Blair: What's going on, buddy?
Scott: Hey man, good to see you, Blair
Blair: As always.
Jamie: That's Morgan Stanley financial advisor Blair, and his client and good friend, Scott. Scott is a successful entrepreneur who's made his fortune in a few different ways, from cigars and telecom to music and motorcycles. They're meeting today to talk about something that's weighing heavily on Scott's mind: to responsibly share his wealth with his 20-something daughter and son.
Blair: When is the right time to share some of the, quote-unquote, "wealth" with them? How do you think about that?
Scott: You know, I don't, I honestly, Blair, I don't have that answer. I'd love to establish the kind of planning that will enable my kids to have choices in life that maybe I didn't have, to pursue their dreams, to pursue their passions, that they don't have to necessarily undergo the same sacrifices that my wife and I did when we were starting out.
Jamie: When he started his career in the '90s, Scott built multiple businesses from scratch. He eventually became a partner in the telecom company his father had started. Scott grew the business tenfold before selling it at the tail end of the dot-com era.
Scott: That was the first time I'd had a liquidity event where I actually had some money. And so, at that point, I invested pretty diversified. But, uh, of course, we had a market correction and I was all in at that moment. So it was, uh, it was almost like, you know, just set my money in, then poof, you know, 30% of it was gone, you know, it felt like within 60 days.
Blair: That was not a correction. It was a bloodletting is what it was.
Jamie: And that experience has shaped how Scott makes financial decisions to this day.
Scott: I've been far too conservative by all standards. After taking that lick, I sort of felt like a little bit of a whipped dog in the sense that, you know, I didn't want any more of that. I would definitely say I had a scarcity mentality at the time. You know, we were stretching to get by. My wife and I were newly married. We had hoped to have a family, but, you know, really couldn't afford one. I didn't know if I would ever see that kind of money again.
Jamie: But as the dust settled, Scott's inner entrepreneur was already thinking about his next venture.
Scott: I was at a point in my life where I thought, "You know, I really get a chance to write my next chapter. What would I want that chapter to include if I were the author of it?" And, I looked at my own interest, and I really thought about, uh, you know, I had a real love for music and I had a real love for motorcycles. Those were things that had been constants in my life, you know, since childhood.
Jamie: So, in 2004, Scott did what so many of us dream of doing, combining his passion and his profession. He opened a 50,000 square foot motorcycle dealership with a concert venue right on the property. And over the next few years, he expanded the dealership to multiple locations and retail stores. And that's when Scott met Blair.
Scott: We were participating in a motorcycle show. And Blair came in and had bought a motorcycle, or maybe was deciding to buy a motorcycle during the course of that meeting.
Blair: I was talked into it with a Coors Light and some friends.
Scott: That's right. I do remember that. It seems like that transaction took place on the lid of a cooler.
Blair: It did, it definitely did. I didn't have any intention of doing business with him to start. We had just hung out and I also have a passion around music, although I'm not musically inclined like he or his wife are, but, uh, we had a great time.
Scott: Absolutely.
Jamie: Before long, Scott started turning to Blair for financial advice.
Scott: It was definitely very organic and it was a slow process. You know, he just, over time, earned more and more of my trust and I started making investments with him. It was really a conversation that started maybe in 2012, but it was based on a foundation of, you know, this is where you're going to be in 10 or 15 years. And, at the time, uh, it was almost comical 'cause I would laugh at Blair. It's, I was like, "Well, I sure hope so. That doesn't seem possible."
Blair: And you remember what happened. Ten years later, I whipped the original presentation out with the highlights, and I said, "You're way above that number." Not only did we project it, but Scott delivered on it. He executed it. He built it.
Scott: We've accomplished a lot of the things we set out to do. Now, how do we really enjoy that? You know, the thing that I set out to accomplish when I started was I wanted freedom. That's the main thing. I really wanted freedom. And, now how do we leverage that in a way that we can truly benefit from it? And, and I hope in the end that brings our family closer.
Jamie: And that's where we'll start today. I'm Jamie Roô. Welcome to What Should I Do With My Money?, an original podcast from Morgan Stanley. Blair has already helped Scott with the important basics: investments, wills, and trusts. So now, it's time to get into the tricky conversation that a lot of families don't even realize they have to have: how to thoughtfully pass on wealth to the next generation. And it's where an advisor like Blair can really help. He's got a framework for how to give Scott's children the freedom to follow their dreams while maintaining their family values, purpose, and a healthy work ethic. But before they can talk about the future, let's hear how Scott got here.
