mission can then be used as a guide for future decisions around their financial capital, whether it's estate planning, investing, risk management through insurance, it becomes that kind of true north on your compass.
Oscarlyn Elder: Again, that's another, I think, important guidepost. So we have the sailboat with a rudder. That's what we want for families. And then we want folks to have that true north. Once a family has developed their family mission statements or perhaps one was developed and passed on to multiple generations, how do you then pass it on to the next generation? How do you start those conversations so that there is that connection across generations?
David Herritt: We like to say to start young, this is a process. It's not a one-time event. Often families are worried and concerned that, oh, if I start to have these conversations, it's going to make the children feel entitled or it's going to create expectations. But what I can tell you is not telling them is going to make them feel diminished and disconnected, inadequate, unworthy, and for the most part, confused. So the biggest thing that you can think about here is how to introduce the topic. And just like with a mission statement, we think it starts with providing that clarity around the family values; telling stories about dedication, hard work, responsibility, philanthropy. Storytelling can be so powerful. And then finding teachable moments throughout life. When you're out running errands at the store, the bank, your children are constantly watching and learning from you. So what we tell them to do is try to practice that modeling behavior so that your children pick up on the ways that you want them to live and you want them to be responsible about the wealth. Maybe you're waiting to buy something until it goes on sale. Deferring gratification can be a really important message for the next generation. We live in a society where anything can be purchased on credit with the touch of a finger. And so the idea is to think about how you can delay that gratification. I don't know if you're familiar with the marshmallow experiment.
Oscarlyn Elder: Yes. Is that the experiment where they put marshmallows in front of kids-
David Herritt: Yes.
Oscarlyn Elder: ...and some of the kids could wait and some could not wait?
David Herritt: That's right. And if you haven't watched it on YouTube, I would suggest that you load that up pretty quickly because it's so interesting. Some of the kids lick the marshmallow, some of them take little pieces of it, some of them walk around and talk to themselves so that they're not eating it. And then some of them just pop it into their mouth the second the door closes. But the interesting part about the experiment is they studied these children for the next 30 and 40 years, and what they discovered was the children who could delay gratification and wait for that second marshmallow actually did better in life. They did better in school, they got better jobs, they got paid more money. And we live in the society where that's not happening. And so now, I just read a report the other day that the 18 to 24-year-old age bracket is the fastest age bracket filing for bankruptcy in the United States today. Now some of that is student loan debt, but some of that is just the ability not to delay gratification. They can at the press of a button, get whatever they want on credit and then they can't pay it back and they end up in this spiral where they're just getting themselves into debt. And so the more you can teach them how to create spending plans and save money for the emergencies and things are going to be great. And then finally, just teaching financial literacy and life skills. We coined the phrase wealth literacy, which includes financial literacy, but also life topics like understanding your personal money history and how does money impact your relationships, both within your family and outside of your family. And these types of topics are rarely taught in school as part of a high school curriculum. I read another recent study that said less than 20% of high schools have any classes on financial literacy. So it's really just preparing those young adults for those valuable lessons so that when you start to pass on the values and mission, they're ready to receive that information.
Oscarlyn Elder: So David, I heard very clearly importance of values and then taking action really aligned with communication and maybe modeling behaviors, sharing behaviors, but instilling the values and then some form of action.
David Herritt: Yeah, I think you're hitting on the right points here, Oscarlyn. I'll just give you a quick example. I had a family that their daughter was away at college in her freshman year and was finishing her first semester and she was working late right before finals, and she spilled a soda on her laptop and the laptop stopped working. And so she called her mother the next day and her mother said, "Oh, I'm really sorry. That's why we bought insurance for it. And so if you pack it up, I'll text you the address. Go down to the post office, send the computer back, and they will send you a new one." And she said, "But I'm in the middle of finals. I have a research paper due. What am I going to do?" And she's like, "Well, there has to be resources on campus. You just need to figure it out. I didn't spill the soda, you did." So like any wonderful young girl would do, she called her father. And her father said, "Oh my gosh, that's really terrible. That's why we gave you the emergency credit card. Why don't you just go out and buy a new computer and send the other one back, and while it gets fixed, you can use the one that you bought and we'll be ready to go for the next semester." And what I told the parents was, neither one of those are a bad choice. It's how you message it to the children. And so in this case, the mother was messaging, "You need to be responsible, you need to be resilient, you need to be adaptable and flexible, and you need to figure it out." What the father was saying was, "Hey, there needs to be money available for these types of emergencies, and you are in a situation where you don't have that money yet, you're not working, but we do. So when you are working, this is a good lesson that you're going to need an emergency fund." So as long as you're messaging it in the right way, neither one of those are wrong answers.
