Frazer Rice - Decision Making for Wealthy Families

Apr 19, 2021

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Frazer Rice is a Regional Director for Pendleton Square Trust Company. In that capacity, he focuses on trustee, fiduciary and family governance issues for wealthy families. He is the author and podcast host of "Wealth, Actually" which centers on decision-making for wealthy families The podcast interviews wealth experts and entrepreneurial families and individuals.

Standout Quotes:

"Something that's happening industry-wide or at least in the US is the concept that being a corporate trustee is a different business than the asset management side of wealth management" - [Frazer]
"Most of the trust planning is articulating a move at the minimum from Gen 1 to Gen 2" - [Frazer]
"I view the Trust and the planning around the Trust to be an outgrowth, when done correctly, of a solid communication structure that has been developed within the family" - [Frazer]
"What the family bank approach is offering to families is a way for them to pass on their intellectual capital...to their human capital, the next generation by having them apply for the financial capital" - [Mike]
"If the kids see what's important to the other kids early, and attach a dollar manifestation around that, I think that you're building the context so you have fewer blow-ups later on" - [Frazer]
"I think the most important thing anyone can have in their lifestyle is the ability to be comfortable in their own skin" - [Frazer]

Key Takeaways:

Frazer shares his background and experiences so far, from college to working in politics, after which he decided to study law and gained exposure while working in different firms. His career started down the path of wealth management when he worked with a Trust company.
He is also the author of the book "Wealth Actually" and the host of a podcast that discusses topics related to finance and wealth management even though that was not the initial plan for the podcast.
Pendleton Square Trust is an administrative Trust company that fulfills the function in a Trustee role aimed at helping families get access to good Tennessee jurisdiction.
3 main Functions of a Trustee: First is the administrative function which includes safeguarding and reporting on assets, paying the taxes. The Second is the distribution of the asset to beneficiaries. The third function is the investment management of the asset which is excluded at Pendleton, Frazer believes most places don't do everything well.
A trustee does not have to be a corporation, it can be an individual acting as a trustee with the ability to perform all 3 key functions, however, it may be difficult to find one person who is great at all functions.
A lot of families would prefer to have more control, and a private trust company allows them to control the aspects they're comfortable with and outsource the rest.
There is a possible conflict where corporate trustees who also provide asset management services invariably provide their asset management services.
The most common customer for the company is a US family that is either actively transferring wealth from the first generation to the second generation or generally has a multi-generational approach.
For those families that have taken their hands off the wheel in terms of managing the wealth, the Trust company operates more like a family office but for those still actively engaged in the continuation of the business, that business becomes the real center of the family office.
One of the real destroyers of wealth is bad communication amongst the family, this leads to conflict, which leads to litigation and litigation is expensive
There's a lot of good work that needs to be done ahead of building the structures so that you're not only setting something up that takes care of the money for the family, you're also getting the family ready for the money.
Family or Shared Philanthropy is one of the tools that helps to work with families as it gets the family members to express their interests and helps them work together while considering the needs of each other.
The Vacation Fund Concept: This is another tool, and the idea is to have the kids make a joint decision around the investment of money by getting them to plan the vacation based on a particular amount available. It helps identify which kids have aptitude and interest, the aggressive or conservative ones, and other responses exhibited by the kids towards the task. Summarily the kids get involved in financial planning and learn critical points related to it.
The idea of a Family Bank is putting structure around the request of money for projects so that it forces preparedness in front of real people who have to make a decision. Learning that persuasion is important helps the next generation to deal with the real world.
It also provides an opportunity to combat the situation of assets growing linearly being overtaken by liabilities growing geometrically, as more opportunities explored can increase the growth of assets.
There's a big difference between Operational succession and Ownership Succession of a family business, the difference in roles may mean some people get paid more but this needs to be discussed earlier on before the transition period.
From Frazer to his kids: I think the most important thing anyone can have in their lifestyle is the ability to be comfortable in their skin. The concept of trying to please other people's sense of success is a difficult road because you're never going to please everyone all the time, more so you will be running from things that could be your path to success. o
Run your own race, be comfortable in your own skin.

Episode Timeline:

[00:46] Introducing today's guest, Frazer Rice, Regional Director for Pendleton Square Trust Company.
[07:26] About Pendleton Square Trust Company and Wealth Management.
[08:46] The 3 main functions of a Trustee.
[11:21] In the US, do families have to appoint a company to act as Trustee in an administrative capacity.
[12:16] The concept of a Private Trust Company.
[18:54] Who would you say is your most common customer?
[28:02] Frazer shares tools used when working with families.
[32:51] The Vacation Fund Concept.
[38:40] Frazer's insight on a Family Bank.
[47:57] Frazer's letter to his kids

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Special Guest: Frazer Rice.