This video is part of our Summer Special Report on Wealth.
Canadian Family Offices‘ managing editor Joe Chidley sits down with Thane Stenner, founder of Stenner Wealth Partners+ at CG Wealth Management, to discuss the complexities families experience as they move up the wealth curve.
Stenner Wealth Partners+ is a Toronto- and Vancouver-based multifamily office and outsourced chief investment office serving ultra-high-net-worth families. Drawing on decades of experience advising families with significant capital, Stenner explains why liquidity events, succession, family education and governance can introduce an entirely new set of complexities.
In his conversation with Chidley, Stenner shares:
• Why the “wealth curve” is really about the growing complexity that comes with significant capital.
• How entrepreneurs must shift from growing wealth inside a business to managing liquid wealth after a major exit.
• Why ultra-high-net-worth families often need to rely on a broader team of professional advisors.
• How preserving, growing and transferring wealth requires a different mindset than building a business.
• Why family education is a key part of preparing the next generation for stewardship.
Transcript
This transcript is provided for convenience and is based on the audio recording of the video. While efforts have been made to ensure accuracy, minor errors are possible.
Joe: Hi, I’m Joe Chidley, Managing Editor of Canadian Family Offices, and today I’m talking to Thane Stenner, founder of Stenner Wealth Partners+ at CG Wealth Management. Stenner Wealth Partners+ is a Toronto and Vancouver-based multi-family office and OCIO. And Thane, you have decades of experience working with, advising, supporting ultra-high-net-worth families, so I’m glad you’re here today.
I wanted to talk to you today about moving up the wealth curve. And what impact that has on families, including, but maybe beyond financial management.
So, you’ve talked about the wealth curve in the past.
Thane: Yes.
Joe: And I want to dig down a little bit on this because when I think about a wealth curve, I think about an economist’s chart that shows wealth distribution in a society. Yes. What’s it called? The Lorenz curve. Lorenz curve—that’s right. But I think you have something else in mind. So, on this wealth curve we’re talking about today, if the x-axis is wealth accumulation, what’s the y-axis?
Thane: Great question, Joe. The y-axis basically is the complexity that comes with significant wealth. Historically, people think, well, you get more money, life’s easier. But the reality is there’s different types of complexities that come with it. And you have to try to navigate through those complexities. So, I think that’s part of the reason why we exist as a group, as a team advising clients that have been fortunate enough and blessed with significant wealth of 30, 50, 100 million plus in capital.
Joe: So, we’ll talk about what kinds of complexity you’re talking about. I guess there are more and more Canadians moving up this wealth curve—
Thane: Yes.
Joe: —all the time with demographic changes, aging boomers etc.—
Thane: Yes.
Joe: —and the rise of the technology industry over the past 20-30 years. Is that your experience, too?
Thane: That is 100 per cent my experience, and it seems to be accelerating. I would say that our view is over the next 10, 20 years, there’s going to be a significant wealth transfer that’s going to take place. And it’s quite interesting, Joe, when folks have a business, a successful business that they view it as they’re operating, they’ve had it for a number of years. Until they’ve had a liquidity event, until they’ve actually sold it, it’s a different mindset that they have to shift into going from operational wealth, on paper, to now liquid wealth, where they actually have to work with other professional advisors. So it goes from what I would call two hands on the wheel type of approach to now one hand on the wheel. They’re the chairman of their capital, but now they’re having to rely upon other professionals a little bit more, and that’s where some of the complexity comes in, but we try to simplify that as much as possible for them. But at the end of the day, there’s a lot of new things for them to learn.
Joe: Yeah, I like that ‘two hands on the wheel’ analogy, because even where you’re trying to get to is changing too, right? Because you’re not about growing a business anymore.
Thane: Correct.
Joe: You’re about preserving wealth.
Thane: Correct.
Joe: Growing wealth, managing wealth effectively.
