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8 | MONDAY, AUGUST 5, 2019 THE NEW YORK TIMES INTERNATIONAL EDITIONbusiness
Parents would be remiss if they did not
talk to their children about drinking
and driving, using drugs and, of
course, sex. Some go even further,
discussing subjects like bullying and
mental health.
So why do a significant number of
parents still not talk to their children
about wealth and inheritance?
Two-thirds of Americans who have
at least $3 million in investable assets
have not talked to their children about
their wealth or never will, according to
a Merrill Private Wealth Management
study of 650 families.
Some in the survey said they did not
bother because they assumed their
children had already figured it out.
But 67 percent had quietly made
gifts in a trust or set aside money in
their children’s name to pay for school,
buy a home or just supplement their
income. Ten percent steadfastly re-
fused to talk at all with their children
about money, saying it was no one’s
business.
“We’re moving forward, but there’s
still a long way to go,” said Stacy
Allred, managing director of the Mer-
rill Center for Family Wealth.
Yet in 2019 — after the Great Reces-
sion, a 10-year bull market in stocks
and a movement against income in-
equality — a surprising number of
parents are still reticent about wealth.
In a world of oversharing on social
media, why does this restraint persist?
It’s complicated. Here are four reasons
parents avoid “the talk,” and what they
can do about it.THE MOTIVATION FACTOR
The most common reason cited for not
talking about money is that parents do
not want inheritance to rob children of
motivation. So if a parent does not say
anything, a child will never figure out
the family’s wealth. Impossible.
Children are well able to use com-
puters and mobile devices to deter-
mine just how much their house, car
and vacation cost, along with their
school fees and the salaries of any
household help. Information about
prominent parents and families is
flowing to their children’s friends as
well.
“A second-grade kid, because theygo to all of these house parties, will be
able to rank the wealth of all the people
in his or her class pretty accurately,”
said Dennis Jaffe, a psychologist who
works with wealthy families. “It’s not
positive or negative, and they’re not
jealous yet. But these are teaching
moments about values.”
This challenges the notion that
waiting until children are older is
better.
By then, they will have formed their
own views on wealth by watching their
parents.
“Values are set by everyday behav-
iors when you’re growing up, and kids
are watching you,” Mr. Jaffe said.
“Entitlement education begins in nurs-
ery school, not when they’re 25 and
come to you and say, ‘I need some
money.’ ”
The strategy of ignorance exposes a
disconnect between a parent’s stated
reason and the real reason for saying
nothing, said Matthew Wesley, a direc-
tor at Merrill’s Center for Family
Wealth and a co-author of the study
with Ms. Allred.
“The stated reason is, ‘We don’t
want money to screw up our kids, and
if we disclose our wealth to them, we’ll
derail their career paths,’ ” Mr. Wesley
said. “The deeper reason is about fear
and control — the fear to relinquish
that control and the deeper psychologi-
cal issues around money.”
Disengagement creates more prob-
lems, though, because it can create a
perception that a family is more, or
less, wealthy than it really is. Leaving
children to guess can also create feel-
ings of insecurity.
Some parents shy away from talking
about wealth because they have de-
cided to give away most of the money.
“That’s great, but if you’re not telling
your kids, that’s weird,” Mr. Jaffe said.
“If that’s what you believe in, why
wouldn’t you tell your kids that ‘we’re
a very wealthy family, but our values
say we’re going to put most of it into a
philanthropy, and we’re all going to
work and do something on our own’?”THE ANXIETY ISSUE
Talking to your children about sex,
drugs and drinking can help release
anxiety for a parent. They’ve done
their job and protected their child. But
talking about wealth, Mr. Jaffe said,
often increases a parent’s anxiety.
“What you fear is your kids will see
it differently,” he said. “But the fact is
when people say, ‘I don’t want my kids
to know we’re wealthy,’ I say, ‘Look
around your house.’”That anxiety can be heightened by a
feeling of not knowing what to talk
about or when or with whom.
