Does growing up mean outgrowing the family financial adviser?

July 25, 2011

As a boy, Bernie Reed watched his father ride into the hills of their Nebraska farm on a yellow-orange Case tractor to farm corn, alfalfa and winter wheat. Bernie’s ancestors homestead has occupied that land since the 1800s, and his dad — a weathered, leathery man with a linebacker’s build — tackled it some 16 hours a day, resting only on church-going Sundays.

The Reed family farm prospered, nearly tripling in size to 1500 acres, and so did the Reed estate: Today it is conservatively worth $3 million. And the financial advising team that his parents, Doran and Maxine Reed,  started with almost 40 years ago in Holdrege, Nebraska is the same one his mom uses today, along with Bernie and four of his five siblings. (A sister lives in Grand Junction, Colorado; Doran Reed passed away almost nine years ago).

“Mom and Dad didn’t specifically tell us what to do; it seemed logical to continue on,” said Bernie Reed, 60, a ministry development consultant. “There’s a lot of trust and peace of mind in knowing that this has been a proven path for our family.”

“Most people here know me or my family, and my credibility is my last name,” said Dave Hunt, the Principal Financial Group representative who handles estate planning and finances for the majority of the Reeds. “With people in big cities, that might not make sense. But this is a town of 5,000. It means a lot here.”

In advising more than one generation of the same family, Hunt is something of a rarity. A new survey of 600-plus financial professionals by Principal reveals that in most cases, less than 25 percent of client relationships involve multiple family generations. And only 2 percent indicate that three-quarters or more of their clients are part of a multi-generational relationship.

“It’s a symptom of how many times parents [have failed]to sit down and advise the children,” said Timothy Minard, a senior vice president at Principal. “People of all generations haven’t taken the time to nail down their financial lives.”

Yet this apparent communications gap has a flip side that any parent of teenagers can appreciate: Even if you’re ready and willing to talk money, that doesn’t mean your kids want to listen.

“We think, often wrongly, that our parents are behind the times, that they just don’t know,” said Jean Chatzky, a New York-based financial expert and author of “Money 911” (Harper). “It’s the same reason we don’t want flip phones. While I’m on a BlackBerry, my kids are dying for an iPhone.

Chatzky, who’s also the financial editor for NBC’s “Today” show, suggested Principal explore the generational gap based on conversations with financial planners at her speaking engagements. “These were the issues they pointed out, so it was down to figuring out how big those issues are,” she said. “Anecdotes are one thing, research is another.”

Parsing the numbers, Chatzky thinks another force comes into play when kids go their own way. Finances are so personal — second only to sex for some folks — that sharing a planner might feel more awkward than making out in front of Mom and Dad.

“You have to be as open and honest as you would be with a doctor, otherwise you can’t have a relationship with them,” Chatzky said. “And you have to be really, really clear about the boundaries: when information needs to flow freely between the generations, and when things need to be kept private.”

That openness comes easier when the financial adviser has a long history with a family, said Linda Campbell, senior financial planner at Budros, Ruhlin & Roe in Columbus, Ohio. “It usually begins by managing the children’s educational and trust accounts during childhood.  We begin to feel we know the children through the many conversations we have with their parents.”

Hunt’s making that happen in Nebraska; he’s managing the college investment accounts for the kids of Bernie’s sister Beckie, putting him to work with a third generation of Reeds. “Anybody can present literature and statistics but when it comes down to it, it’s about a relationship,” Hunt said. “I am as much a relationship manager as anything. I try to meet their needs and concerns. Sometimes it’s just sitting down and doing a little family counseling, getting everyone to just sit down and communicate.”

Bernie Reed puts it this way: “If you have someone with a track record, and their ideas work, that’s money in the bank.”

Yet even great results and communication smarts can’t always stop kids from the time-honored tradition of spreading their wings. Bernie Reed’s children got through college with the help of Hunt’s predecessor, Tom Carlson (now a Nebraska state senator).

But his eldest daughter Janelle, now 29, lives nearly three hours away in Lincoln, Nebraska, where she does graphic design work. She has resources for financial feedback and guidance through her employer.

“She might’ve gone the same route as us,” Reed said, “if she were close by.”

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