16-18 Segment 2: Having the money talk with family

16-18B Money Talk

 

Synopsis: Family members are notorious for getting into each other’s business – marriages, jobs, child rearing, romantic relationships – it seems like nothing is off the table! That’s not entirely true, according to our guest. She says that families are very reluctant to discuss money matters with aging parents, spouses or children. She tells us why it’s so important to have the “money talk” with your significant others and even your boss in order to make sure that there are no conflicts during a marriage, in employment and unemployment, in eldercare situations and before a parent or loved-one dies.

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Host: Marty Peterson. Guest: Lori Sackler, Sr. Vice President at Morgan Stanley Wealth Management, author of the books The M Word: The money talk every family needs to have about wealth and their financial future, and, The M Word Journal: How to have the money talk.

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The “M” Word – Having the money talk with family

Marty Peterson: It’s been said that “money is the root of all evil,” and maybe that’s why it’s so difficult for us to talk about it – even with our friends and closest family members. Lori Sackler has seen the problems that can crop up when families don’t have the “talk” – the Money Talk. Sackler is a Senior Vice President at Morgan Stanley Wealth Management, and the difficulties of talking about finances within families led her to write her books, The M Word: The money talk every family needs to have about wealth and their financial future, and the accompanying workbook, The M Word Journal: How to have the money talk…

Lori Sackler: So I was seeing families struggling with having conversations around money, and I saw it not only in my personal life, but with my clients. And when I started to do some research I found that there’s a 70% failure rate in transferring assets across generations and the primary reason is a breakdown in communication and trust. These conflicts I was seeing were not only tearing the family finance apart, but the relationships as well.

Peterson: Sackler says that our reluctance to discuss money matters in the family stems from a number of different sources…

Sackler: So it’s impolite to talk about money. It’s built in to our history and our social mores. There are what I would call “evolutionary instinct issues” – money, for many, is seen as an object of threat and control. The third reason is what I would call “gender differences.” There are physiologically based differences in men and women’s brains. So, typically, they have differences around communication, setting investment goals and objectives, and also risk tolerance so that creates conflict. And the fourth main reason I see is family history and patterns that have developed over time. So if you have a family for whom money conversations have been part of the culture, it would be significantly easier for you to pass that down to your children.

Peterson: Fortunately, Sackler says, the younger generation has an easier time talking about money than their parents or grandparents do, but with the older folks keeping things to themselves, it’s still difficult to have the family talk about finance. That’s why she set out to make it easier to broach the subject and get all of the information necessary to start he discussion…

Sackler: That is what I call the five step process, so the first one is to define the transitions that you’re facing and I identify five in The M Word: The money talk. And The M Word Journal goes one step further and helps people not only define the transition but start to collect the information that they’re going to need to have the conversation. Step 2 is “preparing the inner landscape” and overcoming those roadblocks. So every family has reasons why they’re having a tough time having the talks and so I think it’s incumbent upon you as an individual who thinks this is an important issue to talk about is to dig deep, and figure out what are the reasons and what are the roadblocks in your family.

Peterson: Next is “prepare the outer landscape.” Sackler says you do this by using professional techniques to conduct the discussion – the “who, what, where, when, why and how.” She says you need to answer those questions before you begin the conversation…

Sackler: The fourth is what I call “ask for help.” Because of the sensitive nature of money, it’s really hard for people to talk about it on their own, and it’s easier if they have professional help. And I do explore some of the different options. And then the fifth is what I call “repeat as necessary.” So anyone who’s tried to do these sensitive conversations with family members will find that you typically don’t succeed the first round. You want to navigate the waters, you want to get some help, and then you want to have a process that you can repeat.

Peterson: Sackler says there are points in life where our financial circumstances change – sometimes drastically. One of these is marriage or other type of domestic partnership. She says that couples come from different backgrounds and that means they can often have different ideas when it comes to making, spending and saving money. Often one member in the couple is a saver and one is a spender, and this difference has to be brought up and discussed. In male-female relationships she says that men often want to save for retirement while women are thinking more of the family and children’s needs. Getting everything out at the beginning can prevent problems in the future…

Sackler: Identify what are the goals first, and then you reconcile by disclosing information. So you have to disclose the bank accounts, you have to disclose the spending habits, and you have to reconcile those differences because in any relationship you’re going to have them and because there are some gender differences at play, there’s conflict that’s naturally going to arise. But if you stay focused on the money talk and follow the five steps, I think it’s going to help you get through it.

