Why there's a 'huge disconnect' when teaching about wealth

0:02Welcome to the latest FT Advisor Editors Podcast with me Simini Kiriakou. How many of you have or have had teenagers? If you have your own or you've worked with them in some capacity as I've done for over 20 years now, you'll know how wonderfully challenging and complex the teenage years can be for young person and adult alike. But it is during these years that core beliefs are developed and nurtured. Beliefs about themselves and ways of understanding the world. ways of navigating the transition into adulthood and the development of their resilience. And amidst all this are fundamental concepts about financial aptitude, saving and spending and long-term planning.

0:43You only need to look at TikTok to know how young people are clearly influenced in their relationships to money and success by what they see on social media. So how does this affect your own discussions and conversations around money with young people in our circles of influence? And how can you help your clients open and maintain effective lines of communication with teenagers about this often under-discussed subject. Here to talk to us today is Jessica McGaulay. She's the founder of Dallington. It's a service that helps young people and their families build stronger foundations for the future.

1:16Thank you for joining us, Jessica. Thank you for having me. Could you describe in a nutshell what Dallington is? Dallington is a private practice. We offer mentoring, coaching and psychological support specifically for ultra net worth families and during the transitional years of adolescence into adulthood. So why did you launch Darrington? So I sort of cut my teeth as it were in family office advisory. It was my first job out of university and I was there for seven years doing next gen program design. I saw the same thing again and again which was these very successful families were so well resourced and supported when it came to anything technical.

1:53Tax, estate planning, financial legal, you name it. They had best in breed, everything was prepared But when it came to the people that were going to inherit those technical plans, they weren't prepared. In addition to this, it was sort of the 30, 40 year olds plus that were really receiving that support when it was available. I thought we're really missing a trick here because, you know, learning a new skill or a language, for example, we all know is much easier in your younger. Yeah. But when it comes to learning about the world and finance, it's not really subjects that are taught at school, even the best schools.

2:30And I think there's also an assumption that if you come from a successful family, that those lessons are being taught at home and they're not. How then can young people look at the success of their parents and maybe apply it to their own lives or do they? Is there a huge disconnect? there is a huge disconnect and it you know it becomes more complex depending on the generation of wealth and success and of course if that involves a family business or if it's just money those change that change the scene as it were but what they can do is parents have to take a more proactive role in explaining what the purpose of creating that wealth or that business was because I've seen, as I'm sure you have, families with an inordinate amount of money, but if there isn't purpose anymore, that can be quite dangerous.

3:21Whereas you can have a hell of a lot of purpose and not so much money, but still have something that motivates and drives you. Sure. So I guess, you know, perhaps the grandparents or even the parents, they've spent their lives on one particular field or building up a particular business and the child might not actually be interested in the business, but they're going to inherit the wealth from it and maybe the business, maybe they don't want the business. Exactly. I mean, imagine being 16 or 18, and these are real examples that I've seen, and being told that you will inherit an amount that more than most people in their whole lives would ever be able to spend.

3:55It would be foolish of us not to think that that would impact the way that they are motivated, the way they see themselves, the way that they relate to other people in their peer group. So those are conversations that just have to happen. We've seen very well-known people such as Bill Gates saying that the majority of his whatever 200 billion, whatever it is, wealth is actually going to go into the foundation to charity, not to his children. I think in the past he said about how he wants his children to develop their own their own selves and their own identities outside of this wealth. But that seems like he's he's one of a very minority of people who kind of got that idea straight.

4:31It must be an awful burden for an 18 year old to think that they're suddenly inheriting all this money with perhaps no financial resilience or understanding about how to manage it. Absolutely. This is both a very practical and personal endeavor to look at. So on the one hand, what Bill Gates has done is say, I think his phrase is, he wants his children to have enough that they can do anything, but not so much that they can do nothing, which is a nice way of looking at it. But if we think about first to second generation wealth, this is the really interesting piece, because first generation significant wealth creators typically come from a very different cultural background.

5:09to that of their children, the one that they're growing up in. So, for example, a first-generation billionaire, for example, may have come from a more working-class background. They most likely did not go to private school. They did not turn left on a plane. They would have known what the price of milk and a loaf of bread is and understood inflation just through that sort of osmosis of being around handling cash. They then make it. They really make it. And they want to bring up their children in a different environment to give them the things they haven't had. But in that process, what they do is they remove all of the life lessons that were so essential to them becoming so successful.

5:50And I'm giving you a very extreme example there. But actually, we see this in middle class families all the time. Absolutely. It's one thing that, you know, we're all sort of afraid of as parents. You know, we want our children to have the opportunities that we didn't. But we know that the struggle we had to get there kind of made us who we are. Oh, definitely. So how do we make these children... That sounds horrible. How do we make these children... How do we help these children to make themselves into the people that they want to be? So you make the conversation about failure a really normal one around the kitchen table.

