Oscarlyn Elder: For many families, a primary goal is to create and sustain wealth over generations. This means providing not only for yourself, but also for generations to come, as well as your favorite causes or initiatives that you want to support into the future. A critical piece of that is how you involve your family and the next generation to ensure that they understand your values and goals. How do you instill those values in them and really ensure that they understand the language and responsibilities around wealth? 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 second in our series on generational wealth. In our first episode, we spoke with Trista Shigley, Fiduciary Division Director of Truist Wealth's Trust and Estate Planning Group about trusts and how they can be used as a vehicle to help protect your wealth. Today we'll cover, preparing and educating the next generation about wealth as a way to help ensure your family's wealth is sustained across generations. 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 forward slash do that. My guest today is Emily Haenselman, Director of Family Education at the Truist Wealth Center for Family Legacy. Welcome back to the podcast, Emily.
Emily Haenselman: Thank you Oscarlyn, it's great to be here.
Oscarlyn Elder: Emily, I know you've been on here before, but for those who may have missed the last episode you appeared on, tell us a little bit about your role and how the Center for Family Legacy works with clients around the topic of generational wealth.
Emily Haenselman: Absolutely, Oscarlyn. So our focus at the Truist Wealth Center for Family Legacy is to help families of wealth sustain wealth across multiple generations. And one of the ways in which we do that is we help to educate and mentor the next generation within the family. My role as Director of Family Education with the Center for Family Legacy is focused on just that. We work on a variety of different areas, both financial and non-financial in nature to help prepare them to be able to sustain the wealth of the family across multiple generations, and also to help them grow and develop to live a purposeful life with wealth.
Oscarlyn Elder: Emily, that's excellent. What we know is that many people believe that the hard part is creating and building wealth, but we see where sustaining wealth is also this monumental challenge as well. How does Truist Wealth think about the framework to sustaining wealth?
Emily Haenselman: That's a great question, Oscarlyn. So research suggests that families have less than a one in three chance of maintaining wealth through multiple generations. And this is due to a variety of factors, but they're not the factors that one might initially think of. The breakdown in the wealth is due far less to errors having to do with taxes and investing and legal errors and more to do with the family itself. So in fact, 60% of the time, breakdowns in family communication and trust can cause families to fail in sustaining their wealth across multiple generations. And 25% of the time this is due to the unpreparedness of the heirs to receive and manage and handle and maintain the wealth, and grow the wealth as well. And 12% of the time it's due to lack of having an understanding of shared family values, a family mission in place, and really less than 3% of the time are these failures due to financial planning, legal and tax errors. And so our role at the Center for Family Legacy and my role is to help overcome these odds by implementing some strategies and some programs and in different ways that we can assist clients with family communication and having a mission and preparing the heirs and all of those non-financial pieces that go into sustaining wealth across multiple generations.
Oscarlyn Elder: So Emily, one of the items that you noted was a lack of preparedness to inherit or be a beneficiary of wealth. How do we recommend these families start to prepare future generations for wealth? What does that look like?
Emily Haenselman: The Center for Family Legacy researched families that were successful in sustaining their wealth across multiple generations, and we found that they had some things in common. One of those things was mentoring the next generation and helping to prepare them. And so our entire education offering within the Center for Family Legacy really came out of the goal of helping to mentor and cultivate and foster development and growth in the next generation within the family. We call this wealth literacy, and there are six main areas that we focus on in wealth literacy. So the first is personal finance, the second is investing, wealth preservation, career development or personal and professional development, philanthropy and impact, another major area and then final area we call family wealth, which we can kind of help to define what that means as well. And those six areas make up really our approach to educating our next generation, which we really try to implement a well-rounded holistic approach that helps the whole person to help and grow, develop, and become the best person that they can to be able to sustain that wealth and live a successful life with wealth.
Oscarlyn Elder: Emily, what you've described to us from an education wealth literacy perspective is six core areas that are integrated. It's not just about one area. So it's not just about teaching someone what a stock and a bond is. Often though our conversation starts with our families both say the wealth creator and the ultimate wealth inheritor around goals and values. Why is that discussion around value so important and what are some areas that you would like to draw out that folks may want to use when they're communicating with the next generation around wealth inheritance?
