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Financial adviser helps clients answer question: 'What is wealth for?'

This article first appeared in the St. Louis Beacon, Dec. 14, 2011 - You rarely hear the words "wealth" and "burden" in the same sentence. Charles Lowenhaupt is out to change all that.

Lowenhaupt, a third-generation money manager who runs his own firm, Lowenhaupt Global Advisors in downtown St. Louis, is co-author of a new book, "Freedom from Wealth," written with Donald Trone.

In the book, Lowenhaupt urges those with enough money to worry about to ask themselves one simple question: What is your wealth for?

By forcing them to take a step back from the daily business of making money and instead think about how they are going to use it, Lowenhaupt wants to make his clients - and his readers - see their true selves and determine how their assets can help make their dreams come true. That way, money becomes less of a burden and more of a tool.

How does that approach work? What does it accomplish?

In the book, he tells of speaking at a family wealth conference and finding himself seated next to a woman who introduced herself as an artist. He explained his approach to wealth. She told Lowenhaupt she was there to learn about hedge funds - not because she cared anything about hedge funds but because the family office that managed her wealth put her on a committee to decide whether to invest in them, so she figured she had to learn about them.

She went off to the hedge fund session, and Lowenhaupt went to give his talk on freedom from wealth. About five minutes into it, he noted the artist come into the room, so after his talk he asked her what made her change her mind and listen to him instead of learning about hedge funds.

"I sat through the first few minutes of that hedge fund session terribly bored," she told him. "The refrain 'freedom from wealth' played in my mind until I decided to hell with hedge funds. I am an artist. I can hire people to decide whether and how to invest in hedge funds."

Not all clients experience such a sudden flash of insight, Lowenhaupt says, and in many cases, cultural differences conspire to prevent people from enjoying all that their wealth can help them achieve. But, he adds, the question of what wealth is for is becoming more common.

Lowenhaupt's portion of the book talks about the issue in detail while Trone's concluding section gets more into how to carry such a strategy out, moving from the why to the how.

Lowenhaupt's grandfather was one of the nation's first tax attorneys, making it a specialty about the time the federal income tax was created with passage of the 16th amendment. His father carried on the family business, then he joined as well. He also heads the law firm founded by his grandfather, now Lowenhaupt & Chasnoff. We spoke in his office on South Broadway near Busch Stadium.

What do you mean by freedom from wealth? What is wealth for?

Lowenhaupt: I've spoken to audiences around the world and I always say the starting question is what is the wealth for. Wherever I say that, people always come up and say that no one has ever asked that before.

Wealth is not for creation or preservation; it should be used to accomplish something.

If you start by asking what wealth is for, you and your adviser can develop a strategy. You may want it to be for philanthropy, for the next generation's education, for investment. That is how you get freedom from wealth and figure out how you can become all you can be, what I call self-actualization.

That simple concept resonates in St. Louis and Mumbai and Sydney and Hong Kong and New York, but it's rarely spoken of in those terms.

If wealthy people want to disengage from actively managing their assets, how do they find someone to trust?

Lowenhaupt: The financial service industry sells products based on complexity. If I believe that everything is very complex and I'm a wealth holder, I go to my financial adviser and say, "This is really complicated stuff, what do you have that can take care of me?" If I start by saying "This is what I want to accomplish, what do you have that can accomplish it for me?" and they don't have anything that can accomplish it, they're in trouble.

I was in New York when Bernard Madoff was arrested. I was meeting with a woman who had managed family wealth. I showed her The New York Times, and she turned white. She said, "The family I worked for had all of its liquidity with Uncle Bernie, $1.2 billion, and it's all gone now." Another lawyer to me, "I represent seven families who were billionaires yesterday and are broke today."

I said to them, how could you do that? She said, "Oh, we trusted Bernie. You have to understand Bernie had integrity with us."

Flying home to St. Louis, the more I thought about it the more I realized that any good crook has to start with a reputation of integrity. I realized that trust is a little like love - telling someone not to trust Bernie is like telling someone not to love his wife.

How has wealth management changed since the recession in 2008?

Lowenhaupt: I was at a cocktail party in 2008, when all hell was breaking loose. I went up to a woman whom I knew who had a billion, billion and a half dollars, and said "How are you?" "How am I - how can you ask? Things are awful. I'm terrible." When she finally slowed down, said she her portfolio was down 40 percent. I asked her, 'What can you not do with $600 million that that you could with $1 billion?' She couldn't answer and got very frustrated. She said, "You're being silly."

But it was a very serious question. I went up to another woman and asked how she was, and she answered, "I'm not doing well. My 21-year-old daughter was just diagnosed with terminal cancer." She really was not doing well. Without perspective, it can be just chaos.

What role does philanthropy play for people with such wealth?

Lowenhaupt: Here are two examples.

Fifteen years ago, if I had said Bill Gates, you would have said Microsoft and antitrust violations. Today, if I say Bill Gates, you are more likely to say education. He contributed globally to education because he had a bad global reputation. That is exactly what Andrew Carnegie did here, with money for libraries. He rebranded himself. I don't think it's incidental that for Bill Gates, his father led that effort, because the father shares the same name.

I've seen numerous cases of family foundations that build communication systems and the family members work together around philanthropy. That has to be done very strategically.

Shortly after Sept. 11, I was to give a program where we could take young people into one room and old people into another room and ask the same question: Should in-laws work in the family business? Then we would bring them together. After Sept. 11, I changed it to ask, "How has Sept. 11 changed your attitude toward your wealth?"

The old people in the room talked about community need. They were going to give more money to their foundations because the world needs more support. The young people started talking about private jets and investment opportunities. We brought them together and said listen guys, the old people are talking about foundations and the young people are talking about private jets. What's going on here? One of the young people said philanthropy is just one more way our parents have to control us and our money. These kids all had parents who were not using their wealth strategically. What's worse than using your wealth for control?

Are there cultural differences in approaches to managing wealth?

Lowenhaupt: You can never talk of philanthropy with Chinese families. It turns them off immediately They don't believe in it. They will use their wealth to build hospitals or schools or museums, but to them that is duty, not philanthropy. It serves the same purpose. It connects their wealth with the community. Whether you call it duty or you call it voluntary philanthropy, it does the same thing.

I worked with a South Indian family that goes back six generations. They have a policy in the family business that if a family member wants to work in the business, they have to spend one month every summer in the village where the family comes from, living in a hut and performing social services. I said that's great philanthropy, but the family told me, that's not philanthropy, that's what our company does. What better way to build an understanding of where the family came from than that kind of program?

Note: Lowenhaupt is a donor to the Beacon.

Dale Singer began his career in professional journalism in 1969 by talking his way into a summer vacation replacement job at the now-defunct United Press International bureau in St. Louis; he later joined UPI full-time in 1972. Eight years later, he moved to the Post-Dispatch, where for the next 28-plus years he was a business reporter and editor, a Metro reporter specializing in education, assistant editor of the Editorial Page for 10 years and finally news editor of the newspaper's website. In September of 2008, he joined the staff of the Beacon, where he reported primarily on education. In addition to practicing journalism, Dale has been an adjunct professor at University College at Washington U. He and his wife live in west St. Louis County with their spoiled Bichon, Teddy. They have two adult daughters, who have followed them into the word business as a communications manager and a website editor, and three grandchildren. Dale reported for St. Louis Public Radio from 2013 to 2016.

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