Camp Teaches Newly Rich to Manage Wealth
RENEE MONTAGNE, host:
On Fridays we talk about your money. Today we're going to talk about the growing number of people with lots and lots of money. The wealth boom of the last decade has more than doubled the number of millionaire households in the U.S.
That got our attention, so we called Robert Frank. He's the author of a book on the American wealth boom and the lives of the new rich. I asked him what it looks like in the country within a country that he calls Richistan.
Mr. ROBERT FRANK (Author, "Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich"): Richistan is really three countries. It's Lower Richistan, with people with one to $10 million; Middle Richistan, where those have 10 to $100 million; and Upper Richistan, where people have 100 million or more. Someone worth $10 million today, as I found in my book, actually feels middle class in the world of Richistan.
MONTAGNE: Now, you write that in the last 10 years it's not only the millionaire households that have doubled; the households with 10, 20 and even $50 million have also doubled. How did so many people get so much money?
Mr. FRANK: There are a number of factors that have come together. You have globalization creating huge new markets; you have financial markets exploding in size and sophistication; and you have technology, which is sort of greasing the wheels for all of this to come together, and never before has it been easier for someone to get so rich so quickly.
MONTAGNE: How much of that wealth are these families going to be passing down to their kids?
Mr. FRANK: Americans have always had a conflicted view of inherited wealth. We like to think that we're not an aristocracy, but today's rich want to provide a comfortable life for their kids. So studies show that most of today's millionaires plan to leave at least 75 percent of their fortune to their kids. There are some estimates that show that there's $30 trillion that's going to be passed from parents to their kids over the next 50 years.
MONTAGNE: Earlier this week, you wrote an article about the children of those new wealthy at an unusual summer camp.
Mr. FRANK: I went to a camp in California. It's run by one of these new companies that teach rich kids how to manage all the money they're about to inherit. And all these kids were in their 20s, and they came from real estate families. One was from a trash-hauling empire. Another was the son of California's strawberry king. And they were all there to learn everything from stocks and bonds to how to sell their spouse on a pre-nuptial agreement. So they're really learning how to deal with all the money that their parents were about to leave them.
MONTAGNE: And the idea being these kids might not naturally know how to hold on to all that wealth?
Mr. FRANK: That's right. I mean, they had learned how to spend money very well throughout their childhood, but they hadn't learned to manage it.
MONTAGNE: One thing interesting in this article in the L.A. Times was you asked one parent why she sent her daughter to the retreat, and she said to you: two words, Paris Hilton.
Mr. FRANK: That's right. Paris Hilton has, for better or for worse - most people would say for worse - has set the example for many of today's inherited rich. You know, old money passed on values that were all about thrift and humility, responsibility to the community. Today's new rich are not passing along those values. What they are passing along is money. So today's parents are trying to offset all that spending by their kids with a set of values.
MONTAGNE: After spending time in what you could call rich kid's camp with these kids, what impression did you come away with?
Mr. FRANK: Today's rich kids are so ill-prepared for getting jobs, for managing money. They've just never had to do the basic things that the rest of us have had to do growing up. So my sense is that they will lose this money fairly quickly over time, and all of that inherited wealth will, in the end, go back to people who actually earn it.
MONTAGNE: And did that make you feel just a little bit better?
Mr. FRANK: A little bit, because I knew that the money with these kids will not last for long.
MONTAGNE: Okay. Thanks very much for talking with us.
Mr. FRANK: Thank you.
MONTAGNE: Robert Frank is the author of "Richistan" and writes the daily blog The Wealth Report for the Wall Street Journal.