Blair: You know, Scott, a lot of business owners sometimes are so focused on the business, they don't think holistically about their wealth. And sometimes, I guess, they don't focus enough on some of the estate planning items that need to be tackled, you know, God forbid something horrible happens. How did you think about kind of your outside stuff that you had outside of the business and wealth and those types of things?
Scott: Well, when you sort of have your shoulder to the plow, you're not thinking about too many things other than what's directly in front of you. And so, once you and I met and we started looking at longer range, uh, goals, that was when I really started to think about my life in terms of, you know, 10-year intervals. Uh, and, and, you know, one of the things I, I knew at some point, I would probably want to transition, maybe sell the business. So that's when the conversations with you started taking place more along the lines of, of estate planning and really getting a handle on, on the future. You know, I ended up doing a transaction in 2023, I think it was.
Blair: This was just the divestiture of one of your smaller, um, organizations.
Scott: Yep. So, one of the things I wanted to do as I was thinking about selling, starting to sell the business or sell out of the business is I, I peeled off one of the dealerships that we had, and I did a transaction, and I, think I was kind of doing that more or less just to get my head around, you know, the process.
Blair: What it felt like, what it looked like.
Scott: Yeah, absolutely. I had the opportunity at that time, I could've sold the entire business, and I'm glad that I didn't in hindsight, because once I went down that path, I really, uh, came to the realization that I didn't totally want to be out of the business. And then, later, you know, uh, had the opportunity to put together a transaction in which I maintained a pretty significant equity interest, equity partnership, sold, equity to a larger group, which happened to be a family connection, you know, in the auto industry through my wife's family. Uh, it enabled us to have some of the structure that I felt like would enable us to go, you know, and continue to operate and to operate beyond me. So it took a lot of pressure off me. We're not necessarily growing the business, we're planning on how to maintain and hold on to you know, the assets that we put together.
Jamie: Today, Scott's financial concerns are more about what to do with the wealth he's built and how to make sure his children understand both its possibilities and its responsibilities.
Blair: So you've moved from scarcity, over the course of time, like all entrepreneurs, to a place of abundance. The issues that your family has are no longer technical. They're no longer that you don't have the right trust structures or you haven't gifted stuff in the right trust, et cetera. But it does now come down to shared family responsibility of what do you do? What's the point of it all, and how do you proceed?
Scott: Yep.
Blair: You know, we talked about family mission statements. It is a statement of collective purpose. And most people think of it like a corporate mission statement applied to the family. And in reality, it's much more important with that. In order to build the collective, the individual must come first. And that's the big differentiation that, that I view how we're gonna start with your family. It is going to be a discussion around all of the important questions, right? How do we educate our children? How do we think about work, responsibility, meritocracy? Those things will all come in the mission statement, and those are critical. I mean, we're gonna, we're gonna frame the strategy for the family, but importantly, we always start with the individual first, and that way we know that they can commit to a collective when they've identified what they believe in individually. Have you had much thought about what you want to accomplish with the family and their interactions with everything you've built?
Scott: Well, this is really where we are as a family today, and really where we are with your and my relationship as far as, you know, the next stage of where we go. You know, I think I would consider myself, you know, a G1 in terms of generational wealth. And I think that's a very difficult place mentally to be, because when you look back at and you think about, "Okay, how did I get here? And what formed, you know, um, the characteristics that got me from where I started to where we are today?" A lot of them were struggle, and the drive to lift yourself into, you know, one step to the next. And while, you know, I think most every parent would say to themselves and to their family that they don't want their children to experience those same struggles, I think most G1 entrepreneurs would say to themselves, without those they wouldn't be here today. So, it's a real interesting scenario to think, okay, how do you take the next step as a parent and to steward what you have built in terms of maybe generational wealth? How do you help your children grow into the next step? Not deprive them of the struggles that will help define and, and help them to grow as individuals and build their character and their resilience, but at the same time give them the opportunities to pursue their passions and, and, uh, and their interests in life? And this is really a new conversation for me. And what I'm looking for us to do in our working relationship is for you to sort of help steward me through that, uh, to, to set the guidance as you have with our estate planning and, and keeping me on task.
