At 7.30am at the University of California–Irvine campus, a stream of Land
Rovers, BMWs and Mercedes pulls into a car park. A collection of
tired-looking twentysomethings shuffle out of their cars, file into a
class-room and introduce themselves over Diet Cokes and doughnuts.
Among the first to arrive is Kyle Circle, a spiky-haired entrepreneur in jeans
and a T-shirt, who mentions that his father is California’s strawberry king.
Tina and Lisa, platinum-blonde sisters, say their grandfather made a fortune
in real estate. A tall, earnest young man named Tim, wearing a green polo
shirt and khakis, says his dad owns a farm in Minne-sota. (“It’s a pretty
big farm,” he admits.)
Several other attendees belong to a family that made its money from an
electrical contracting business. Rounding out the group are Kelsey and Kara,
willowy brunettes whose family runs a garbage-hauling empire. All together
the kids in the room represent family wealth of more than $3 billion.
The kids are asked why they are there. “My dad kind of suggested that I come,”
says a developer’s daughter. “Actually, he more than suggested. He said it
was kind of a requirement for my inheritance.”
Tina says: “My grandmother said if I did this, she’d give me money to go to
Vegas.”
They are attending a two-day course called the Financial Life Skills Retreat,
a new kind of summer camp for the sons and daughters of today’s
multimillionaires and billionaires. The entrepreneurial rich of the 21st
century have created Richistan, a virtual country within their own country.
Beyond worrying about money, Richistanis also worry about their kids. Their
fears can be boiled down to two words: Paris Hilton.
Richistanis want to give their children luxuries that they themselves never
enjoyed growing up. Yet they also want them to have a strong work ethic,
which can only come from struggle. To help reconcile these two urges, and
teach the next generation how to handle all that money, they are turning to
summer camps like the Skills Retreat.
For two days in July, and another two days in October, young Richistanis
gather at the University of California–Irvine campus to learn how to manage
the vast fortunes they’re about to inherit. They talk about portfolio
theory, price-to-earn-ings ratios and debt management.
They learn how to convince their intended to sign prenups and how to ask their
dads for loans. They learn basic “life skills”, such as how to control their
spending, how to work with others and how to interview for a job. Most of
all, they learn how not to squander their fortunes.
Lee Hausner, a psychologist who has become one of America’s top advisers to
children of the new rich, gets things rolling with a lesson on families and
money. After 19 years as the senior psychologist in the Beverly Hills school
system, Hausner is an expert on talking to rich kids, especially about
family problems. With her broad smile and pastel business suits, she’s the
model of a cheery, sup-portive west coast therapist.
The class is divided into groups and told to answer a series of questions.
“How important is money to you today?”
One group answers: “Really important.”
“It’s important but it’s not who we are,” says another group.
“Very important for, like, survival,” says another.
Hausner asks: “How was money used in your family?”
“Education, vacations, and a way to get control.”
“Rewards.” “To buy love,” says one group. “Like Disneyland dads, where they
confuse money and love.”
“Very good,” Hausner says. “Did you hear that? Disneyland dad. That’s a very
important concept. I want you to get in touch with that.”
She moves on: “What do you remember your father saying about money?”
“Nothing is free,” says one student. “Money doesn’t grow on trees,” says
another.
Hausner asks about the dangers of money.
“Drugs,” says one group. “You become lazy. You don’t want to work because you
don’t have to.”
“Other people’s perceptions. If they know you come from money, they think
you’re spoilt.”
“Or if you’re dating, you’re always worried about someone taking advantage of
you. And on dates you have to, like, pay for things all the time. You’re
worried that they like you for your money.”
“People come out of the woodwork to be your friend,” Kyle says.
Turning a group of privileged southern California youths into savvy investors
and professionals represents a triumph of hope over history. Yet it’s a hope
that IFF Advisors, the company that runs the Skills Retreat, finds
increasingly common among Richistanis who are about to entrust their
children with millions.
The American wealth boom has created a boomlet of rich kids and a new
generation of anxious Richistani parents. Based on average family size,
there are now more than 4m children of American millionaires. And all those
silver spoons are dipping into a record amount of disposable income and
inherited wealth.
Up to $15 trillion will be passed down to the children of millionaires between
2002 and 2052, according to a study by the Boston College Social Welfare
Institute. Much of that will be passed down from baby boomers (and even
younger parents) to their kids. While economists differ on the exact amounts
that will be passed down, few doubt that the wealth boom of the past decade
will create a cascade of cash flowing to the next generation.
