'Old money' vs. new: Each kind of client brings quirks, challenges

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You know the stereotypes. “New money” is about stocking the garage with a Lamborghini and a Ferrari. It’s buying a swishy McMansion and ordering the most expensive wine in a restaurant to go with … pizza. New money is gauche.

On the flipside? Old money – earned generations before – eschews anything too flashy. It’s about expensive yet understated clothing and knowing the right travel destinations that merge true solitude and whisper-soft comfort. It is refined.

And these clichés are almost all total hogwash.

As any family office advisor knows, families are singularly unique. The moment you pigeonhole clients, they turn around and surprise you. And even if you ask advisors which kind of client is easier to work with, it’s rare to find a consensus.

Here’s what three experts have to say about the challenges and upsides of working with both groups.

Nicole Bacsalmasi, associate principal, the Targeted Strategies Group, Calgary

In my experience, I find that old money is entrenched with old advisors. So, “this is my dad’s lawyer or my dad’s accountant.” We tend to get involved in the intergenerational work, the transfer of assets from Generation 1 to Generation 2. G2 can seem very saddled with the G1 advisors, and they are hesitant to take on new ones because this is what they’ve always done. They’re less open to new ideas.

Whereas entrepreneurs love all the new ideas and want to know the newest or the most interesting way to structure something. It’s, “Let me know what else we could do.” And they’re happy to be introduced to advisors to make that happen.

There can be more work in the sense that you have to educate a bit more, but less work because they’re willing to be educated. We deal predominantly in really technical and high level insurance planning. I would say most of our entrepreneurial clients’ knowledge of insurance is based off the Internet, TikTok and podcasts. So they have a way more open mind. They want to learn more. They want to know what would work for them. Whereas I think the more experienced families who’ve had wealth for a long time know the traditional ways to use insurance. And they’ve heard horror stories about other people being given the wrong products, so they tend to be, “Oh, I know everything about that, and I’ve already made a decision a long time ago.”

The newer generation is smarter than the older one. Every generation is just more exposed to information.

Elie Nour, Nour Private Wealth

I would prefer to deal with those who know nothing but are willing to be educated versus those who think they know everything. I always say the belief of knowing everything is just one way to stop knowledge.

Kelly Demo, senior wealth advisor and portfolio manager, West Oak Family Office, Calgary

I think with new money, especially out West, it’s very entrepreneurial and very, “I can do this all myself.” So it’s really about educating these wealthy families on why a family office is important, how we operate, and why so many other wealthy families from different jurisdictions around the world rely on or build family offices.

It’s usually very slow progression with new wealth. Usually when money starts to transition, the matriarch and patriarch are still alive. The kids who are the benefactors don’t necessarily view the wealth as their money. I think there’s often some guilt associated with it because they didn’t earn it themselves. They look at society and their friends and think, “Well, how come I deserve this? All my friends who work really hard don’t have what I have.”

We often see them overcompensate for the guilt associated with money. For example, in terms of philanthropy, who they give to is very different than who their parents would give to. There’s less of a focus on, “How do I save tax, protect and grow?” There’s more of a penchant toward, “How do I help society?” I don’t think they go out to do this intentionally, but the decisions are a lot more left-leaning.

I would prefer to deal with those who know nothing but are willing to be educated versus those who think they know everything.

Nicole Bacsalmasi, Targeted Strategies Group

When new money comes in, everything is so siloed. Nothing speaks to the other. Everything they’ve done has been transactional over the years because the focus has been on the business. Lawyers don’t speak to accountants. You’ll have some conflicting issues. So, for example, a tax strategy might not be contemplated properly in the will.

Whereas older money, they generally think about second- and third-order consequences of their decisions. It’s more integrated. It’s also expected that they’re going to have advisors and a proper framework already built to manage the hard issues: How do we save tax? How do we protect capital? How do we grow our capital?

So I’m going to say there’s more work with the older money because usually there’s a lot more focus on integration of family, instilling values and creating a mission statement. All those types of things take way more time.

Elie Nour, chief executive officer, chief investment officer and portfolio manager, Nour Private Wealth, Oakville, Ont.

Look, there are a lot of similarities. We attract people who are mainly looking for preservation of wealth. New money – they’ve worked extremely hard to build it. They want to keep that legacy, so these folks want to discuss tax and estate planning. If it’s old money, it’s the same thing. They want to preserve it. They’re living off of that money, and want to move it from one generation to the other and avoid any mistakes.

So the thing they have in common is focusing on capital preservation. They’re not coming to us to double or triple their money overnight. They want to protect it and build it.

Young money definitely needs more handholding with respect to financial structuring, but even about reputation. They want to show that they’ve done well, but they need to be smart. They’re more involved. Old money? Yeah, they’re used to having money.

At the same time, the newer generation is smarter than the older one. Every generation is just more exposed to information. And they know they’re not dealing with unlimited funds, whether they inherit $10 million or $50 million or $100 million. So you need to make sure they keep the discipline and focus on the legacy they leave to their estate.

Old money is usually more comfortable with exploring the independent space, though, because they’ve dealt with banks before and they’ve had that experience. So old money would be attracted to firms like ours. New money doesn’t have enough knowledge, so they want to go with what they perceive as the safest, which would be banks. At least until they realize they’re not getting the level of service, performance or anything else they need. And then they start looking elsewhere.

I have a client who sold his business – obviously this is new money. He was never involved with charities. He wasn’t involved with real estate. Now he’s considering other businesses, too, so we’re helping him out with a full structure. He had already been disappointed by two banks when he had a lot less money.

These clients want service, they want everything, and they’re willing to pay for it.

More from Canadian Family Offices:

• When should family office say ‘sayonara’ to a client?
• Future of family offices: less isolation, more customization, says Tina Di Vito
• A tool to pass down wealth through generations
• Investor Brice Scheschuk on spotting gems in early-stage tech today

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