Oscarlyn Elder: Right. So multiple pass for based upon values.
David Herritt: Yes.
Oscarlyn Elder: And what one generation would like to teach the next generation is kind of what I'm hearing from you there.
David Herritt: Absolutely. Yeah.
Oscarlyn Elder: So we've talked about when to get this idea of family culture started, but what about more tactics for how. What are some of the ways to get your children or other family members involved in these very meaningful conversations or discussions that will help pass down, instill that culture and the values that you want to instill into future generations?
David Herritt: I think I would start with something we've already talked about, and that is storytelling. Passing down the family values and legacy, the family history and culture through storytelling is just so impactful. We do a lot of interviewing of family members and then documenting that history on some sort of media. We've created books, we've created videos. But capturing it in the words of the individuals are really essential. I was working with a family recently and they were retelling a family story from the past, and each one of the siblings remembered it differently and they were telling the story differently. Because they had put it through their own lens. And so if you can actually hear your great-grandmother's words on a video or see them written and you are getting the story directly from that person, it just gives it an extra meaning. And so we do a lot of that. I think also inclusion is really important. So even if the younger generations aren't making the decisions, if they feel like they have a seat at the table and that their input is being heard, they're going to feel vested in the process in a different way. And so a lot of what we do is helping that generation by putting together different areas where they might be able to make decisions together around something. It could be a shared vacation home or it could be a charitable donation that they're making. Anything that they can work on together where they can then go to the senior generation and say, "Here's what we think you should be doing." It helps to promote that shared responsibility and they start to learn how to work together. The other thing that we love to do is team-building exercises, taking families to escape rooms or ropes courses. Where other places where they can have fun, but also learn how to communicate and build trust so that when they start to be the ones who are the decision-makers in the future, they've had some practice in how they're going to communicate with each other. And then finally, I would just say conflict within families is inevitable. It's going to happen. You spend more time with your family than you do with any other person on the face of the earth. And that gives you all kinds of opportunities to build up biases and prejudices. And so unlike when you have conflict with a stranger, where you're just trying to resolve it and you don't care if you have a relationship at the end of that or if you see that person again, conflict within families tends to be circular in a way where when the conflict happens and it starts to escalate and get out of control, one party either steps away from the conflict 'cause they don't want to ruin the relationship, or a third party interjects them into the middle of it to diffuse it. But it never really goes away. And so that same issue or a new issue comes up and the same thing continues to happen. And if you can't break that cycle of conflict, it's eventually going to rip the family apart. And so, one of the things that we do with families is help them create a conflict resolution policy. Now, these are morally binding, not legally binding documents, but it's a way to put down on paper how the family is going to resolve their conflict and mediate that conflict, and it creates a process for them to be able to do that.
Oscarlyn Elder: David, can you give us some examples of what a conflict resolution policy might look like? I'm just, I'm interested in it. I'll just share, I'm interested in it because look, as you pointed out, every family has conflict. And it sounds like the policies of framework, but the framework has to be executed, I'm guessing, in order to be successful. So I'm kind of interested in what you've seen from a framework perspective that could help our listeners.
David Herritt: Yeah. And so, the kind of framework that we think about is that most times with conflict two people are on separate sides of the table and the conflict is in the middle, and they can't resolve it because they're looking at it from their own point of view. And so what we like to do is bring them both on the same side of the table and put the conflict on the other side of the table and have them start to talk through what's really at the heart of the conflict. And most times, the conflict resolution policy has some sort of mediator. It could be a family member, it could be a family friend, it could be a professional, depending on the family and how they resolve conflicts because every family is at different levels of unhealthiness, if you will. But it's really just talking through the conflict with somebody to help you talk it through so that you don't get personal. You're not calling out your family member and saying things that are just going to escalate the conflict. You're really just focused on the problem and what it is. And so usually that's what it is. It's just a step out of, "All right, so we're going to get on the same side of the table, we're going to have somebody to help us resolve it, we're going to talk it through. And if we can't resolve it, then we're going to have to think about what that next step could be for the family." I always say the loose ties bind the best, and sometimes if there's a conflict that can't be resolved, it may be better for the entire family, for one family member to step away and do something different.
