A conversation with Tom Clark by Xing Zong(2)
C: In the America, too. Our expression is “From shirtsleeves to shirtsleeves in 3 generations”. What that means is that a worker may need to roll up his shirtsleeve to do physical labor. That working generation creates an opportunity for the next generation to go to school. The second generation might make a lot of money. For the third generation, they might become spoiled and lazy and not work hard, just spending their inherited money. If so, they will soon be back to physical labor. I have seen that. A wealthy person can put money in U.S. Trust to protect his children and grandchildren from losing the family fortune. But even that money will dissipate over a long time because more and more people will live on that wealth, which is managed in a conservative way. For each succeeding generation, if they don’t add money to the wealth, they will become less wealthy. Often children of wealthy families don’t have an incentive to work hard and make their own money. They prefer just to spend the money.
Z: China is becoming wealthier. But a lot of rich families don’t know how to manage money. I think this is due to lack of knowledge. U.S. Trust is known for its expertise to manage money for most successful individuals. Generally speaking, what is the typical approach for the successful individual to take care of the wealth?
C: First of all, not all Americans will do the same thing to preserve their wealth. Some of them will do one thing, some of them will do another. One such group are people who operate a business, who make something. For example, often the founder of a factory wants to manage it until he dies. Our suggestion is that he shouldn’t do that if the business grows very large. At some point the founder should turn the business over either to children who are interested in the business, if he has any, or to professional management, meaning someone who graduates from Duke’s Fuqua business school, or Harvard business school. Circumstances change, the founders often can’t change as rapidly as the circumstance. That is not always true but is sometimes the case. Or the founder should sell the business, turning it into cash or stock. Then a firm like U.S. trust comes into play.
We will evaluate the newly liquid wealth. Is it for his children to live well? Is his plan to give the money to a church or to a school or to another good cause? The person who made and owned the wealth has the ability to decide what happens to the wealth. He should spend the income from the money, like the dividend of the bond, not the principal.
For example, the man who founded the factory, or created any type of business, he has talents in becoming successful in that business, but often not in managing liquid wealth. He should hire people who are experts in managing that wealth. They would hire a trust company or an investment management company. Then they don’t have to worry about the money. They can enjoy their life, whatever “enjoy” means to them. Someone else who is expert at managing wealth is now responsible.
Z: It makes good sense to me. Just take Bill Gates for example, he probably wouldn’t spend his time in managing his own wealth, which is a staggering number.
C: I don’t want to talk about Bill Gates because only a foolish man will give him advice! His expertise was in building Microsoft. He launched the Bill & Melinda Gates Foundation, which is the largest foundation in the world. He has done that in his lifetime and is still a young man. I don’t know how he structured the assets of that foundation. My guess is that he hired some professionals, sold some Microsoft stock, and took the proceeds and put it into hedge funds, stocks, bonds, etc. I am pretty confident, even for someone as smart as Bill Gates, he still needs to hire professionals to manage the wealth.
Z: In terms of wealth structuring, how does U.S. Trust optimize every aspect of clients’ financial landscape?