“When you talk about ‘these conver-
sations,’ what does that mean?” asked
Michael Liersch, global head of wealth
planning and advice for J.P. Morgan
Private Bank. “Is it money or the
balance sheet or roles and expecta-
tions in the family or family values?”
Unlike some other anxiety-filled
talks, conversations about family
wealth aren’t cued by a stage of life.
“When they’re 15, you’re primed to
teach them how to drive,” said Bradley
T. Klontz, a financial psychologist and
professor at Creighton University in
Omaha. “But there is no set time to
say, ‘We’re going to sit the kids down
and tell them about our estate plan and
bring them in with
the C.P.A. and attor-
ney and tell them
what’s going on.’”
The thought of a
series of discussions
can be overwhelm-
ing to parents who
feel ill prepared for
the questions their
children will have.
“Talking about
something sensitive
always requires
conversations about related sensitive
topics,” said John A. Davis, senior
lecturer in the family enterprise pro-
grams at the Massachusetts Institute
of Technology’s Sloan School of Man-
agement. “If you don’t feel you have
answers to questions that might come
up, or solutions to behaviors you don’t
want to see, you will kick this can
down the road.”
Advisers suggest starting when
children are young but keeping the
conversation age appropriate.
Talking in stages will produce less
anxiety than trying to reveal every-
thing all at once.
“Talking about money in a family
doesn’t actually mean you have to talk
about investment holdings and strat-
egies,” Mr. Liersch said. “It could be
talking about the purposes and goals
and the meaning of wealth. That’s
often more productive than the key
details.”NEVER HAD THE TALK
Sometimes, parents avoid the discus-
sion because they do not know the
answers or even how much money
they have.
Melissa, who asked that her last
name be withheld for privacy, was partof the Merrill study. She said that she
and her husband had started talking to
their four children about their wealth
eight years ago but could have started
much earlier if she had known how
much money they had.
They were living comfortably, but so
was everyone else in their suburb
outside New York.
What she did not know was how the
value of her husband’s part of a busi-
ness had increased over the years or
about the success he had in other
ventures.
“It was so overwhelming that I
nearly died,” she said. “At the same
time, my older children were heading
into the work force, and I thought we
weren’t giving them the right financial
skills.”
Since then, she and her husband
have held annual meetings with their
children, whose ages now range from
18 to 31. Their goal has been not, as
Melissa describes it, to suddenly shine
a bright light in their children’s eyes
but to gradually reveal information,
like a dimmer switch slowly lighting a
room.
They began by outlining their own
feelings about money and where it
could help and hurt.
“It’s such a valuable process to
communicate and have respect for all
members of your family,” Melissa said.
“That’s really been a surprise to me; if
you can give them skills, you’re guid-
ing them and they’re learning.”YOU DO NOT COME FROM WEALTH
Families that inherit wealth often
continue to be wealthy because of the
conversations they have.
It’s what they have done for genera-
tions.
William T. LaFond, head of family
wealth at Wilmington Trust, which was
founded in 1903 to manage the du Pont
family’s wealth, said many of the com-
pany’s clients had preserved their
wealth beyond the third generation
because they talked early and often
about it with their children.
These families, he said, follow a
three-step process: Educate their
children about finances and wealth,
communicate the family’s values, and
hire good advisers.
Those who do not succeed in passing
money along successfully often have
silence to blame.
“The generation that receives the
money has no education and no skills
and wakes up like a lottery winner,”
Mr. LaFond said. “You don’t want your
kids to be lottery winners.”YIFAN WUDiscussing family money
Wealth Matters
P AUL SULLIVAN“Talking
about money
in a family
doesn’t
actually mean
you have to
talk about
investment
holdings.”Trump’s latest threat came just one day
after top American negotiators con-
cluded talks with their Chinese counter-
parts in Shanghai.
“China has to make long-term plans,
and it will be more focused on itself,”
said Song Guoyou, deputy director of
the Center for American Studies at Fu-
dan University in Shanghai. “It cannot
change the Sino-U.S. trade war process,
which makes China realize that it should
put more focus on domestic reform.”