Oscarlyn Elder: Interesting. So say that again. The loose ties-
David Herritt: The loose ties bind the best. If you force somebody into something and say, "In order to be part of this family, you are going to have to agree to this," it's not something they're volunteering for. And so there's a resentment throughout the process. So it's almost better for the entire family if that family member steps away, because they're going to continue to stop the family from moving forward.
Oscarlyn Elder: David, it strikes me that especially for families of wealth that has successfully transitioned across generations or is involved in multiple generations, let's say 3, 4, 5, I know we've got some five and six generation families that we work with. I'm assuming that the approach to conflict resolution needs to be one that can evolve as the family perhaps becomes more complex, as it gets bigger with more generations.
David Herritt: Absolutely. Right. I mean, we always want to provide a framework. Because I always say it's very difficult to have these conversations without a framework, and especially when things are challenging. It's even hard when things are going well, but when you're having challenges and you don't have a framework, it can be very difficult. But when you think about it, families are growing exponentially, and most of the experts in the field of family wealth say the most difficult part of this is when you get to the third generation and beyond, so what we call the cousin consortium. Because when you get to that level, they don't grow up together in the same house. They're most likely geographically dispersed, so it's much more difficult for them to stay connected. And also you're having family members come in to the process. So you have people who come in through marriage, you have people who come in through blended families. And for them to understand the culture, it's not only important to integrate them into your culture, but to understand their culture and what they're bringing to the table. Because they can bring wonderful pieces of their own culture into the family and integrate it. A lot of times the senior generation says, "Oh, well, we shouldn't include the in-laws." And I was like, "But at one point you were an in-law." We were all in-laws at one point. Right? So you want to make sure you're celebrating everybody's background and differences.
Oscarlyn Elder: David, that's a great point. Everyone has their own wealth story. As our listeners' family expands, you may need an adjustment. And the purpose may stay the same or it may evolve, but your plan for sustaining the wealth has to be one that can always change to stay and be relevant.
David Herritt: Absolutely.
Oscarlyn Elder: David, before we go, as you know, because you've been on multiple episodes of I've Been Meaning To Do That, we have a tradition on this podcast of asking our guests about what they've been meaning to do. And I remember your last one. What's the one thing that you've been meaning to do but haven't done and will commit to do in the future?
David Herritt: Okay, so first of all, let me just say that I am proud to say that I finally did communicate my estate planning intentions to my children, which was the one that I had not done that I've been meaning to do. So I'm really excited about that. Now, the one that I want to commit to into the future is to finish a book that I have been writing with my youngest son. I was in a flood when I was 10 years old, we've been starting to write a book about that. And I've been doing it for, I don't know, seven years. And I just really want to put the time aside to finish that book.
Oscarlyn Elder: David, that sounds like a very important, I've been meaning to do that, that you've added to your list or you're elevating on your list. And I really look forward reading that book one day. Not knowing about this experience, but knowing you, I'm confident that there'll be deeper meaning and that it's an important journey to share with others. So I look forward to reading it as soon as possible. No stress, but as soon as possible. Oh, David, thank you again for joining us and for sharing your expertise and your wisdom. I hope that our listeners take away something very powerful that can help them as they're thinking about their family culture and how to strengthen and communicate it.
David Herritt: Well, thank you. Whenever I do one of these, it's always the best part of my day. So thank you Oscarlyn.
Oscarlyn Elder: And for you listening, thank you for joining me today. As a reminder, this is the final episode in our three episode series on Sustaining Family Wealth. If you missed either of the first two episodes, go back and take a listen. If you liked this episode, please be sure to subscribe, rate, and review the podcast, and tell friends and family about it. If you have a question for me or a suggestion for this podcast, email me at dothat@truist.com. I'll be back soon for another episode of I've Been Meaning To Do That, the podcast that get you moving toward fulfilling your purpose and achieving your financial goals. Talk to you soon.