A survey by Prince & Associates, a wealth research firm, found that most
millionaires today plan to leave at least 75% of their estates to their
children. The number is highest for families with households worth $25m or
more, disproving the widely held notion that wealthier families are more
likely to leave a greater share to charity.
Today’s rich are also indulging their children now. With little time and
plenty of disposable income, nearly 40% of today’s millionaires give them
unregulated access to money. All that spending has helped create a new
economy built around a new set of kiddie elites.
High-end resorts are building five-star kids’ centres and playgrounds. When
Ellen Perry, a wealth-education expert, went to the Four Seasons in
Scottsdale, Arizona, the staff greeted her four-year-old daughter with a
child’s bathrobe and a platter holding a freshly baked cookie with her named
inscribed in icing. Each day at 4pm the staff delivered coconut popsi-cles
and smoothies to the children’s pool, and the resort’s restaurants had
child-sized silver cutlery.
In Palm Beach, one of the fastest selling lines at Aristokids, a children’s
clothing shop, is crocodile-skin deck shoes with deerskin lining and gold
eyelets. The price: $899 a pair.
Television is filled with images of young wealth gone wild, with pouty
heiresses demanding new Mercedes and $200,000 birthday parties. Paris Hilton
kicked off the trend with The Simple Life, a reality show where the doe-eyed
sex symbol slums it on an Arkansas farm. MTV’s Rich Girls chronicled the
shopping expeditions of Tommy Hilfiger’s teenage daughter Ally and her
friend Jaime Gleicher, while the channel’s other teen-spend-ing fantasy My
Super Sweet 16 shows the sons and daughters (mostly daughters) of the newly
rich vying for the title of most profligate birthday party.
All that extravagance has created new parenting problems – and new industries
to solve them. A spate of recent research studies is shedding more light on
how wealth, in addition to giving kids advantages, can become a family
curse. Without the need to work, children develop little sense of motivation
or drive. They have trouble developing basic life skills – cleaning up,
managing money, working with other people – since they’re used to relying on
house staff and parents.
“You don’t learn basic skills that are fundamental building blocks for the
rest of your life,” says Ellen Perry, founder of Wealthbridge Partners, a
training organisation that caters to families worth $100m or more. “The
privilege gets in the way of healthy maturation.
“Money gives people the ability to buy their way out of life experiences.
The parents may think they’re helping their child, but they’re actually
robbing them.”
A private banker in New York told me the story of the 11-year-old daughter of
a real-estate magnate who grew up flying on the family’s private jet. For
her birthday, the girl asked her father for a ride on a commercial flight.
“But we have our own jet,” the magnate told her.
“I know, but I want to ride on a big plane with other people,” she said. “I
want to see what an airport looks like on the inside.”
Other side effects are more serious. Research by Suniya Luthar, a professor of
psychology and education at the Teachers College of Columbia University,
finds that today’s affluent kids are just as prone to “rule-breaking”
behaviour as inner-city kids. While the most common delinquencies among
inner-city kids involve weapons and fights, affluent kids are prone to
stealing from parents and friends.
Luthar also found that one in five affluent American kids is clinically
depressed – far more than the national norm. A study of private schools
found that alcohol and drug use among affluent kids is even higher than that
of inner-city kids. One reason the rates are comparable: absent parents.
Wealthy kids today are often raised by a revolving door of nannies and house
staff and see little of their parents. “They tend to be more isolated from
their parents physically and emotionally,” Luthar says. Yet she added that
the pressures to succeed for affluent kids also play a huge role.
Before the 1980s, inherited wealth was largely confined to blue-blood families
that taught their children the importance of keeping a low profile, never
embarrassing the family and choosing careers that were respectable without
being mercenary. Richistanis, however, want their kids to be strivers. They
want them to make money. Or at the very least, not to lose it.
The result is a booming new industry in courses for rich kids like the Skills
Retreat in California. As the day goes on there, the kids start to talk
openly about their lives and money. Some have turned into drifters and
spenders, others are hard-driven professionals and entrepreneurs. Few want
to follow their parents’ footsteps – either in business or life.
Two are artists, two are teachers and one woman is a chef. Tina and Lisa, who
have already blown the first instalment of their inheritance, are starting
their own beauty salons. Kelsey and Kara, who live in Malibu, are still
searching for careers. Kelsey writes songs part-time and is looking to break
into the music business. Kara, who’s still in college, is a top competitor
in the show-horse circuit.
Like many Richistani offspring, the sisters have an ambivalent view of wealth.
