What We Believe: Principles of Successful Wealth Planning

Adrienne Penta, the executive director of the BBH Center for Women & Wealth, and Alison Hutchinson, a senior wealth planner, focus on the topic of families, wealth and communication, discussing the guiding principles that we believe help families create life-affirming, enduring, effective wealth plans.

Successful Families Understand the ‘Why’ Behind Their Planning

Knowing the “why” – or said differently, the values – that underpin how money is spent and allocated is critical to creating a wealth plan that meets a family’s objectives and allows for long-term success. In this article, we offer six guiding principles we believe help families create life-affirming, enduring, effective wealth plans. These plans are the bedrock of family legacy – what we leave for those who come after.

Born in 1926, just prior to the Great Depression, John grew up poor, a child of immigrant parents. He saw two of his four siblings perish from childhood illness in the 1930s, which led him to go to medical school and become a physician. As an adult, John was intensely focused on his wealth. He kept a ledger calculating the value of his real estate and investments. Every page of a thick book summarized the value of his net assets. He updated the calculation every day for decades. He watched his investments grow to a sizable sum but never stopped tallying the value of his wealth daily. Why?

For John, money was a means to having security for himself and his family – never having to wonder where their next meal would come from or how his children’s education would be paid for. His family found the ledger after his death, nearly a century after the Great Depression. They realized the poverty that pervaded his childhood influenced his thinking about money’s role – how he spent, saved, invested, and gave – for his entire life, even when those early years of scarcity were a distant memory. The ledger served as daily reassurance that his family would not want for financial stability, but also demonstrated the pervasive fear that a fortune not carefully tracked and tended to could disappear.

Our understanding of the purpose and role of money is typically shaped early in our lives. A childhood with limited resources can mean money is a means to security. In another household, there may be plenty of wealth, enabling the family to have a summer home, where everyone gathers, spends long days on the beach, and creates lasting memories. The home represents a place of connection and meaning, where family traditions are celebrated. The family may prioritize the summer home’s preservation and fund a family trust to support the property’s maintenance and guard against the scenario where none of the family members have the means to keep an expensive piece of real estate. For this family, money is a means to maintaining family connection and tradition. In still another family, unlimited access to all of the “stuff” money can provide without context or communication around that money may foster in children a sense that they are entitled to the family wealth without an appreciation for how it was created and how it should be managed.

What Do You Want to Accomplish with Your Wealth?

When families are asked, “What do you want to accomplish with your wealth?” most often the answer is phrased in the negative: “We don’t want to pay estate taxes,” “We don’t want our children to be entitled,” or “We don’t want creditors to reach our assets.” While these are all important objectives for a good financial and estate plan, they do not answer the question: What do you want to accomplish? In other words, what life-affirming values underlie how you deploy your wealth?

As Ellen Perry, a Senior Advisor to Brown Brothers Harriman (BBH), writes in her book, “A Wealth of Possibilities: Navigating Family, Money, and Legacy:”

Strong, healthy families generally have well-defined, clearly articulated, life-affirming values. In such families, values are discussed openly, lived enthusiastically, constitute the organizing principle of family life, and define the nature and quality of many family relationships.

Family members tend to have common values, even though it may not always appear so at first glance. This makes sense because values are often derived from stories shared, memories of ancestors, and the collective family narrative. The values underlying family decisions can serve as the framework for determining when and if a wealth plan should be changed. In other words, values are a north star to a family’s wealth plan – helping the family stay on course even in changing conditions.

We believe the following six guiding principles can help families create life-affirming, enduring, effective wealth plans:

  • Communication and trust are critical to preserving family wealth and values
  • Raising financially responsible children is a lifelong endeavor
  • Children should be allowed to take risks and make independent decisions
  • Everyone should be at the table
  • Privacy should be respected, but secrets are risky
  • Children learn by watching their parents

Communication and Trust Are Critical to Preserving Family Wealth and Values

Many families fail to transfer wealth effectively; however, just 3% of failures are due to poor tax, legal, or investment advice.1 Ninety-seven percent of the causes for failure are within families’ control and relate to a lack of communication and trust among members.

The most important factor in successful wealth planning is communication among family members. Once families understand the “why” behind their biggest decisions, they should consistently and openly discuss how their values influence behavior and decisions.

“I keep $x in fixed income because I value security, so it is important for me to know I have five years of living expenses in low-risk securities.”
“We are contributing significant assets to a family trust to endow the maintenance of a summer home because we value the traditions and family relationships fostered there.”
“I am not going to buy my son a car. Instead, it is important for him to earn the money to purchase it himself. I value hard work, and earning it himself will teach him the value of working hard for something he wants.”