Blair: Sure. And it's always a hard transition to pass down those lessons to the kids, because I don't think that false scarcity or creating dragons for your kids to slay is the right approach either, right? I think that it's an approach of understanding individually first what's important and what the standards are individually for each of you, and then to discuss openly, right, where you want to be as a family. What impacts should this make on our lives? What philanthropic decisions should we make together? I mean, this is tough work, right? And we'll get together. After we do the individual mission statement, we'll do the collective one. We'll talk about it. You guys will go away, and we'll get back together and we'll say, "Hey, have you lived your life in accordance to the mission statement?" And, and if you're honest with it, you, y- you say, "Well, maybe not." And then our follow-up question is, "Well, how do we do to get back on track? What do we need to do?" If you had to architect 10 years from now how your family interacts relative to what you've built, or on an individual level, how do you think about what would make you and your wife, uh, just overjoyed that you've achieved something with the family? What does that look like?
Scott: I think, and that's a great question, you know? And that's one I've really never been asked or thought about. But, I think I've been fortunate enough that I was able to pursue things that I was passionate about. And I found success in doing that. I would like for my children to be able to do the same thing, to, to pursue things they're passionate about, and, and to have success doing that. And success can be defined in a number of ways. You know, that's not necessarily financial success, just, just happiness, just general happiness, contentness with your life.
Blair: Yeah. And look, I mean, in absence of this work, right, I think what happens, and I'm gonna use what I would say a provocative, maybe pejorative term, but I don't mean it in that sense. The pathologies that exist with children, wealth enhances. You know... so, money in and of itself is not an enemy to anything. But to the extent that there are issues, they can compound those issues significantly. And I think that part of the magic of this work is to understand where everybody sits individually and collectively. And I would replace happiness actually with another phrase, this is for me and my kids. It is purpose and meaning, which is what makes you happy, right? And I think that those are the types of things that you've done well with in your personal life. I know you personally, and I know how much meaning and joy your life has through building and through helping others, and trying to transmit that to the kids. They've watched you do it silently. Now we're gonna do it overtly. And that switch, that just that little frame of, "Now we're gonna talk about it. You've watched Dad do it. You've watched Mom do it. We're gonna sit together around the table and we're gonna talk about these things, because I want you to have the same joy in building and meaning that I've had."
Scott: Mm-hmm.
Blair: It is easier to, to sit down with a family and craft a mission statement, a collective mission statement, but the real work, I think, requires a discussion of the individuals first, right? What is important to Scott? What is important to your wife? Individually, not collectively. The kids. What, what are their passions? Where are they disappointed in their own direction? What standards do they set for themselves ? And this is individual work. We give them a packet. And it has different modules. It has next gen education, philanthropy, meritocracy, a mission statement, individual identity. Those are simply guides. The most important piece, and the thing that I would argue for the most, is that you have the conversation. And what comes out of it is a deeper discussion and understanding of who you are as an individual, who you are as a family, and where you're going.
Scott: Ab-absolutely. Yeah, no, that makes perfect sense.
Blair: So, you know, the second phase of this, when we get into the family mission, we, we literally sit down, we'll give you some prompts, some things to think about, and we'll start architecting what it is that's unique and special about your family, right? How do you guys find meaning? How do you guys find purpose together? And so, for us, it's really about making sure that you have the next ten years to enjoy thoroughly, and that the wealth that you created doesn't increase negative outcomes, and exacerbate bad outcomes. And we read about that all the time, right? I think the good news with you is you've laid extraordinarily good groundwork with your family. Many times, that's not the case, and money is a substitute for power or love. I mean, if you think about when somebody passes away and the will is read, and they get less than their fair share, in their mind, it's devastating. And so, those things should be talked about, right? And that's what a family mission statement does. It's cohesiveness across the family.
Scott: You know, not having gone through this before, there's a lot of unknowns. I think, you know, um, what do you do if you're not aligned? How do you move forward if you're not aligned with your goals as a family? If you got, you know, outliers on, on one side or the other. The parents aren't aligned with the kids or vice versa.
Blair: Do you feel you would have that type of divergent opinion in your family?