Thane: Yes, and also educating your family and educating your next gen. So sometimes an entrepreneur is running the business, and the family knows that they’re running the business, but now it broadens out. It now is kind of like, okay, there’s legacy issues, there’s philanthropic issues, there’s educating the next gen and trying to help them, empower them to be potentially good stewards down the road of that capital and how to transition that. So, the complexity curve or the wealth curve that I refer to is where you go from just pure business focus to more of a family focus and what to do with it.
Joe: So you deal with clients who have tens of millions, sometimes hundreds of millions of dollars.
Thane: And billions, yes.
Joe: And billions. Good for you. And sometimes this money came to them quite suddenly through a liquidity event.
Thane: Yes.
Joe: So on a broad level, what changes happen for these families?
Thane: Well, the first thing I’d say is their privacy changes. Because if they go through liquidity events, if it’s front-page news on The Globe and Mail or The Post or local news, all of a sudden everybody knows they’ve had this liquidity event. So, for charities now, they’re on a list for this type of thing.
Also, the family’s privacy changes. You can get scenarios, if it’s a younger family that goes through a liquidity event, now all of a sudden the kid’s talking at the kid’s school about, ‘Hey, your parents are rich.’ So, I was actually having a conversation last night with a couple who have actually gone through this exact thing. They’re relatively—they’re late 40s, kids are in their teens, and they’ve gone through a liquidity event, and it was quite well-publicized. And all of a sudden, the kids are coming home from school going, ‘Hey, is something going on'” And they hadn’t really talked that much with them about it.
So things like that, there has to be a level of increased communication within the family, and more intentionality as to how to communicate internally, but also with the external world.
Joe: Yeah, that brings up a point that I was thinking about, about how decision-making has to maybe change or should change as you move up the wealth curve, even within the family, yeah?
Thane: Yes, that’s true. I would say, though, dad and mom are still the decision-makers.
Joe: Right.
Thane: I think at the end of the day, they now want to step into the world or the realm of being more inclusive with their kids about, ‘here’s a situation …’ and age specific. And that’s always an interesting topic that we try to give some guidance to the parents around, as to what’s appropriate for different ages. But by the same token, it now becomes, it’s a different world. It’s now a more liquid world for them, and their steps are seen more versus just being known as a business owner or a family business, right? It’s now, okay, what are they doing in the community? Are they philanthropic?
Wealth tends to amplify personalities. So, the more wealth you get, it tends to amplify the personality of the kids and of the parents. So, if the parents, the family, have historically been more philanthropic or family-focused and very authentic, the more money they get, they tend to be more of that. And then the opposite happens. If people are a little bit cranky before they got wealthy, unfortunately, I’ve seen it, unfortunately, where they can be more cranky, and just money doesn’t seem to bring them more peace for some reason. So, there’s two ends of the spectrum there.
Joe: So, I guess that’s complexity in the sense that it’s harder to deal with that stuff when Dad’s got $100 billion.
Thane: Correct. Well, and quite frankly, as advisors to these types of families, I have to say, because we only take on eight new clients a year, we really try to take on people that share similar mutual values, and we try to avoid PITAs.
Joe: Okay. So, that’s great. I’m wondering, too, about, and I’m sure you could write another book about this, but the complexities of financial strategy when you’ve entered that sort of ultra-high-net-worth world. Can you speak to those a little bit, too, in broad strokes?
Thane: Yeah. So, particularly around after a liquidity event, which is again where most money in motion or lump sums come from, especially larger ones, what you really have to try to do is help the families develop, A: a deployment plan, but also an investment policy statement around the types of things that they’ll want to invest in. Maybe they have a particular preference for certain things. And then also, conversely, what are the things that they really don’t have an appetite for? So, you have to try to filter that. It’s like a game plan for a business or a game plan for architectural blueprint for if you’re going to build a luxury home or a hotel or resort. You have to have a game plan.
So, spending time figuring out their financial DNA profiles, which is actually something we’ve done quite a bit of for the last 15, 20 years, trying to actually figure out how they relate to the wealthindividually. And a husband and wife can be very different. Yeah. One can be very hands-on, one can be very delegative. Same thing with the adult kids. So, you just want to embrace having these conversations with them and help them work through maybe some stuck points along the way, some difficult decisions, particularly about when to give kids money, at what ages, how to do it, what’s fair, what’s maybe considered unfair. So yeah, that’s how I’d answer that.