6:22You know, if children can see that their parents have got to levels of success through trial and error, through getting it wrong, but getting back up, that's really good modelling. And so often, instead of just seeing the nice house and the private school, you've got to hear about the story that went before it that's important so you take it from failure you talk about the failures you normalize that how do you then encourage the children to fail okay first of all don't swoop in and provide a safety net i mean i'm a parent you're a parent you know how difficult it is to see a pet your child fall over and get upset and be hurt but it is really essential like understand your boundary and what your line is regarding when you're going to step in and when you're going to actually let them learn so i think that's really important for example if during their first week at university they blow the budget let them feel it don't don't surplus that you know don't don't save the day for the rest of the term i'm sorry absolutely and they will learn that way so don't swoop in and save the day otherwise they don't learn the lessons so there are those sort of more basic principles um now it's a really difficult one we don't want to we don't want to traumatize our children we don't also want them to necessarily have to feel some of the hardships that we might have gone through that have created our success but there are things that can build their resilience like not making things so easy making sure for example a cold shower even now and again we are our children are so used to having all these basic comforts all the time I encourage my teens that I work with to you know have a cold shower walk to the office don't be with your phone all the time these are very basic things that anyone can do that just build up their their grit it would be really good if financial advisors could help their clients to kind of put some of these rules in place you know have those kind of normal conversations because obviously the financial advisor they do a lot of work with families and passing on intergenerational wealth and they may well talk to the children as well as the parents but it's what happens outside of that when the advisor goes home the parents have got to maintain these kind of conversations right and it is it well we know that it's not easy to open up lines of communication with young people how do you try and encourage that especially when a teenager just wants to sit in their room and listen to like really sad music was that your was that your experience oh well that that's my well I just wanted to listen to heavy metal when I was a kid so my parents oh wonderful okay um I would challenge that slightly I think there is this concept that advisors can't relate to their their clients children because they also are their clients children but they're missing a trick if they don't think they could be their client in a few years to come so be interested in them do not see them or speak to them as the son or daughter of you know approach them as their own person find out what interests them um across the board be that from you know film politics whatever find out what makes them tick and then build up your own rapport with them on that you will find something to connect on so more than a money conversation absolutely more than a money conversation yeah just in the same way that hopefully the advisors listening have developed that relationship with their current client they understand you know where they like to dine and what they like to do in the weekends and what their hobbies are you should do apply the same approach to the client's child there's a fear that with young people sort of turning to TikTok or being really engaged with AI that they're not going to want to have that kind of face-to-face contact with an advisor is that a real generational fear that young people are just going to go down an AI or crypto route and not pay any attention to traditional wealth management methods I think there is definitely that fear and and some of it might be right but I think it's therefore even more important that wealth managers and frankly any technical advisor really skills up on understanding the eq of the relationship with their client really learns how to sit with uncomfortable topics to i realize this is quite psychological language but to talk about what's beneath the surface what's going on most of us know when something is unsaid and you know i'm in london right now with you we're talking to maybe quite a British audience but culturally a lot goes unsaid in this country my day-to-day client work is about getting families to talk about what is not being talked about and that is what really makes connection vulnerability.

11:06I've spoken to some advisors who've got sort of quite old wealthy clients who are a little bit nervous about passing money to the youngest generation because they think they're just going to blow it all on crypto or they're going to get scammed by AI. I mean, is that a clear worry among your high net worth clients? It is, but I would say that there have always been risks. So this is the current one, but there have always been risks. What we must do is trust in our, first of all, prepare them, educate them, but trust in them enough to say, look, we're going to give you a little bit of something and we hope that you make the right decisions.

11:38We're here if you want to come and ask us and you can ask, please ask the stupid questions. There is no such thing. But if it goes wrong show up we'll work through it because to assume that they're only going to make the right decisions without any experience is you know setting them up for failure frankly and as we said that sometimes failure is good so maybe i like that idea of giving them a little something now to see what they do with it and you know praising them and rewarding them for the good stuff and then working through the issue if they fail definitely rather than just castigate them and make them feel like they're completely worthless.

12:14Exactly, exactly. I mean, is TikTok, or I'm blaming TikTok, is social media, let's just say, is social media and the way social media presents wealth to young people, is that a concern for you? No, I might be the wrong person to ask because I'm working with quite a small group in terms of, you know, only ultra high net worth families typically. That is not where they're going for their wealth advice. No. It's really not. the concept of advice and advisors is so well ingrained in the culture of their family that they would not go to TikTok for that in the same way that they wouldn't go to TikTok for psychological advice of course there are plenty of pop psychologists on TikTok they still know that the best people are in person in a room sitting face to face because they don't necessarily need the aspirational because they already have that lifestyle exactly so this is then about wealth preservation and understanding how to manage that and understanding their own resilience and responsibilities.