China’s top leader, Xi Jinping, has
called on the public to brace for a period
of hardship. In recent months, the coun-
try’s central bank has allowed money to
flow into infrastructure projects, a once-
reliable recipe for growth that now
threatens to add to a mountain of debt.
Senior officials gathering last week at
a high-level economic meeting headed
by Mr. Xi said that China needed to tap
domestic demand to help manage what
they described as new economic risks
and challenges. They also hinted that
the central bank could pump more
money into the system to allow local
governments to shore up the economy
over the next few months.
“The Chinese will no longer give pri-
ority to controlling trade war scale,” Hu
Xijin, the outspoken editor of China’s na-
tionalist tabloid Global Times, said on
Twitter. “They will focus on the national
strategy under a prolonged trade war.”
Officials are also taking concrete
steps to shift China’s dependence on the
United States for certain goods. They
have focused efforts on new trade part-
nerships with countries like Japan and
South Korea and lowered trade barriers
for other countries. They have also
struck deals to import agricultural
goods from countries other than the
United States. Last week, China ap-
proved barley imports from Russia.
The strategy has risks, especially if
the trade war continues to drag on.
China has plenty of financial firepower
at its disposal, including the savings of
its people inside its state-controlled
banks and a vast hoard of foreign cur-
rency. Its control of the local media can
also go a long way toward preparing its
people for tough times.
But supporting its vast economy, the
world’s second largest after the United
States, could get increasingly expen-
sive. Mr. Xi could wait for next year’s
American elections to see whether vot-
ers oust Mr. Trump, but at least some of
the potential Democratic candidates
also favor a tough stance against Bei-
jing.
If Mr. Trump makes good on his prom-
ise of implementing the new tariffs next
month, China has some measures that it
can turn back to, including placing tar-
iffs on the rest of China’s exports to the
United States.
It could also begin to place American
companies on an “unreliable entities
list” it recently announced in response
to an American blacklist. China has al-
ready issued warnings about FedEx,
which it has accused of delaying ship-
ments from Huawei.
It could also make life more difficult
for American businesses by holding ex-
ecutives at the border through so-called
“exit bans” and by slowing the pace of
license approvals and deal clearances.
Officials could also call on consumers
to boycott products from Americanbrands like Apple. But such a move
could also backfire because it would hit
factories that employ hundreds of thou-
sands and dent growth at a time when
the government is depending on con-
sumers to help kick-start the economic
growth engines.
One measure that would also help to
soften the blow of new tariffs would be to
devalue the renminbi. This approach,
however, is fraught with problems.
Money flooded out of the country when
China shocked markets four years ago
with a surprise devaluation, prompting
Beijing to tighten its control of money
flowing through its border and spend $
trillion to shore up the currency.
It could also seriously escalate ten-
sions. Mr. Trump has repeatedly com-
plained that Beijing weakens the ren-
minbi to take advantage of the United
States. A cheaper currency gives Chi-
nese factories an advantage when sell-
ing goods in the United States.
In fact, Beijing right now is prevent-
ing, not enabling, a weaker currency.
The renminbi would weaken if Chinese
officials relaxed their grip.
China may do exactly that. They
make take a freer hand with the cur-
rency, letting it weaken toward 7 ren-
minbi against the dollar, a psychologi-
cally important marker that would be
likely to get the Trump administration’s
attention if it was passed.“Psychologically, it is important, but
economics trump politics at the mo-
ment,” said Shaun Roache, chief econo-
mist for Asia Pacific at S&P Global.
However, officials would have to risk
letting the currency fall too quickly,
which would set off panic in China and
cause outflows.
On Friday, the renminbi dropped to its
lowest level so far this year against the
dollar, hovering at 6.9590.
Before September, however, it is un-
likely that Chinese officials will take
much retaliatory action.
“China will try to focus much more on
domestic stability than retaliation. We
were seeing growth start to stabilize but
it was by no means guaranteed. Their
first priority is domestic stability,” Mr.
Roache said.
As they consider their moves, Chi-
nese officials will also try to parse Mr.
Trump’s negotiating strategy. Experts
said his capricious style had flummoxed
Beijing.
