COMMENTARY
by Judy Barber

As I work with clients and their advisors, the topic of young heirs and motivation often comes up. Worried that early access to money will affect their children's ability to set priorities, plan and find a suitable career, many parents choose not to pass assets in one lump sum or opt to provide income after their offspring reach middle age.

There is no doubt in my mind that having large sums of money can be disconcerting for a young adult. A substantial inheritance can isolate a person from the mainstream, the world of work and one's friends. Settling on a career and sticking to it can be tough when one has the means to live comfortably without a salaried job. Yet many children do. Whether in the profit or non-profit world, people who have access to the family's wealth and face these issues early can and do find purposeful work.

From my experience the following five key factors influence an heir's ability to successfully make the transition to the adult world of work even in the face of daunting financial means:

1. Having the ability to get out from under the shadow of a powerful or influential figure, usually a parent whose success and sometimes judgmental nature may intimidate a young man or woman starting out in the world.

Susan, age 28, loved the world of graphic design but believed she would never be as successful as her mother, Victoria who founded a large advertising firm. She knew she didn't have the entrepreneurial drive of her mother who 30 years earlier as a single mom had completed the designs for her first ad campaign.

Susan never had the desire to join her mother in the business, believing she lacked the leadership and management skills necessary to follow in her footsteps. Susan shelved her artistic talent the first four years out of college. Her independent income, an assortment of unsatisfying jobs and a fear that she could not find her own place in the tough world of advertising kept her away from the design work she most loved.

Finally, at age 26, she gained enough maturity to begin distinguishing her talents from those of her mother. Working as a designer in a medium-sized advertising firm, Susan now manages three other designers as well.

2. Being exposed to role models that are passionate and exhibit a disciplined approach to work whether in the profit, non-profit or volunteer world.

As with so many other areas in our lives, our children learn most from what we do rather than what we say. If they see us work hard at something that is important to us, chances are greater that they will find their way to a focused approach to work.

For example, Ben loved to help stamp and seal envelopes when his dad brought his work home. It was a time they shared together and, as a result, the experience fostered in Ben positive feelings about working.

3. Having parents and other key elders in the family who are accepting of their child's choices and who relay the message that making a lot of money is not the only benchmark of success.

In some families, "acceptable careers" is a short list and this attitude can greatly affect how a young man or woman accepts or avoids important life decisions.

Jack, Jr. left investment banking twice before making the final break to return to graduate school in social work. Over the years as he spoke to his parents of his dissatisfaction with the financial world, he incurred his father's wrath. "Men in this family don't do women's work," Jack Senior told him along with reminding his son of his grandfather's hard work. It was with great sadness that Jack finally moved his wife and children across the country to secure distance from his father's disapproval. Ironically, Jack is still in the business of raising money, only now he does so for private, non-profit social service agencies. Although there is still tension between him and his father regarding the choices he made, Jack's father has recently acknowledged his son's courage to break the family mold.

4. Getting a first job early in the teenage years and building a foundation of varied work experience.

Many young people graduate from college with little work experience, which can hinder their confidence in aggressively pursuing a job. Travel, camps, athletic programs through schools and country clubs are enriching experiences and can be of tremendous value in building self-esteem. Yet, they don't substitute for on the job training. Getting a job on one's own, working shoulder to shoulder with those from diverse backgrounds, getting feedback from supervisors on job performance, living with one's own mistakes, surviving office politics, working for an unsavory character and getting a paycheck are the foundation for building confidence in one's abilities. These and other experiences in the work force can help a young person become more focused on a career path.

5. Providing an environment which fosters internal motivation, a focused outlook and self-discipline while at the same time minimizing amusements and privileges that can diminish individual accomplishment.

In a recent conversation with a couple concerned about the impact that a substantial inheritance may have on their children, they commented, "The most important thing we want for our children is for them to discover what it means to be self-motivated, whether in the profit or non-profit world. Money that is readily accessible can be such a distraction for all of us; we want to protect our kids from feeling overwhelmed by it and to nurture their self-esteem, which we hope will come from their own accomplishments."

