Wealth manager sees opportunity in working with next generation

Beth Fitzgerald//August 29, 2012

Wealth manager sees opportunity in working with next generation

Beth Fitzgerald//August 29, 2012

U.S. Trust focuses on working with heirs to high-net-worth individuals, to bolster education and keep customers from taking assets elsewhere.

U.S. Trust manages wealth for high-net-worth individuals and their families, and the firm sees a significant opportunity to grow its business in New Jersey, according to Gregory Khost, managing director. Khost is recruiting experienced private client advisers to support that expansion, and U.S. Trust, a subsidiary of Bank of America, also has begun helping wealthy families train their children and grandchildren to become good stewards of the enormous wealth they will inherit in years to come.

Khost cited a study by the research firm Wealth-X that puts the number of New Jerseyans with net worth of  $30 million or more at 1,260. He said another study sees the ranks of New Jersey millionaires increasing more than 9 percent over the next five years, to about 233,000 households. Khost is based in Florham Park and oversees U.S. Trust operations in four states; New Jersey is by far the largest, accounting for about 75 percent of his operations. Khost has brought in six new private client advisers this year, and 13 over the past 18 months.

“New Jersey is a very prosperous state,” Khost said. The state’s affluent residents tend to be corporate executives, private business owners, and families that own commercial and residential real estate. To work with the state’s expanding pool of affluence, Khost is recruiting private client managers from competing wealth management firms, who typically come with 10, 20 or more years of experience: “We are looking for people who have the connectivity to this type of market to go out and tell our story, which we think is a terrific one, in the marketplace.”

Khost said the baby boom generation will pass trillions of dollars of wealth to their heirs over the next 25 years — and many of those heirs are woefully unprepared to manage wealth. To that end, U.S. Trust has created a kind of customized college curriculum, covering 18 topics, “that a family can use to start to engage their children in conversations about wealth.”

In many cases, he said, “parents are too busy creating wealth to have these conversations with their children.” Many baby boomers feel philanthropy is a key consideration they want to convey to their children, and need to know “how do we engage our children in philanthropy, in the causes that are near and dear to our hearts — and how do we open up the door for them to explore what causes they find important?”

He said a 2012 survey of the affluent found that only 39 percent believe their children are prepared to handle a financial inheritance, and only 37 percent have fully disclosed the level of the family’s wealth to their children.

Khost said a large number of wealthy individuals have never introduced their children or grandchildren to their financial adviser, so when the heirs inherit wealth, they move the assets to another firm. He said U.S. Trust advisers have begun to suggest that clients introduce them to their children, and help start the conversation about how to handle inherited wealth.

“The biggest worry these families have is that their kids will not spend the money wisely, or they will be taken advantage of,” Khost said. “Most people need some sort of help from an outside source, like their private banker, to start to have these conversations. In many cases, it can’t be solved just by the parents and their children — they want someone else to build a structure around these conversations.”