Articulating the connection between values and action is how families pass down values to the next generation. Each family member will express values differently. Even if everyone prioritizes the same set of values, they will make choices that look and feel different from each other.

In the example of the family summer home, the first generation (G1) may endow the home, the second generation (G2) may enjoy it and use it as intended for family gatherings and traditions, and the third generation (G3) may sell the home and use the proceeds to gather the extended family yearly for a vacation in an exotic location. This seemingly radical departure by G3 does not mean they do not value family and tradition. In fact, it is not a departure from the family values at all. This generation is expressing the same values in a different manner. For G3, going to the same place every summer may be inconvenient due to their geographical dispersion and the sheer size of the family. However, they are still using family resources (the summer home trust) for the intended purpose: to connect with family members and celebrate traditions, new and old.

Let’s imagine that G1’s guidance to the trustees of the summer home trust provided:

Our greatest wish is to ensure that family members prioritize family connection and communication over generations. We encourage our descendants to take time to gather, celebrate family traditions, and reconnect with each other regularly. In providing this trust fund for the summer home, our intention is that this home serves as a place for such family occasions and connections and that the house will not be a financial burden for the family in the future.

G1 would likely be pleased that three generations later, their plan to pass down family values has been successful, despite the sale of the summer home. G1’s priority was family, not the preservation of the home. The house was a means to an end. The clarity of purpose and values, as well as the connection to G1’s actions, allows G3 to understand and perpetuate these values in the face of changing conditions.

The Importance of Values Outside the Parent-Child Relationship

Nieces, Nephews, and Friends:
Values are applicable far beyond the parent-child relationship. Many childless individuals and couples provide for nieces, nephews, and the children of friends in their wealth plans. These gifts are generous, but providing substantial wealth to a friend’s or family member’s child also comes with complex communication challenges. Without robust communication, these gifts can be misunderstood and unappreciated. For children and emerging adults, start with explaining your motivation for the gift to their parents, which can prevent misunderstandings down the road about what the money is meant (or not meant) for and underscore your respect for their family values and attitudes toward money.

Corporate Values:
For private business owners, values are often central to corporate governance, especially for family businesses. After all, values fuel corporate culture. One client, the CEO and founder of a technology company, valued accessibility and wanted her employees to reach underserved communities with the business’s technology. She instituted a policy encouraging all employees to spend 10% of their time on pro bono activities. Just like in families, being explicit about corporate values and how they drive decision-making allows greater value alignment, positive corporate culture, and understanding across the business.

Raising Financially Responsible Children Is a Lifelong Endeavor

Learning about wealth and values starts early, often alongside formative experiences. Consider John: He was 3 years old when the Great Depression began, and the years that followed shaped his understanding of money for the rest of his life. Think about your first understanding of money and how it affects your attitudes about spending, saving, and investing. These early memories likely hail from your elementary school years and were influenced by the economic conditions of your family and the world.

Teaching children to be responsible with wealth requires an understanding of the “why” (the values), as well as the “how” (the mechanics). Children are not born understanding the value of money. This understanding comes from seeing how their parents make spending and saving decisions. Often, wealthy families shield children from conversations about wealth because they worry they will be spoiled or unmotivated if they understand how much the family spends. On the other hand, many children raised in families struggling to make ends meet hear money discussed daily, whether it be observing parents clipping coupons or comparing costs at the supermarket. The best way for children to form an understanding of wealth’s value or purpose is to be included in spending discussions and then to be allowed to make spending and saving decisions on their own. These critical life skills cannot be taught through a finance course or the occasional family meeting; they must be ingrained in children through a lifetime of small, consistent lessons.

Parents who raise financially responsible children focus on two life skills: delayed gratification and independence. Teaching children to exercise willpower and to behave and think independently of others, including their parents, is challenging, especially in a world of relatively unconstrained resources, and requires a proactive plan. Lessons about spending, saving, investing, and giving start in preschool and continue through emerging adulthood. In each stage, there are three key components:

  • Distinguishing wants from needs
  • Spending and saving wisely
  • Giving back

Whether talking to a child about the difference between purchasing something small each time she receives an allowance vs. saving for something big in the future, or discussing the importance of budgeting to include a sufficient safety net with a college graduate, raising responsible children is a lifelong endeavor.

