Burbank, Calif., planner Cameron Thornton worked with one of his first clients for 15 years and devoted much of that time to estate planning. An entrepreneur with a 40-year-old business, the client prepared meticulously to pass his assets on to his wife and children. But when he died, the worst happened.
"I watched it all just implode," Thornton recalls. Each of his children lawyered up and went to war with one another. The years of work on estate planning were largely for naught. The one key element that Thornton thinks he and his client missed - and many planners still miss - was involving the family in a pre-inheritance process.
"They hadn't been prepared for the money," Thornton says. The experience prompted an epiphany. It set him on a path that led him to found a second company alongside his planning practice - Navigator Legacy Partners. It's devoted to preparing wealthy families for the transformational experience of inheritance.
"We want this money to be a blessing, not a curse, as it often is," Thornton says. "It doesn't matter where you are, in a capitalist or communist society. Wealth rarely survives to the third generation." Prevailing wisdom holds that in 90% of such cases, families suffer from this third-generation curse. Navigator Legacy works with families who answer yes to the following question: Do you want to break the cycle?
In his 30-year-old planning practice, Thornton manages about $100 million in assets, with clients' investable assets ranging from $1 million to $10 million. But, since founding Navigator Legacy in 2006, he says, much larger clients, with assets up to a $250 million, have found their way to him.
"There are so few people doing this work right now," says Thornton, who uses the term heritage planning. The work takes Thornton and his two co-founders deep into the heart of murky emotional terrain where many financial professionals fear to tread. It's not therapy, but it does tap Thornton's undergraduate degree in psychology. It utilizes a process developed by the Lake Oswego, Ore.-based Heritage Institute.
The institute studies those 10% of families who manage to beat the dreaded third-generation curse. Its founders have developed a process the institute uses to train legal, financial, nonprofit and other professionals to help wealthy families remain unified through "the financial and the emotional inheritances they will receive." All three Navigator team members are licensed through the institute to use the proprietary "guided discovery process" that begins with them listening deeply to each family member.
"I don't care about facts when we are doing this," he says. "Where the conversation goes is where we follow. It's not uncommon that people start crying because the process uncovers what means most to you."
In this way, Thornton helps families gather and pass on the stories and values that constitute a family's emotional inheritance. Over the course of a period that may last weeks, months or longer, the Navigator team helps families come together to create a family council, a family fund and their own approach to philanthropy. These are not legally binding, but serve as guiding tools for the family as it goes forward.
Often, Thornton says, he has seen domineering patriarchs, accustomed to being firmly in control, morph into "marshmallows" as their heirs come to understand their stories and as they come to appreciate the often-quieter achievements of descendants who may be teachers, small businesspeople or artists. The ultimate goal, Thornton says, is to focus on "the business of being a family and not on the family business."
In the best cases, families that once were at odds end up being able to relax together, to travel together on ski trips and beach vacations. They can develop a new ability to enjoy one another's company and experience a new level of family unity, Thornton says.
Steve Marken, the founder of Caritas Legacy Group, met Thornton a few years ago while working as director of gift planning at the Orange County Community Foundation. At the foundation, Marken says, he began working with an advisor to a family in a tiny oil town in central California. He learned that the father had gifted shares in his oil company to his wife and children before a major discovery made all of them suddenly very wealthy.
Increasingly, the father worried that he had inadvertently harmed his daughters because their new wealth had altered the way some of their lifelong neighbors treated them. And this made him worry about the impact of future inheritance. Other tensions, such as the father's poor relationship with one of his son-in-laws, divided the family.
Marken says he told the family, "I could get all the charitable tax planning in place, but ultimately that wealth will not be a blessing but a curse unless we address these issues. Go meet with Cam. He will help open up those lines of communication where they've broken down."
In the years since, Marken says, the Navigator group has worked with the family and helped bring about a transformation. "The family before was fractured into units. Everyone was separate. What Cam has done is he has brought them together into a cohesive whole."
Navigator now has about 75 clients, Thornton says. The cost to a family is roughly equivalent to buying a car. Depending on how the agreement is structured, the total cost can range from the low four figures to six figures.
To make his case to prospective client families, Thornton points to a 2005 study conducted by insurance giant Allianz. A survey of boomers found that most felt that passing on memories, stories and values was 10 times more important than passing on money.
In Thornton's view, the field of financial planning is destined to wake up to this fact. He believes the field of heritage planning is now comparable to where estate planning was in the 1980s. In the late '80s, he says, there were fewer than 90 members in the National Network of Estate Planning Attorneys. A decade later, the group had 1,500 members and living trusts have become the norm in many estate plans.
Thornton can speak from personal experience when he says that money is not always a first priority. After founding his planning practice in 1982, Thornton had built it up to $125 million in AUM by the mid 1990s. Around that time, he chose to downsize by giving $25 million of this amount to another planner. In so doing, he freed himself from those clients who demanded too much for the return he derived from them.
For much of his career, Thornton worked with a coach who helped inspire him to make this change. Throttling back increased his profitability and freed up time for him to develop his heritage work. It also gave him more time to focus on being with his wife and three adult children.
"Keeping families together is not about the money," Thornton says. "It's about the unique family stories and lessons. Life is about more than accumulating assets. It's about loving. You want to see family gathered, laughing and having fun."