Emily Haenselman: Yeah, so I think it's really imperative for families to kind of start with a conversation around values. So helping your children understand your core values and where you are coming from in your life from the values perspective, but also understanding them and their values and their goals and what they want to do with their lives. This helps you have a discussion with your children, which I think is really imperative around your intentions for them from a planning perspective. So as you're looking at your financial plan, your estate plan for how you want to pass your wealth down through the generations or whatever other way, whether it's philanthropic in nature, being really clear as appropriate with your children around your intentions and what you want and the reasons for why you've made the decisions that you've made, and then learning from them about what they want to do with their lives and what their goals are and their values. And as you're doing this, you want to be very age appropriate of course. So there's no need, as you're having these conversations, there's really no need to focus on the numbers specifically, but rather the "why", your value system and where these decisions came from and what your goals are and what your children's goals are as well.
Oscarlyn Elder: Yeah. And Emily, I know you've mentioned before that success can be a word that folks have different definitions for and this value discussion is really wrapped up in that. How might others view success and giving folks the space, especially as children age, to define what success may look like for them beyond the financial numbers?
Emily Haenselman: That's right. So the definition of success I think really evolves over time as well as children begin to grow and to develop. And so helping to foster an environment in which children are able to learn and grow potentially to even have some failures along the way. So really helping your children understand what's most important to them and really have the desire and the ability to go after what they want in life. This helps with self-sufficiency, self-confidence, having just an overall understanding of "who I am as a person", which as I said, I think evolves over time.
Oscarlyn Elder: In addition to that definition of individual success, one of the things that we're looking for and hoping to help guide families towards is really family success over the long term across multiple generations. Are there elements that you would draw out to encourage folks to talk about and be deliberate around relative to that family success of sustaining wealth?
Emily Haenselman: Absolutely. Focusing in on these six areas that we talked about earlier that make up what we define as wealth literacy, starting with simple basics like personal finance and having conversations with your children as appropriate by age about saving and spending, investing and giving some of the strategies maybe you use to do those things. There's lots of different things you can do. With younger children, you can even do something fun and simple like asking them to plan a day of a vacation and giving them the total amount of the budget and having them plan the day for the family or having them come to the grocery store with you and learn the cost of various items and how much the grocery store bill really is talking to them about what your goals are in savings and in how you budget when you go to buy a car, talk to your children about what's driving your decision making around that car. And as your kids get older, you can start to talk with them about major purchases that they might have in their life, whether it's college, buying a home, buying a car, and really helping to mentor and help them along the way, not necessarily financially, although that's certainly an option, but rather more about helping them to understand the decisions they're making and to be deliberate about that. When we talk about investing, oftentimes we like to just start with the basics, of course, right? Because the topic of investing, I'm sure kind of seems like a foreign language to a lot of us. And so just start with the basics with your children and even you can have them invest a small amount of money and track their investments over time. There's many other strategies like programs that you can use to invest big money in the real stock market.
Oscarlyn Elder: And Emily, it's a lot about the power of compounded returns. It's just amazing when you start showing folks with illustrations the power of allowing wealth to work over time, and that can hopefully drive behaviors that encourage the wealth to be protected and to give it time to grow.
Emily Haenselman: That's right. Even for myself, I can talk about a personal way that I've implemented this idea of compound interest, investing some money in a money market account for my daughter and I sat with her with a financial calculator and I showed her the interest and how it would grow over time. And of course the first thing she said to me was, "When will I be able to buy an Apple Watch?" or whatever it was. And I said, "Well, you can buy an Apple Watch, if you spent the money in five years, this is how much you would have, if you waited another 20 years, this is how many Apple Watches you could buy." That conversation was so incredibly powerful. And of course my real goal in the back of my mind is that she will use that money for some great trip to Europe when she's older or that she'll use it in college for something, but I don't have to start there, I can start with the Apple Watch conversation. So another key piece is to meet your kids where they are as you begin to have these conversations.
Oscarlyn Elder: Emily, what role do we think, especially with teens, encouraging them to get a job where they can actually begin to learn about how money is made, that it takes effort. If we're laboring to make a wage, there's direct effort there that needs to happen in order to earn an income. So how do we think about that? And of course, teaching them about taxes and other types of withholdings that take away from those gross earnings.