Children Should Be Allowed to Take Risks and Make Independent Decisions

To teach children to be successful, financially responsible decision-makers and stewards of wealth, giving them independence to make decisions is critical. Sometimes this means they will make the wrong decision. The first time you give a young child a crisp $5 bill as her weekly allowance, she may lose it or spend it unwisely. This is a learning opportunity. The next week, she will likely think twice about carrying the $5 in her hand or spending it at the first opportunity. Giving a child the freedom to make these choices is important; allow her to make mistakes and, most importantly, to learn from them when the stakes are low.

Let’s use Samantha, a successful CEO, and her son as an example. Samantha’s son is a recent college graduate living in San Francisco and pursuing an investment banking career. Naturally, Samantha wants him to succeed, and she has the resources (both financial and network) to allow her son to live in an expensive city and ensure that he lands a plum first job. Samantha arranges a number of interviews for her son at well-known investment banks. In addition, Samantha and her husband established a now sizable trust on the advice of their estate planning attorney, and their son receives the income.

For Samantha’s son, there is little opportunity for failure. He shows up at his interviews unprepared and seems unmotivated. If he does not land the first job, he will simply move to the next opportunity his mother has provided. He does not have to create a budget or worry about spending. There is no consequence to making bad decisions – no risk to sharpen his mind on the current opportunity.

Wealthy families often focus on “How much is too much to give my children?” Another way of asking this question is: “How much wealth have I prepared them to manage?” Arguably, Samantha’s son is not prepared to inherit any amount. He does not appreciate the ramifications of his spending decisions, the family values, or the impact of his decisions on the future. To learn these lessons, a child must live with the consequences of his decisions. If Samantha were not providing so much support for her son, he might have to work hard to secure an interview at a good firm, meaning he would take the opportunity seriously and arrive prepared. If he were out of work for a few months and did not have trust fund income to live on, he may have to begin making different lifestyle decisions.

Of course, parents rightfully want their children to feel safe and secure. If something disastrous happens, a monthlong illness or loss of a job due to an economic downturn, many parents want their children to know there will be a parental safety net. This security allows children to take responsible risks, to grow and stretch for the best job or opportunity they can obtain. There is a difference between a safety net and a consequence-free lifestyle. The real opportunity for failure – in age-appropriate ways that do not have lifelong ramifications – is fundamental to learning how to responsibly manage wealth.

Everyone Should Be at the Table

Families create better long-term plans when all stakeholders come together to make decisions. In the corporate context, we know diversity of thought creates better results – more innovative solutions and more compelling financial outcomes. The same is true in families. When one person makes all the decisions for a family, there is no diversity of thought, and often the plan is not durable. We have seen countless examples of estate litigation, estranged family members, and poor financial decisions that may have been avoided had all the family members been engaged in the plan’s creation. Every family member has an important perspective – we need all of them at the table – including children.

Of course, engaging children in decision-making must be appropriate to their age and maturity level. One woman, who has funded a nationally known family foundation, started inviting her children on site visits for the foundation when they turned 12. After three site visits, they could begin attending board meetings as observers. After making their first grant recommendation, they could join the board as a junior member, eventually earning a full seat and vote. Make children earn their seat at the table, starting with small decisions, learning, showing competence, and then moving to bigger decisions.

Even when families successfully engage the next generation, often they are flummoxed when confronted with the prospect of bringing their adult children’s spouses to the table. Certainly, there are some conversations that may not be appropriate for the in-laws; however, before assuming that, consider the conversation’s objective. It may be appropriate, in addition to more effective and efficient, to engage the in-laws if the objective of the conversation has a substantial impact on them (or their children) or if they will influence their spouses’ opinions and attitudes about the question at hand. Excluding in-laws from these conversations can create a subsequent set of outside discussions. The meeting facilitator or host will then have less ability to resolve conflict, understand motivations, and reach an effective plan. This can lengthen the decision-making process or result in family members undermining decisions or plans that seemed final.

How Much Wealth Do We Have? When and How to Answer Difficult Questions.

Unlike the question “How much is too much?” there is a clear answer to the question “How much wealth do we have?” The real question is: When should you tell children the extent of the wealth? The answer: Children should not learn the extent of the wealth before they are ready to receive and responsibly process the information. If faced with an inquiry, you may simply answer, “I’m not quite ready to discuss that with you, but I will someday” or, “I am still working on my plans, and I’m not sure.” BBH can help you and your family prepare for these important conversations.

Keep in mind, too, that children may already know more than parents have told them. Public filings, cafeteria chatter and even cousins and other relatives are often excellent sources of information for curious children. This is why we encourage open conversations as soon as children demonstrate readiness. As a start, involving children in a family’s philanthropy is one way to teach him about investing and give him exposure to asset management without fully disclosing the extent of the family’s wealth.

