Wealth Management Advice for the Second Generation

By Robert (Buck) C. Klintworth, CMT
Senior Vice President

There’s a saying among wealth managers in Charlottesville, Virginia and elsewhere: the first generation makes it, the second generation spends it, and the third generation blows it. No generation sets out to lose everything that the previous generation spent time building, yet that’s often what happens. According to the Williams Group, 70% of wealthy families lose their wealth by the 2^nd generation, and 90% lose their wealth by the 3^rd generation. If you’re in the first generation, you know the time and sacrifice that went into building up what you have. If you’re a member of the 2^nd generation, what can you do to grow, and not blow, your parent’s wealth?

Basic Money Skills

It’s never too early (or too late) to start learning basic money skills. Parents can begin teaching their children at an early age basic values about saving, spending, investing, budgeting, and credit. We spend time with children teaching them to read and write, but money skills don’t come naturally to every person. For those who don’t feel like they’re equipped to do the teaching, classes are available to teach basic skills, although it’s still important to communicate with your children what your values are.  Financial discipline is something taught, not inherited.

There’s no better way to learn than through experience, so if you’re working with a financial professional, begin to include your children in your meetings once they become adults. That way, they can learn from you how to communicate goals and concerns to financial professionals, and you can gradually begin to include them in the decision-making process. Even if your children don’t consider themselves financially savvy, it’s important for them to have a basic understanding of how finances are managed.

We work with a number of clients with adult children who aren’t familiar with the way their parents’ money is managed. We encourage them to invite their children to join them at client meetings and when we host company events. This allows the children to understand how the money is being managed. Our clients and their children are welcome to contact us any time with questions, and we’re happy to answer their questions or point them to where they can find out more information.

The Importance of Stewardship

It’s important for the 2^nd generation to think of itself as stewards. A steward looks after another’s property, and in effect, that’s what the second generation is doing with the first generation’s wealth. The generation that creates wealth has a focus, and money is usually a byproduct of that focus. When something is given to you, it’s far easier to take it for granted and not think about the work that went into acquiring it.

A simple demonstration should make the point. Imagine that you find a $100 bill lying on the ground.  You’re much more likely to see it as “free” or a “bonus” and spend it frivolously instead of looking at how it can fit into your bigger financial plan. Now imagine that instead, you’re hired to do a job, and at the end of the day, you’re given a $100 bill as payment. You know the work that went into getting that money, and you’re going to treat that money differently.

Not everyone thinks of themselves as stewards of money. That’s why, according to Time magazine, it takes just 19 days for the average recipient of an inheritance to buy a new car. They see it as something to spend, rather than something to take care of. We all make financial decisions at some point in our lives that we end up regretting, and it can be something that we learn from. If you can change the way you think about money, that can curtail some of the unwise spending.

Just as the 2^nd generation should think of itself as stewards, at Chase Investment Counsel, we have been entrusted by clients to be good stewards of their money as well. It’s not a charge that we take lightly, because we know that our client’s assets, no matter what size, are important to them. That’s why we take the time to understand each client’s situation, so that we can make sure that their money is appropriately invested.

Do Your Homework

Legendary investor Warren Buffet once said, “Never invest in a business you cannot understand.” That holds true whether you’re investing $1,000 or $100,000,000. There will never be a shortage of people who will have a great idea about how you should invest your money, whether it’s through sound investment or get-rich-quick schemes. But remember:  It’s far easier to lose money than to earn it back.

Always do your homework before investing and know what it is you’re buying into. If you don’t understand it, don’t put money into it.  Some people like to buy real estate, but it’s only those who know what they’re doing who make money on it in the long run. Some people like doing the research and buying stocks on their own, while others turn to someone else to invest for them. If you’re going to entrust your money to someone else, make sure you’ve done your homework on them and understand their process. Not every investment is right for every person, so you need to figure out if your investments are appropriate to meet your goals.

Communication is Key

We want our clients to know about the companies that they are invested in, which is why we keep in touch with them to let them know what stocks we’re buying, and why we’re buying them. In addition, we provide our market outlook so that clients can know the risks and opportunities that we see in the stock market. We believe that communication is key, which is why we encourage clients to contact us if they ever have any questions.

Some people aren’t comfortable talking about their money, especially with their children. But it’s important to take that step so that the 2^nd generation can make sure that your wishes are carried out, so that they can learn from your mistakes (without making the same ones), and so that they have a head start in planning their financial future.

About Chase Investment Counsel

Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages approximately $300 million in assets.

About Robert (Buck) C. Klintworth, CMT

Buck Klintworth is Senior Vice President of Chase Investment Counsel and Portfolio Manager of the Chase Growth Fund. Buck received his BS in mathematics from Westmont College. He serves as a portfolio manager, technical analyst, and trader. Buck is a CMT® charterholder. He has been quoted in Barron’s. Prior to joining Chase in 2004, he had a career in accounting. Contact: 434-293-9104×105, or

[email protected]