Scott: Well, not necessarily. You know, not having gone through this process, I really don't know what to expect. I, I've got two children and they're on, you know, different ends of the personality range, you know? One's due south, one's due north, you know? And, and, and I feel like my wife and I are pretty much in the middle. And I'm just curious, you know, because if this is a family uh, mission statement, getting the family sort of aligned in one vision and one goal, I think it could be challenging.
Blair: That is exactly the reason we do it, because in absence of that, it will be challenging, right? In absence of any direction or discussion, when your family faces a trial or a tribulation, you have no roadmap, you have no plan. But the divergence of opinion on matters, again, the individual identity issue is critically important to the individual. Once they know where they stand, they know what they can commit to, right? And so they can voice in this exercise, and it may move you and, and your wife off positions that you strongly hold as you hear your kids advocate for different positions, right? And realize how maybe mature they are beyond what you thought they would be around these types of discussions. And our job is simply a moderator. We're not there to inject our opinions of what you should do. This is for you and your family alone. And so, you set the strategy, and then the decisions around how you invest, what you invest in, who is a recipient of what you invest in that capital, right, are all determined by what you decide collectively. So, if one of the children want to start a business, right, you've set clear boundaries as to what those expectations are and what you require. And so if one of your, your critical components of your family mission is that we don't just give money to people that don't earn it, right? Like meritocracy is very important to us as a family. It helps us architect what, how you actually get access to the money. Do we structure it as a family bank where we loan money to the kids and they have to pay it back? Is there a component of that that then just becomes usage because you, you have the same last name, and it's just a family, family asset? So it very much affects how we restructure estate planning when we know where the north star is.
Scott: mm-hmm.
Blair: The first time you do it, it feels weird and awkward, and you're like, "I don't understand why we did this." And then when we come back together, it's a little less awkward, and you kinda got a sense of it. But, the next thing that's important is you give the kids the ability to make mistakes, and you give the kids the ability to come back to you and ask for advice. And that's really, I think, the critical component of this is, ultimately, it starts the conversation that you generally haven't had maybe around wealth and money and and the use of it, meritocracy, all those things that are critical. Then there will be some activities that we would suggest, like for instance, letting the children participate in some of the financial decisions you make. Maybe letting them open a brokerage account at E*TRADE and, uh, making a gift and watching how they make a budget, right? How we help educate them through around budgeting and investing through our wealth education modules. And that type of interaction starts building to the next family meeting. And that next family meeting, we'd get back together and say, "Okay, like, do we still believe the stuff we put on the paper?
Scott: You know, I can tell you, this is probably something I would not be thinking about, you know, just through the normal course of my thought process. The fact that you have brought this up and, and we've been talking about this for probably about a year now, you know, and, and we're at a point now where we're fixing to start implementation. I think we certainly will benefit and will benefit from going down this path, and, and having more of a structured path, because I'm not a highly structured individual. I'm more of a, I don't know, I think more of a daydreamer than the guy that dots the i's and crosses the t's.
Blair: Ready, shoot, aim.
Scott: Yeah, and you've done a good job keeping me on track through our estate planning and getting through, you know, a lot of that. So, I think it's a natural evolutionary step for us. I think it is a step that will help our family become closer and have better communication as it relates to our financial resources. And I think it's also a step that will help my children start to understand how to manage responsibility that they may be left with. You know, I like the idea of having a plan where there's expectations and there's goals to achieve, and then there's, sort of, the reward for doing it in the sense of, of, you know, personal satisfaction, but also, I would love to see my, my kids have personal growth and me to be able to help steward and guide them through the decisions we make today into them being a better developed, happier person as they grow into their mid-20s and 30s.
Blair: Well, first, I mean, you, you, you did everything you did to build to get to this point, and we're just blessed to be able to sit alongside you and help you in the next leg of this, sit with the kids, sit with you, and as always , it was great speaking with you and spending time with you, and look forward to the next time
Scott: Well, same here, Blair. I appreciate all that you have done for me and my family, and I, I look forward to, you know, to many more years of working together and seeing how we can develop and evolve into the future.
Jamie: If you'd like more information on how to prepare the next generation to responsibly manage wealth, or about building your own family mission statement, come see us at morganstanley.com/mymoney. I'm Jamie Roô. Talk to you soon.
DISCLAIMER: This material has been prepared for general reference and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Please see our show notes for a full disclaimer on the information provided.