Privacy Should Be Respected, but Secrets Are Risky

Communicating values clearly matters, and how those values are communicated is critical to success. In wealthy families, money can be a taboo topic. Children are sometimes told not to talk about certain luxuries family wealth affords them. If a child is simply told not to discuss money without further explanation as to why, he may intuit that he should be ashamed of his family’s lifestyle.

Distinguishing between information that is private – that is only important to the family and need not be shared outside of it – and information that is secret – that the child may feel shame about – is essential. There is a fine line between learning to hide information from others (learning to create and keep secrets) and learning that there are certain things a family, or even the child, should hold close in the interest of privacy. Secrets can engender shame around money and wealth and make children feel embarrassed to bring friends home. Appropriate privacy, on the other hand, is key to teaching children to be self-aware, modest, and respectful.

These conversations can be difficult, but if you believe the extent of your family’s wealth should be private, then it is imperative to explain to children why this is the case. Children of all ages must know the “why” behind each new piece of information to understand. Rather than saying, “We don’t talk about money because wealth is private,” explain why you believe wealth should be private. Perhaps one explanation for older children is that once it is known that you are wealthy, others may see you differently or try to gain financially from your relationship. Another answer may be that many people have preconceived notions about those who come from wealth, and you want your child to start new relationships with a blank slate. Regardless of your reason, children will understand and respect privacy much more if they understand why privacy around this topic is important to you.

Children Learn by Watching Their Parents

Make a quick list of your top three values. Now, if a stranger followed your every move for the next week or month, and then listed what she thought your values were based on your actions, would her list match yours? The difference in the lists distinguishes motivational values from aspirational values.

Aspirational values are the values we might write in a family mission statement or list if asked about our personal or family values. Motivational values, however, are those a passive observer may perceive based solely on an objective review of our daily actions – they motivate how we make decisions.

Children are their parents’ keenest observers. No matter how many times a parent says he values hard work, if his son grows up seeing him live off a trust fund without any explanation as to where the money comes from or how the capital was earned, the son may not appreciate the value of hard work. Consider where you spend your most valuable resource – your time – and then link your everyday actions back to your values for your children, who are always watching. For example, if one of your top aspirational values is hard work, think about what you say to your kids as you head out the door each morning. If your daughter says, “I wish you didn’t have to go to work today,” instead of agreeing with her, consider taking a few minutes in the moment to say how rewarding hard work is for you and the family. It may help her to hear that though you will miss her while you are at work, this family has a strong work ethic, and part of being reliable and hardworking is doing your job even on days when it might be more fun to stay home. The adage “Actions speak louder than words” encapsulates the fact that our children learn by observing and will inherit our motivational values – whether we like it or not.


In “What We Believe: BBH’s Principles of Investing,” BBH Chief Investment Strategist Scott Clemons wrote that investment success is a marathon, not a sprint. Successfully preparing your family for wealth is also a lifelong endeavor, not a short-term undertaking. While each of these guiding principles may not work in every family, every time, we believe they work over time. No two families are the same. For over 200 years, we have worked with families of all kinds, from all over the world. These principles guide us as we guide our clients because our experience suggests that they offer the best chance to foster strong, healthy families who are highly functional and embrace wealth as a creator of opportunity for themselves and others.

Love and Money: Why Communicating Values Matters

Financial literacy is often the starting point for family conversations about wealth because there are clear, accessible answers. While understanding the “how” (what a 401(k) is and the role it plays in saving for the future, for example) is critical, it is no substitute for an education on the “why” (why you save and plan for the future). The “how” and the “why” must go hand in hand.

Talking about wealth values starts with understanding your own values and creating a plan for communication. At BBH, we help clients tackle these discussions by following three steps:

1. Discover Your Story: Understand what in your family history has influenced your values.

2. Live (and Plan for) Your Values: Consider how your values affect your decisions today and the plan that you put in place for the future.

3. Share Your Story: Create a plan for communication, either now or in the future.

To learn more about these three steps, read “Love and Money: Why Communicating Values Matters.”

If you are interested in learning more about how we work with families to create life-affirming, enduring, effective wealth plans, contact a BBH relationship manager or wealth planner.

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Love and Money: Why Communicating Values Matters

Adrienne Penta, executive director of the BBH Center for Women & Wealth, re-examines the criticality of intergenerational communication around wealth values. She discusses three steps for families to use in articulating, living and communicating their essential values.

1 The Williams Group.

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