Joe: Yeah, a lot of complexities when families are thrown into the mix, right?
Thane: Well, personalities, right?
Joe: And personalities, which gets to my last question on the complexity issue. What behaviours should change?
Thane: Well, that’s a great question. I would say our behavioural patterns, from what I’ve seen, are pretty much baked into our DNA. And I kind of alluded to this earlier that when more significant wealth comes in, as people move up the wealth curve, they need to try to become more educated, learn more about how to be good stewards of that wealth.
Joe: Right.
Thane: Because if they don’t, and if they don’t educate the next generation, we’ve all heard things, especially in the family office situation, that you’re the editor of the pre-eminent group in Canada.
What can basically happen is you go from shirt sleeves to shirt sleeves in three generations. The Harvard studies and various studies have proven over and over again that the likelihood of original wealth from the first generation making its way past the third generation is only like a 10% chance. So, the families that do make it past that, high communication level, they align values as a family and they have a good backdrop for basically being able to work through challenges that come up.
Joe: Mm-hmm. And I guess, too, to get help, right?
Thane: Yes.
Joe: Because the skills that helped you build that wealth, let you build that wealth, may not be applicable to stewarding that wealth.
Thane: Very good point. And another way of putting it is concentration of efforts and time typically is what creates the wealth, but then you go into a diversification path, and now it’s more liquid. When you’re running a business, you’re not getting a monthly or daily valuation like you are in the public markets, for example. Now you’re subject to the foibles of the public markets going up and down, or private markets and illiquidity and different things. So, getting help for sure.
And I guess the other point I would stress here is a lot of times people that go through a liquidity event, maybe they’ve had friends that have been their advisors from high school buddies or university buddies. And they get to a certain point where they kind of intuitively realize maybe they’ve outgrown the existing advisor they’re with. They may like the advisor a lot, but they may feel like, ‘”‘Hold on a second, there’s a lot more complexities coming to this. I may have outgrown my advisor.’ So, that’s always a tricky scenario to get into, but the reality is a lot of times, they intuitively understand that they need a team approach and that they need some more Sherpa guidance. It’s like climbing the mountain, right? They’ve climbed the mountain, now how do we navigate this? So, having more advanced techniques, more advanced strategies to try to get through those things is really, at the end of the day, what they’re looking for.
Joe: Okay. So, here’s a true hypothetical. Mostly a fantasy. But I’ve just sold my company or I’ve inherited a large sum of money or otherwise become ultra-wealthy. Give me one piece of advice.
Thane: I would say slow-play your next move. Classically, if you’re an entrepreneur and that happens to you, or you inherit the money, for example, people feel like they’re in a rush to put the capital to work.
Joe: Yeah.
Thane: Right? It’s natural. They don’t want to waste time. They don’t want to waste efforts. But sometimes that rush part is where you can end up deploying too quickly and not having a true game plan. So again, you’ve got to have some help, in my opinion. Develop the guidelines, right? The investment policy statement. That’ll be a guiding principle and document that you’ll refer back to. It’ll keep you on the path of what your North Star is to where you want to go.
Yeah, so do that first and, at the end of the day, try to find independent advice as to how to actually navigate things, because this is going to be the rest of your life, right? It’s going to be a legacy thing. So, take your time.
Joe: Yeah. Thank you, Thane. That was a great conversation. Thanks for being here today and let’s do it again. And thank you for joining us. Bye.
Adam Bisby is senior producer at Canadian Family Offices and a Toronto-based writer, editor and consultant who contributes regularly to national and international publications such as the National Post, The Globe and Mail, the Toronto Star, MSN and SHARP magazine. Over the last 30 years, he has written about real estate and housing, finance and investment, technology, food and wine travel, and health and wellness, among other areas. He began contributing to Canadian Family Offices in 2021.
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