Growing up in southern California, they had all the comforts of a wealthy
family. Kara drove a Mercedes to high school. They had nice clothes. When
she was eight, she got her first horse and now she has about 45.
The sisters don’t “act” like rich girls and have the laidback, down-to-earth
air of regular college kids.
Watching their parents work 14-hour days – their mother is the general manager
of the company – the sisters gained a strong appreciation for hard work. Yet
they also know they don’t want their parents’ workaholic lives and they
don’t want to run the family business, at least not yet.
“I would like to do something on my own and make my own impact first,” Kara
says.
They’re also growing tired of the hedonistic culture of Malibu, which they say
is filled with young heirs and heiresses spending money and passing the time.
“It’s so materialistic,” Kara says. “It’s all these people strung out on drugs
and drifting from one thing to the next. It’s not normal. I want to live in
a normal place and have a normal life.”
© Robert L Frank 2007
Extracted from Richistan by Robert L Frank to be published by Piatkus Books
on July 2 at £12.99. Copies can be ordered for £11.69 including postage from
The Sunday Times BooksFirst on 0870 165 8585
Fear--fear seems to be at the heart of everything worth loving. Whether rich or poor we all have our ups and downs. Would you rather have these experiences rich or...poor. These kids and their parents problems are shared by many more than just their peers. The problem is that most people shun the very thing that keeps "them" and us alive--jealousy. Don't hate. Participate!
Denad, Canton, Michigan
The real issue is failure. For a person to be a success, they have to fail at something, and they've to lose something. In my grand folks generation it was the Depression and WW II. In my folks generation, it was Vietnam. I am a disabled vet. (@27), & lost several friends in Iraq, and have several disabled pals as well. One thing we all agreed on was that if we ever got out, we'd never take our time for granted. Failure, and the displeasure of its taste are the only way to truly find out who you are and what you're made of.
Despite the fact that many ultra rich parents are making some mistakes with their work life relationships, its never to late to do the right thing. They might consider letting their kids fail, and cry a bit not to mention feel a little loss. Let 'em know you support them, but that you also believe in their cunning and wit to define themselves respectably. Because face it, what you do or fail to do is directly related to what you achieve or fail to achieve.
JR, Colorado Springs, Colorado
You cannot become a responsible person, either financially or socially, after 2 two-day "retreats." This is especially true for people who are already in their twenties. Mummy and Daddy waited too long to even think about being parents and they are only sending their spawn to camp now to protect their own money. Pathetic on all counts. I hope the money that was created in one generation of shallow gits is completely used up by the dear little second generation darlings.
Kathy, Rohnert Park, California
The key to helping children to have a constructive world view, where they feel themselves to be part of the world and are motivated to make a positive impact comes from early childhood experiences, not from a weekend of intervention at age 20. I'm sure the course is better than nothing but a lot of these problems can be avoided by adopting a philosophy of promoting independence in children, with responsibility for natural consequences from birth onwards. It is hardly fair or reasonable to expect children to completely change their characters when they have been spoiled their whole lives, but if they have experience of independence early in life then it won't seem strange to actually take on the roles of adulthood around a normal, adult age.
Sarah Krippenstapel, Bergamo, Italy
As the editor of the worlds No1 web site for advisors to the wealthy (xalt.tv) I have discussed this issue with many of the worlds leading private client lawyers and bankers.
The key issue is to enable children to establish a route to 'making an impact on the world' when the key motivators for doing so have been removed. Money is not a factor, and any 'success in business' (family or otherwise) is always considered to be as a direct result of parental success (ie life permanently in the shadow).
However, there does appear to be an answer. For wealthy families who turn to philanthropy, and engage their children in the 'business of philanthropy' it appears to create both a sense of 'making a difference', of 'succeeding in a role that has nothing to do with parental skills' and even provides an element of political/anti establishment rebellion where the philanthropy is linked to government failure (3rd world debt/poverty/health issues etc).
stephen, jersey, UK
Good for the kids who were sent to the Skills Retreat. They have parents who care enough to raise responsible children. Unfortunately, there are those who tolerate their children's bratty ways and indulge their inflated egos
Dee, Pennsylvania,
Nothing new in any of this - mind you America has always been brilliant at rediscovering phenomena as old as the hills and dressing them up as its own creative inventions.
What we have here is a series of examples of the nouveaux-riches spoiling and over-indulging their offspring. This has always been the curse of new wealth. America however is the only country which has created a new industry around this phenomenon - so they do invent things as well!
Gervas Douglas, Andorra la Vella,