Peterson: The money talk isn’t confined to spouses or family. Sackler says that women, especially, need to have the money talk with…of all people…their bosses!

Sackler: I liken the process here as something that can be used for every life transition, including asking for a raise, or seeking a new promotion. I mean you literally have to think through that conversation and advocate on your behalf. I recently did some interviews of senior executive women around the country and they talk about the importance of having a mentor and a sponsor to help you in your work situation. And they can offer help; prepare you for the money talk.

Peterson: In addition to marriage and employment, how money will be saved for retirement and eldercare are also important issues that should be discussed with family members as they age…

Sackler: We see Baby Boomers living longer and working longer as well as their parents living longer. So, we feel like that’s a conversation that needs to be discussed and how it impacts other family members. Another area is long-term care, caring for an aging parent, which is very impactful to families – typically not just a financial place, but also caring. How do you care for them? How do you balance the physical and the financial pieces to the puzzle?

Peterson: Planning for retirement can be tricky. Who knows how long they will live? What costs they’ll incur for healthcare, housing and activities? Sackler says there are some steps you can take to make a good estimate such as deciding how you want to live, looking at your resources, calculating how much you need to live that lifestyle, and taking steps to get there. Maybe you need to work longer, or work part time when you retire. But, again, it involves talking it over with your family and perhaps a professional to help you get things in order…

Sackler: You’re going to have conversations with your partners, with your children. I mean because I see families being impacted when one of the family members retires. Now sometimes it’s good, they decide to enjoy life and maybe there’s extra money and they can gift a little bit. But I’d say the vast majority of Americans tighten their belts, and they need to really think about how they’re going to achieve that long life expectancy and live in the way they’re comfortable.

Peterson: Passing on assets after death can be a touchy subject to bring up. Some people want to keep their wills secret for fear that it might affect how a family member treats them as they get older. Others just don’t want to face their own mortality. Sackler says that all of the heirs should be brought into the discussion and understand why decisions were made and what their roles and responsibilities will be when the family member dies…

Sackler: I quote Warren Buffet in my book because I saw an interview with him and he describes how he never even signs his will until he talks to his kids first. Now he obviously is in a different financial position than the rest of the world, but he’s a wise person and he has good, sound advice. You really want to engage them at some point and make sure they understand what’s going on.

Peterson: Sackler says that not having the talk beforehand can lead to conflict and hard feelings when it’s too late to do anything about it…

Sackler: What happens is the will is final. Once that person is gone, what is in that will is very final and research shows, and what I’ve experienced is if you don’t have these sensitive conversations, for example, if there’s discrepancies in the will – one person gets more than the other, which I typically don’t recommend you do unless you have the money talk — it’s very important that you discuss this up front. And you don’t have to necessarily give out all the details, and it depends on the kids and their readiness, and their age, and their ability to manage it, but for those who are carrying on key responsibilities, they really have to know. And if there’s something in there that’s very sensitive, it needs to be resolved if you want to protect the family from having conflict ongoing after you’re gone.

Peterson: As we said at the beginning, it’s often a good idea to seek professional help when the big decisions in life come your way. But how do you find a good financial planner? Sackler says you do it the same way you find a good doctor…

Sackler: You can ask around, and what I do is get multiple opinions and interview these people and find out exactly who’s the best person. And I think you have to do that kind of due diligence. So you’re going to ask questions like, “Is there a good connection?” “Are they a caring person?” “Is the right chemistry there?” “Do they have the right character?” And then you have practical things you want to ask, “What’s the profile of the client that they work with?” “Are they going to be able to satisfy my needs?” “Do they have the expertise I’m looking for?” And of course then you want to ask, “What fees do they charge; how do they get paid?” There’s a lot of ways to get paid and you want to, obviously, have some real transparency on that. And, ultimately, the decision will be, “Is it a good choice for you or not?” There are people out there who can do it themselves and can go through a direct program. I find, and obviously I have some bias here because I’m in the advice and counsel business, but I find that people make big mistakes when they think they can do this all on their own, because it’s complicated.

Peterson: To get started on organizing your money issues and gathering the data you need to have the money talk with family and perhaps a professional financial planner, you can pick up Lori Sackler’s books, The M Word and The M Word Journal, available in stores and online. She also invites listeners to her website themword.com. For more information about all of our guests, log onto our site at Vvewpointsonline.net. You can find archives of past programs there and on iTunes and Stitcher. Our show is written and produced by Pat Reuter. Our production directors are Sean Waldron and Reed Pence. I’m Marty Peterson.

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