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Sep 18, 2017

How can financial advisors apply a “family”-like ethos toward the responsibilities of wealth?

Family dynamics are anything but simple, and as a family and its wealth grow, so do the complexities of effectively managing that wealth. This complexity is only compounded when individual family members haven’t defined their goals. In fact, they may not even know what those goals are.

We at The Lenox Group start with those goals. We believe that the accumulation of wealth, whether through the sale of a business, earnings, inheritance or portfolio growth, is the means, not the end. We believe that wealth itself is meaningless unless the client imbues it with purpose. That’s why we ask the important, but oft overlooked, questions about values, family views on wealth and relationships within the family. Only after a thorough discovery and planning process can we truly interpret and refine the client’s goals, and subsequently leverage our experience and resources to deliver credible solutions.

Such an interaction was clear in our relationship with a family matriarch who was gifting highly appreciated individual securities in her brokerage account to various charitable causes. This process, while efficient from a tax standpoint and ultimately in line with her charitable values, was administratively burdensome. Eventually, our group also learned that, in addition to reducing these administrative complexities, the matriarch wanted to empower her children with the same philanthropic spirit by giving them independent direction of these gifts.

Unfortunately, this would have been difficult because the assets were titled in her name. As a solution, we proposed a donor advised fund. That way, the client could eliminate the burden of buying and selling individual securities and authorizing transfers to individual charities. With those administrative burdens transferred to The Lenox Group, the client could focus on where and how her gifts would be distributed and how to instill the philanthropic values she desired in her children.

We not only protect clients’ assets and secure their personal wealth, but also apply a family ethos toward the responsibilities of wealth.

Another example of our family-centric approach lay in our interaction with clients who had contributed to a Uniform Gifts to Minors Act (UGMA) account for their son. Initially, the UGMA had been aimed at securing the son’s financial future while simultaneously reducing the couple’s own estate. However, as the son grew older, and the UGMA grew, the parents became concerned about their son receiving such a large sum of money. Additionally, we uncovered that the parents wanted to shield these assets from liability and any potential future spouse the son might have (were he to divorce).

While the clients couldn’t reclaim these gifts (contributions to an UGMA are irrevocable), we aided them by transferring the UGMA to an irrevocable trust so the money would still adhere to their wishes. This change did require the approval of the beneficiary—the son—however, a collaborative approach with the family ensured that everyone concurred. In the end, the parents’ wishes were achieved and the relationship between parent and son was preserved.

In short, The Lenox Group’s proudest professional moments have less to do with the performance of our experts’ investment strategies and more with discovering what makes clients and their families tick. We at The Lenox Group consider ourselves a family: We represent multiple generations and specialize in different roles, pooling our knowledge to support one other and our client families. By drawing on years of experience, resourcefulness and our group’s own “family”-like environment, we not only protect clients’ assets and secure their personal wealth, but also apply a family ethos toward the responsibilities of wealth.

These examples are hypothetical and shown for illustrative purposes only. The Lenox Group at Morgan Stanley is a financial advisory team with the Wealth Management division of Morgan Stanley in New York, NY. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, member SIPC, www.sipc.org. Morgan Stanley financial advisors engage Worth to feature this article. The author may only transact business in states where he is registered or excluded or exempted from registration, www. morganstanleyfa.com/lenoxgroup. Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where he is not registered or excluded or exempt from registration. Morgan \ Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley financial advisors or Private Wealth advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters. CRC1818353 06/17

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