Few of us can control the career choices our children make. But attempting to understand the difficulty many young people have in finding a rewarding career path may be an essential first step in smoothing the way.

PERSONAL EXPERIENCE

How the Work Ethic Worked for Charles Grace

Sixty-year old Charles Grace, whose inheritance harks back to the Bethlehem Steel fortune, has worked productively and prodigiously more than full time all of his adult life. For the last twenty-two years he has run Ashbridge Corporation. Charles' father, Charles B. Grace, Sr., founded the family holding company over 40 years ago to manage the family's assets. His father was the right hand man of Charles Schwab, founder of the steel company and served as Chairman of Bethlehem for over 40 years.

FM - What is your current role in relationship to the members of your family?

CG My role is as a chairman and president of the family investment company. E.G. Grace, the old man and chairman of the steel company, was the first generation; my father the second; I'm the third. My children are the fourth and we now have trusts for the fifth generation. So I do two things - I sit on a bunch of trusts, and I run the family investment company.

FM - In an earlier discussion, you mentioned that you grew up in a family with a strong work ethic. What does that mean to you?

CG It's learning the details from the bottom up. No sense of entitlement. Earn it. Work hard without being president right away. Earn it by getting up early and working hard at it. It's a willingness to roll up one's sleeves, do the work and to prioritize work above other activities. Work always comes first, even if it means canceling something that's on the play side, originally scheduled, work always comes first.

FM - Is that still true for you?

CG Absolutely. Slash dinner parties, vacations, all that kind of thing if any excuse to work comes up. There are also loyalties that go with the work ethic - loyalties to family, employees and clients. Family becomes very important. This may not be exactly what you were driving at by work ethic, but that's what "work ethic" means to me.

FM - Can you give us examples of where those values came from?

CG When I was a young guy, people like us were born with the work ethic. Our parents grew up in the Depression, so we were only one generation away from that experience. Also, in the kind of society that I grew up in, young men were taught to act rather than talk. We were sent to schools that taught us how to do things. For example, I was sent away to school when I was about seven or eight years old. I was on my own to sink or swim with a bunch of other little kids. And so, you learn to take care of yourself, and you learn a little something about self-reliance, because your mother wasn't around anymore.

FM - So you left home for boarding school when you were seven or eight, and were gone throughout your education?

CG Yeah, all the way through. That was the age of preparatory school. I went to Deerfield Academy, to Princeton University, and into the Marine Corps. I'd go home on weekends, but I was away on my own from a very young age.

FM - What did you learn about growing up that way?

CG I feel comfortable in a lot of situations because of it. I'm pretty self-reliant. There were some specific people in those schools who taught that you succeeded by hard work and by doing things the hard way. So I sort of grew up with that ethic. As I look back, it was an important part of the formation of how one should deal with one's work.

FM - What experiences reinforced this for you?

CG As soon as I was old enough, probably at the age of fifteen, I went to work in my father's manufacturing company during summers. I was sent abroad some summers and spent some summers in Southampton.

FM - Growing up did you think you would follow in your father's footsteps by joining the family business and managing the family's wealth?

CG Being the eldest son and the highest achiever as a young man, I knew from the beginning anything I wanted to do, I did. Deerfield, Princeton, captain of school teams, all those sorts of things. In those days, things were much easier for people; it was easier to have that sense of achievement.

FM - So have you ever doubted those expectations and your choice to accept them? Did you ever want to do something else?

CG Yes, I wanted to be a diplomat when I got out of college. I took the State Department exam. I didn't prepare properly, so I flunked. The other major choice was whether to stay in the military or not. This may sound strange to you because you're younger than I am but back in the 1950's the military was a pretty exciting career and I'm not saying it's not today, but we hadn't been through the Vietnam war yet.

FM - So there was a period of time that you thought you might make a career of the Marines. How long did you seriously consider this?

CG A couple or three months. Once I'd made the decision to go into business, though, I never looked back.