13:12Exactly. So to give an analogy, if you were given a vintage car, that would be both a gift and a responsibility because everyone knows a vintage car is beautiful and it has a lot of history. And if you get into it, you might smell the leather that your grandfather sat in here and you have all these memories and that's something you might want to preserve and protect. At the same time, looking after a vintage car, we know is nightmare because the parts don't exist anymore it's expensive you've got to really take care of it so when we think about wealth and stewardship and inheritance we've got to think of it in those terms that this is both gift and responsibility and do you think that gen alpha you know the young i think our children are gen alpha aren't they do you think they're going to be more financially resilient for more financially responsible perhaps than we were yes if the parents are so this comes down to us so the fact that you're having these sorts of conversations with your son and I'm having mine that will is what will help change the dial they're not going to just become more financially responsible unless the adults and that's also their employers their caregivers their teachers unless we are the ones instilling that in them but when we talk about confidence I really think we should just come back to the core of confidence which is feeling okay to ask questions feeling okay to get it wrong to come back to an authority figure talk it through try again before we started this podcast we were talking about how we really love teenagers because they're able to um say what they feel and they haven't learned how to mask things but we also realized that their prefrontal cortex hasn't even formed so while we're expecting a 16 or 17 year old to understand what we're telling them and to be able to be logical and think logically they're not really are they so can you give us some sort of hints and tips about how to manage conversations with young people who still are not quite sure who they are and they're not even formed yet you know I think the number one thing we have to remember is that um teenagers and early 20 year olds crikey some adults I know are very reactive and that's really normal because like you say there isn't the the distance in between a thought and a reaction and so really modeling what reflective communication looks like is key so if your teenager is being reactive with you if they're arguing with you do not model that back because they're not going to learn anything it's imperative as hard as it may be at times to remain calm to say right we're going to go away from this conversation we'll come back in an hour or tomorrow or next week whatever's appropriate for you as a family and structure a conversation i always say to families it's really important you learn how it's an actual skill to learn to have how to have a difficult conversation and now i i don't know if this is helpful for your listeners but how i would structure this to any parent or advisor in the who's listening is follow this method number one state the problem just state it without emotion, just state the facts.

16:23I'll give you an example that I hear a lot as a parent. You are on your phone a lot of the time in the house. Okay, so lots of parents are just fed up of looking at their teenagers who have got their face in a screen. So you state the fact you're constantly on your phone in the house. Is that fair? Is that a fact? The teenager can rarely argue with it and they say yes. Okay, you then move into the emotion which is step two. When you do this I don't feel engaged with you I don't feel connected so you just state how you feel step three you offer a solution I would really appreciate it that when we're in the common areas the kitchen the living room at the dining table you put the tech away because then I can really talk to you step four how that will make you feel and then I'll feel really connected to you and by all means have your tech time in your own room but you can learn these these are skills yeah it does sound easier said than done it does and sometimes you know even as adults when we come home we just want to switch off and just put our put our tech on because we've been so busy you know at work all day or just you know back in my day back in my day it was just picking up my book and just getting immersed in my book my mum sort of constantly asked me questions and I had no idea she was even talking to me the poor woman but I think these are really important conversations and we've seen this as well with not just the ultra high net worth but the uh sort of the mass affluent and those who've just been really clever at saving into a junior isa for their children the children come to 17 18 there's a chunk of money and you want to say to them this is for your university or for your college don't blow it and the child's okay well what do i do with this this is more money than i've ever seen so you know the first thing they want to do is go to Ibiza or whatever it is.

18:06I don't know what young people do. Yeah, absolutely. No, don't do that. No one should do that. Save up and give it to them when they're 18. Absolutely introduce these topics from a young age. And like I said, small amounts, incremental amounts. And sit with them, talk about basic budgeting. What are the basics that every month, I even do this with my son who's six. I'm like, what do you think every month we have to get? we absolutely have to get and he'll be able to say well we need to get cereal absolutely every month we get an inordinate amount of cereal and what are the things that sometimes we need and sometimes we don't and you just introduce these very basic topics to them no it's very easy as well today my son was saying uh how he wants all these particular brio things and so i looked online and said these are very expensive you might be able to afford one of them with your pocket money but you should really be saving and i thought right we're going to go straight into his junior ISA portfolio and I showed him that and I showed him the peaks and the troughs and he said, so when the stock market goes up, I will make money.

19:09Yes, yes. I thought, finally, I've got somewhere here and I was just about to get onto compound savings and pound cost averaging. He said, let's go back and look at the Brio train again. So, okay, well, you know, bit by bit, step by step, but it really is about the steps, isn't it? But I think more importantly, you have worked out your relationship with money and your you've developed a fluency and a narrative around it which is so important i would my advice to all parents is unless you have done that don't start these conversations because otherwise what you're modeling is maybe indifference or um or maybe even actually quite a challenging relationship with money one of the first questions i ask my mentees my clients that come in is when i say money you say and the amount of times they've said things like dirty messy divorce you know that's how they relate these words so we have to help them detangle maybe what is an intergenerational or or parent related in relationship with or traumatic or traumatic exactly yeah and let's also just really remember that money and wealth are two different things you know and i firmly believe that anyone can be wealthy if they're willing to define what wealth means for them, because they're very different things.

20:29Absolutely. That's a really good point to end this podcast on. And Jessica, I could talk to you for ages and ages. And I'm sure our listeners are very grateful for the insights and guidance you've given them. So thank you very much. Thank you for having me. And thank you for listening. Until next time, take care.