The Hindu Business Line : Wealth management starts with the question ‘What is the wealth for?’

We believe that wealthy families are global. They have children overseas, they have investments overseas, philanthropy is now global, and best practices are global.

MR CHARLES A. LOWENHAUPT, CHAIRMAN AND CEO OF LOWENHAUPT GLOBAL ADVISORS

A challenge for most wealthy families is that of managing succession. Their great concern is whether the next generation will be willing to assume some responsibility for the wealth.

“Yet each generation and each individual in each generation is different from prior generations,” reminds Mr Charles A. Lowenhaupt, a US-based wealth management expert. “The economics that allowed great wealth to b e built in one era are not the same in another.”

He compares the wealth creator to a collector of art. “He has enjoyed the challenges of building wealth, the excitement of the ‘chase’. When he passes that wealth to his children and asks them to ‘preserve’ the wealth, he is turning them into ‘curators’ of the collection without the excitement and challenges of building the collection.”

So the starting point in ‘next generation’ is recognising the individuality and interests and skills, explains Mr Lowenhaupt, in a recent e-mail exchange with Business Line. “In fact, it is frequently desirable to design a ‘wealth management’ system which allows each family member to pursue his or her passion without feeling ‘burdened’ by the wealth.”

Mr Lowenhaupt, a B.A., cum laude, from Harvard University and a J.D. (magna cum laude and Order of the Coif) from the University of Michigan, is a member of the bar of Missouri and the New York Bar. He is Chairman and CEO of Lowenhaupt Global Advisors ( www.lowenhauptglobaladvisors.com ), the family office for select families of substantial wealth globally.

Excerpts from the interview:

What are the key elements of family wealth management?

Wealth management for us is holistic. It starts with the question: “What is the wealth for” and then moves through the many disciplines necessary to help the wealth accomplish its purposes.

These areas include not only investment, taxation, governance structures (wills, trusts, corporations, etc) but also next generation education, philanthropy, record storage and retrieval and many other areas.

How important is philanthropy?

We have never found a family to build functionality around its wealth without some engagement in philanthropy.

Wealth’s purpose is not its creation or preservation — it is created or preserved to serve a purpose. Teaching a child or grandchild that wealth has value beyond creation often leads to using the wealth for community.

If the purpose of wealth is to allow better life for future generations, building a livable environment and community is part of wealth’s purpose. Who wants grandchildren living in a world of poverty, anger and unhappiness in the streets?

And family over many generations becomes so spread that ultimately there is little relationship between family and community. For these reasons, philanthropy and family wealth are forever entwined.

Strategic philanthropy is what we frequently call the use of philanthropy to improve a family’s functionality around its wealth.

It can be used to redeem a family’s name, to teach investment discipline or to build dynamics between generations. We have many stories where strategic philanthropy has been quite successful in families.

Do cultural differences play a major role in family wealth? And what are your insights about Indian families?

I have not found cultural differences when considering family and wealth. The opening question is always “What is the wealth for” — and that must be asked in any culture. There are differences based on where a country is in its wealth cycle.

Many Indian families today are where many of our US families were in the 1970s — building booming businesses but facing issues of next generation involvement and succession.

A fifty-year-old today is contemplating how to engage his twenty-year-old in the business. The depth of thought and culture in India has made many families think deeply and philosophically about the role of wealth in family, so I find that the kinds of conversations we engage in are quite interesting to Indian families.

And I must also admit that I have found traditions and concepts here which I share with families elsewhere in the world. The Indian family is most often global, with children overseas and travel overseas.

On the history of your company.

We are a hundred-year-old law firm founded by my grandfather in 1908. He was the first income-tax law specialist in the US. Over those hundred years we have worked for many families who built businesses, saw them flourish after World War II and then sold the businesses to become families of portfolio wealth.

I work with some clients who are fifth generation of working with my grandfather, my father and me. We see our role as helping those families decide what they want to accomplish with their wealth and then helping them accomplish those goals.

We believe that advice should be “unconflicted” — that is without product to sell. We customise our advice family by family and individual by individual. And we work with families around the world.

We believe that wealthy families are global. They have children overseas, they have investments overseas, philanthropy is now global, and best practices are global. So in our company we are purposely looking for ways to service families in countries around the world by building relationships with those who service those families outside the US.

D. MURALI

http://InterviewsInsights.blogspot.com

More Stories on : Interview | Financial Services | Whackonomics

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
FDI versus portfolio investment

The killer instinct

A culture that cares to learn

Ben raises interest in rate cuts

Wealth management starts with the question ‘What is the wealth for?’

Just Do It

Time to reshuffle the investment portfolio?

Sticklish Issues

Number Crunch

Just Do IT

Does ISO certification fall under consulting engineer’s services?

With ordinary people you can make extraordinary company

The ‘mystery’ side of business