FM - Would your father have been disappointed if you'd said, I'm going to do this for 25 years, and when I'm 55 I'll come back?

CG Yes, because he knew he had a potential businessman, and he wasn't sure about the others. He wanted very much for me to work in the family company right after I got out of school. I decided against that. I kind of kept that at arm's length for a lot of reasons. I probably thought that maybe there's a bigger world out there and that I had to prepare myself. But he wanted very much to have me in the family business.

FM - So that would have been a big disappointment for him. What part of your decision was based on not wanting to disappoint your family?

CG A lot of things I did were because of the family. I went to Princeton because of my father; I joined a college club because of my father, the Marine Corps because of my uncle. There were a lot of traditions to follow.

FM - But from what you describe, it sounds like the path or plan fit for you.

CG It fit fine. It was more than a path or a plan, though. It was an execution of a life - making what I thought were the most interesting choices, like choosing to go to Paris rather than to stay in the Smith Barney office.

FM - Do you ever think about leaving the business, retiring early and doing something else or enjoying the fruits of your labor?

CG No, I can't do that. I don't like enjoying the fruits. There are lots of other things I'd like to do, but the new company, the job of taking the family's investment services and offering them to others, isn't complete yet. There's another five years.

FM - And then what will you do?

CG Well, I'd like to keep working but do less detail, but we have to get over this hump first, you know.

FM - If you had not been president of this company, how would your life have been different?

CG I would have been through all the wars on Wall Street - the ups and downs with Merrill Lynch or Smith Barney or Morgan Stanley - something like that.

FM - So if the family business hadn't been there, you probably still would have been in the investment business?

CG Yes. I was in the non-family investment business until the age of about 40 years old, so I was well embarked on a financial career. Having had experience in the business world made a big difference.

FM - Do you have children? How many? What are their ages?

CG I have four children. But then I have nieces and nephews and little cousins. And I deal with all of them too, because I do handle much of the family's financial business.

FM - How have you dealt with their potential inheritance issues?

CG The company has a financial education program of bringing them in from time to time. The next generation sits down with the lawyers, the bankers and those of us in the company and talks about their investments and other things that they are interested in. We spend a day talking business and talking to each other and trying to instill in them an understanding that there's some money here, where it came from, how to respect it and how to use it.

FM - These meetings provide another benefit. It gives the next generation the opportunity to begin to talk amongst themselves about other issues related to their inheritance, issues they may not feel comfortable talking about with people outside the family.

CG In my generation, we didn't talk about money. I felt retarded money-wise until I went to work for Smith Barney. Then I learned a little bit about money, but my family never talked about it.

FM - What are you and other family members of your generation doing to inspire your children, nieces and nephews to develop the strong work ethic you have?

CG That's a tough one. We try to lead by example. We talk about things that relate to the work ethic and the family money. We give them opportunities and exposure when they're young - boarding school for example. Not everybody would agree that that's where the work ethic resides, but at the best schools they try and do that. We cannot tell children what their values should be or what they should do but when they work hard and achieve we make them feel good about that. My brothers do that and our parents did that. It's primarily not by telling them, although I do have times when I tend to lecture them, but lecturing doesn't work. It sort of sets them the other way.

FM - What about opportunities to work?

CG Yes. We put them to work when we can. We encourage them to work in their summers. All of my kids have always worked. One of my problems, by the way, is to find the next president of the Ashbridge Corporation from the family. It is something I worry about. I'd like to have a family member involved with this. If we build the consulting business up to be a big business, I'd like to have a family person there, because it's owned pretty much by the family but nobody's on track yet. Somebody needs to be working at Goldman Sachs or Morgan Stanley for five years and I don't have anybody like that yet.

FM - Do you think the environment that children are growing up in today makes it easier or harder than it was for you to create meaningful work in their lives?

CG I think it's harder. I'm talking about the generation, not our family necessarily. I think this generation has become more permissive. They don't have the same structure. They're not asked to perform in certain ways. They don't have that military obligation when they finish college. They don't have to prepare for it. Entertainment's a much bigger thing now and entertainment's delivered externally rather than created by oneself. Life is much more competitive than it was in my day, but I think young people are less prepared for it.