Emily Haenselman: Not every family does it. Some families focus more on having an allowance and there's no right or wrong one way or the other. But I do think a job can really, really have some great lessons held in it. And one of those is this idea of grit and work ethic. When you're younger, working, busing tables or mowing lawns or whatever else, a lot of work goes into it and the is not necessarily indicative of how much work you put into it, and yet it teaches a level of work ethic and appreciation for what it takes to grow and sustain wealth over time, and that is going to follow you for the rest of your life. So this idea of it really helps to instill grit. You can also see just practically as you mentioned, the types of taxes and other social security and all of that that comes out from a paycheck before you even really see the money. And finally, I would say a job is a wonderful teaching strategy because it helps to give your children a drive for maybe finding work that provides a good quality of life for them that they will be able to sustain and appreciate and enjoy in the longer term. I can tell you that for me, waiting tables was a huge motivation to go to law school and have a career that was not waiting tables, although all work is noble and that work was certainly noble as well.
Oscarlyn Elder: Let's talk for a moment about career development and specifically how do parents do grandparents, aunts and uncles, you think about the family structure, how can we best encourage the exploration and career development with next generation wealth inheritors?
Emily Haenselman: Well, I think the first thing that is helpful to understand is to really need, like I said, needing your children where they are. So even from an early age, talking with your children about their dreams and their aspirations and embracing their responses and those responses will change most likely over time. And so the key though is to talk with your children really about the importance of effort and that sometimes you have to fail. You're not always going to achieve and overcome and be the best at everything. And I think there is more, in today's world, having young children, myself, involvement of parents in their children's lives and a fear of allowing them to fail. But failure is a really key driver for overall success, longterm. And so embracing your children's responses about their dreams and their aspirations, allowing them to fail and helping them to explore their talents and their skills, understanding your talents and your skills and developing those, but really having the focus beyond the effort. I think that historically there was this idea, "Oh, you're really good at that", "You're really good at this and you're not good at that", but I think now there's a lot of research that's been done that shows that when we focus not on being good or bad or achieving some score on a test or a grade, but rather, I'm really proud of you on how hard you worked doing that. So a great place to start when it comes to development. So those are just some, when children are a little bit younger, those are some ways you can kind of do that. The world now is very, very different for my children and will be different for them as they go into their careers than it was for me. So what worked for me is not necessarily going to be what works for them. They're going to have to navigate the world, and there are some answers that you might have and there's some answers that you might not have. But when you instill these values of grit and work ethic, confidence and the ability to fail, get back up again and keep trying, that's going to prepare them for life no matter what the world throws at them.
Oscarlyn Elder: Emily, thanks so much for sharing that information. You've highlighted some action steps that folks can take around education related to personal finance investing and career development. And our next episode we'll be talking with David Herritt, Head of Truist Wealth Center for Family Legacy about how families can work on conversations that build culture among the family unit and really ensure that purpose and values don't just get passed down, but that hopefully they get passed back and forth among generations. As we both know, sometimes those conversations can be really challenging.
Emily Haenselman: I think that's a great follow-up to the conversation we've had today.
Oscarlyn Elder: Emily, thank you so much for your time. It's been a great conversation and I think that our audience has probably learned some important tactics as a result of our conversation. Before we go, Emily, we have a tradition, as you know on this podcast of asking our guest about what they have been meaning to do. So what's the one thing that you've been meaning to do but haven't done and you're going to commit to do in the future?
Emily Hanselman: Yes, I knew that I would be asked that question on this podcast, so I've already made an appointment with our lawyer to update our estate plan. I help families with their estate planning and their estate and trust administration, but I have not focused on my own so much as I probably should. And as my children get older and my husband is a small business owner, I think it's becoming more and more apparent that I need to make that a focus. And so we have made an appointment and are ready to go. We have our ideas in mind about what we want to do, and I'm really looking forward to having that accomplished.
Oscarlyn Elder: Emily, that's a critically important I've Been Meaning To Do That item, I look forward to checking in on you and your progress. I'm glad to hear that you made the appointment. That's the first step. There'll be some other steps, but just really glad that you've done that and again, just really appreciate you joining us today.
Emily Hanselman: Thanks so much, Oscarlyn, it's always a pleasure.
Oscarlyn Elder: And for you listening, thank you for joining me today. Keep an eye out for the rest of this series in the coming months. 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 suggestion for this podcast, email me at do that at truist.com. I'll be back soon for another episode of I've Been Meaning To Do That, the podcast that gets you moving toward fulfilling your purpose and achieving your financial goals. Talk to you soon.