“We don’t know how to deal with this
either,” Tu Xinquan, the president of the
China Institute for W.T.O. Studies at the
University of International Business
and Economics in Beijing.
“Is he a sane person at all?” Professor
Tu said of the latest move by Mr. Trump.
“It’s quite surprising. Didn’t the White
House just announce that the trade talks
were constructive?”
But, he added, if new tariffs kick in on
Sept. 1, “I think the Chinese side will
stop trade talks completely.”Imported soybeans at a port in Nantong, China. Agricultural products as well as special-
ized products like microchips make up much of China’s imports from the United States.REUTERSChina finds hands tied
over trade retaliation
T RADE, FROM PAGE 1Elsie Chen contributed research.“The Chinese will no longer give
priority to controlling trade war
scale. They will focus on the
national strategy under a
prolonged trade war.”More recently, Mr. Trump has made a
sport of targeting the central bank,
blaming the Fed for slowing the eco-
nomic expansion.
“As usual, Powell let us down,” Mr.
Trump said on Twitter after the Fed’s
cut, which he saw as insufficient.
If the Fed can get the word out that it’s
trying to serve the American people by
keeping the economy healthy over time,
it might ingratiate itself to its congres-
sional overseers. In doing so, it could
forestall any attempts to rein in the
Fed’s independence.
Despite its efforts, the Fed is not ex-
actly setting a new standard in moderni-
t y.
The institution has done limited re-
search on climate change compared
with its counterparts abroad, notably
the Bank of England. And when issues
are too divisive, officials steer clear. Mr.
Powell declined to give concrete an-
swers about minimum-wage proposalsduring recent testimony, telling law-
makers that “the question of the min-
imum wage is really one for you.”
That might be because openness still
carries risk.
Congressional overseers could slap
the Fed on the wrist if they think it is
straying too far over the political line.
And the gap between a research-sup-
ported truth and a partisan judgment
can be whisper thin in economics.
Crossing into contentious territory is
a particular concern for Washington-
based members of the Board of Gover-
nors, who are political appointees. Re-
gional bank presidents, who serve their
area’s interest, have more freedom —
and are using it.
Ms. Daly, in San Francisco, has
started a podcast that asks how commu-
nities cope with social divisions and la-
bor market shifts.
Researchers at her bank will hold the
system’s first conference on the eco-nomics of climate change in November.
Robert Kaplan, the Dallas Fed chief,
regularly makes a carefully worded
case for permissive immigration poli-
cies and strong trading relationships
with Mexico, focusing on the economic
benefit that flows from those.
Patrick Harker, president of the Fed-
eral Reserve Bank of Philadelphia, often
speaks out in favor of skills training as a
way to improve employee productivity.
He thinks it is a key part of his job.
“I think people realize that the prob-
lems we face — like the lack of workers
— are pretty deep, and it’s not a partisan
issue,” he said. “If we want growth to
continue, we need to solve some of these
more structural problems.”should, in theory, push wages and infla-
tion higher. Recently, though, inflation
has been soft despite very low jobless-
ness.
That gives the Fed room to test how
far the economy and job market can run.
And if the Fed can spur higher wages,
they might feed into higher prices, help-
ing the central bank to clinch its inflation
goal.
The Fed came around to the idea that
it should experiment with a hot labor
market slowly, and lifted rates nine
times between 2015 and late 2018 to fend
off the threat of inflation.
But it has long faced external pres-
sure to keep rates low. Fed Up, an advo-
cacy group started in 2014 and affiliated
with the left-leaning Center for Popular
Democracy, spent Ms. Yellen’s tenure
pushing the central bank to hold off on
raising rates so that unemployment
could fall more.The Fed wants to be friends with everyday Americans
Jerome H. Powell, chair of the Federal Reserve. The Fed needs to shore up public sup-
port at a time when President Trump regularly criticizes its actions.MANUEL BALCE CENETA/ASSOCIATED PRESSF ED, FROM PAGE 7
“You have to know what their
experiences are if you’re actually
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