FM - What advice do you have for young people who have a substantial inheritance?

CG View your inheritance as an asset that has to be worked and respected, rather than consumed. If you go through it real fast and consume it, then the children will see that it's being consumed, and they'll have to get in there fast before it's all gone. You ought to respect it and use it and grow it rather than just consume it.

FM - What unique philosophy and approach do you bring to Ashbridge that you can attribute to your own experience of inheritance?

CG Confidence, discretion and a sense of responsibility. Confidence because I knew the money was there and I didn't have to work, which permitted me to make the hard choices or be open to more choices. I learned discretion about money, too. We knew privilege came with money, and we'd better be discreet about it and be responsible for family as much as for the money.

We've preached that the family is the only reason that we're here now in the fifth generation. We've stuck together as a family. It's partly tax law, partly leadership - lots of things. Families need to stick together financially because if they break up they don't have the same buying power. We're not just here money-wise. We know each other as a family, and we know all the generations, the last of the second generation has died. So now it's third, fourth, and fifth generations.

FM - Charles, thank you so much for your time.

CG I enjoyed doing this. It made me think about a lot of interesting things.

Charles B. Grace, Jr. graduated from Princeton University in 1956. Upon the termination of his service from the Marine Corps, he worked in the Corporate Finance Department of Drexel & Company in Philadelphia. He received an MBA from the Wharton School where he also taught in the Statistics Department.

From 1962 through 1976, Charles served in the Corporate Finance Department of Smith Barney & Company where he specialized in international business development and corporate finance.

In 1976, he took over as President of Ashbridge Corporation, a family holding company and founded Ashbridge Investment Management in 1992 and since that time has served as chairman & CEO for both firms. Today, due to Charles' leadership, Ashbridge manages the family's money as well as the assets of other families with investible assets of $10 million or more. Charles can be reached at www.interdependence.org.

PROFESSIONAL VIEW

On Growing Inherited Wealth: Tips from a Pro
by Jane H. Williams

Robert Sarnoff, former President of the National Broadcasting Company once described finance as "An art where money is passed from hand to hand until it disappears." As a counterpoint to this description, we prefer to think of an inheritance as being like sourdough bread starter. If it is handled properly and used regularly, an inheritance, like good sourdough, will continue to grow and provide many benefits as it is passed down from generation to generation.

Whether inherited, earned, received as a gift or granted through a marital dissolution, wealth carries with it clear benefits. It also carries its share of burdens in the form of responsibilities and restraints that are not so obvious.

My first goal is to help clients answer the initial question: what do you want to accomplish? A few years ago, one of my clients (we'll call her Margie) found herself divorced and responsible for building a new life on her own. She was in a quandary about how to proceed since nearly 100 percent of her assets were invested in the volatile common stock of a young company. This client represents an interesting example.

Margie had a modest lifestyle prior to the change in her financial situation, and she was inclined not to make any immediate changes. However, she wanted financial security and she recognized that she needed to take the necessary steps to achieve it. Under a long range plan she has gradually sold shares of her dominant stock position, doing more selling in positive markets and less in slow ones and accepting irregular tax burdens as a result of her opportunistic selling program. As she has created cash liquidity from the sales of the illiquid shares, her resources have expanded, and she has been able to enhance her lifestyle and her financial outreach.

One of her greatest pleasures comes from the support she provides to her favorite philanthropic enterprises, not only through cash donations or gifting of her low basis stock, but also with her personal energy and active involvement. The personal loss she experienced which began this process has not held her back. Margie has been able to heal herself and stride ahead, making creative, constructive contributions while establishing personal security. Setting realistic expectations was a major reason for her success.

If you suddenly find yourself with the responsibility for managing inherited wealth, what course should you follow? If you are like most people, the obvious goal would seem to be to earn a handsome return on your money with as little risk as possible.

In my opinion, however, this is the time for you to focus on two critica

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