MANAGING A CLAN WORTH $1 BILLION The Pitcairns of Pennsylvania have their own church, their own school -- and a fortune. Now they're opening up and marketing their financial expertise to others.
By William E. Sheeline REPORTER ASSOCIATE Sandra L. Kirsch

(FORTUNE Magazine) – PRESERVING family wealth has been a struggle since God told Adam and Eve to be fruitful and multiply -- and promptly banished them from the Garden of Eden to a life of earthly toil. Not until the 19th-century English economist Thomas Malthus analyzed God's math did anyone formally articulate why it's so hard to keep money in the family: As a rule families multiply geometrically, but accumulated wealth, the fruit of their labors, increases only arithmetically. Estate planners, asset managers, and trust company officers spend their careers wrestling with those inexorable Malthusian curves. Now come the descendants of John Pitcairn, a co-founder of the Pittsburgh Plate Glass Co., today called PPG Industries. They have set out ''to beat old Malthus at his game,'' in the words of Feodor Pitcairn, 55, a grandson of the founder and chairman of the Pitcairn Financial Management Group. They invest their $1.3 billion inheritance, 70% of it locked into trusts, through that family company. What's more, they hope to parlay their experience with great wealth and their nearly 70 years of operating a family office into a financial services company for others equally well off. There have been four generations of Pitcairns since founder John; the dynasty now numbers 334. Theirs is a strange, almost medieval heritage. Most have grown up in their own sheltered community, Bryn Athyn, a small borough atop a wooded hill 18 miles north of Philadelphia. They belong to the Church of the New Jerusalem, a sect based on the writings of Emanuel Swedenborg, an 18th-century Swedish mathematician, physical scientist, and theologian. They worship at the massive, handcrafted Bryn Athyn Cathedral, endowed by Pitcairn money and completed in 1929. They go to school together at the nearby Academy of the New Church, also endowed by Pitcairns. The family, which liquidated its 15% stake in PPG five years ago, opened the doors of the Pitcairn group to outsiders last year. Thus far it has attracted 13 clients with about $100 million in assets, and hopes to add ten to 15 more each year. The company offers estate planning, trust and asset management, tax counsel, accounting, insurance, and financial planning tailored to wealthy families, and it will soon provide private banking as well. It's a growing market, because there are more rich families than ever in America. The company believes that as many as 500,000 individuals now have between $10 million -- the Pitcairn minimum today -- and $100 million in manageable assets. One satisfied customer, Earl M. Latterman, 60, sold his steel-plate products company in Pittsburgh a few years ago and turned most of his assets over to the Pitcairns. He is familiar with bank trust departments but preferred a family-oriented approach. Says he: ''It's a marvelous opportunity to tap into all of their capabilities. There is nothing else that provides these advantages. My thinking is multigenerational, and it's comforting to know that if I'm not on the scene, my wife is going to have as her investment partner people who have this level of ethics and ability.'' The Pitcairns have not escaped the hazards of inherited wealth, which often binds descendants to a fabled past even as they dissipate the money that helped make their heritage so splendid. Ultimately, a family feud usually breaks out, and in the battle the family flame is dimmed or extinguished. For the Pitcairns, the first flicker of trouble appeared in 1983. Kirk Pendleton, now 50, a hard-driving fourth-generation family member who was then chief executive of the family company, tried to shake it out of what he saw as its complacency. That disturbed his four uncles who serve as the major trustees and keepers of the family purse strings. They forced him out, and the rift traumatized the family. The company underwent a series of restructurings. Longtime non-family employees were eased out or retired, and investment performance suffered. The company had always paid dividends to the accounts of family shareholders, but younger members began to clamor for a more liquid investment. A handful wanted out altogether. Only recently, the family members who run the company relented in the face of threatened legal action and devised a way for roughly a dozen disgruntled relatives to appoint their own trustees and pull their accounts out of the company. That experience, combined with opening the company's doors to outsiders, instilled a newly competitive attitude in the family officers and directors. ''We don't take anything for granted, and obviously we have to earn our way with the family every day,'' says Feodor, a tall, thin egret of a man who is one of the four major Pitcairn trustees. ''We have to deliver a superior financial service to retain their loyalty.'' The company occupies a sleek, three-story glass-and-concrete building tucked into the side of a hill in Jenkintown, five miles south of Bryn Athyn. Last year the polished, no-nonsense Hans Ziegler, 49, took over as chief executive. His quarter-century of experience working with wealthy families includes seven years as head of U.S. private banking at Chase Manhattan. Ziegler believes the company's array of services is superbly tailored to its clients: ''The question is, Are there providers that meet the needs of affluent families? The answer is, Yes, but apart from ourselves no one provider does it all.'' Dirk Junge, 41, vice chairman and a great-grandson of John Pitcairn, is a 16-year veteran of the investment department. An almost boyish booster of the company's new mission, he helped develop the client-oriented approach and welcomed the decision to bring in new customers. Treasurer Duncan Pitcairn, 34, has designed a sophisticated proprietary software system that integrates every aspect of a client's account -- investment portfolio, insurance, estate planning, taxes, banking -- and brings it all to a single screen. Clients and family members who want them have computer terminals that allow them direct access to their accounts, which are updated nightly. They can send the company instructions -- to pay bills, move funds, raise cash, or advise them on the purchase of a yacht, for example. Says Sara Hamilton of the Family Office Exchange, a Chicago-based consulting firm: ''Every private bank in America would love to have this computer program. In that area they are the best in the country, bar none.'' One appealing investment the company offers is the Family Heritage Fund. It seeks out companies that display qualities typical of well-run family concerns -- solid links between ownership and control, a strong corporate culture, clearly defined rules of succession, and a conservative balance sheet. The fund manager, Mark Cunningham, identified 132 companies where a single family owned or controlled a 10% to 54% interest and that from 1969 through 1989 had an average annualized return of 18.13%, vs. 11.53% for the S&P 500. Among them: Anheuser-Busch, Dow Jones, and Kellogg. The fund is new and so has no track record, but Pitcairn officers believe the roughly 30 companies they have picked so far are the best of the bunch. JOHN PITCAIRN, a tightfisted Scot, worked for the Pennsylvania Railroad for nearly 30 years before founding Pittsburgh Plate Glass in 1883. Beyond his fortune, his legacy to the family was twofold: a reputation for scrupulous honesty in business dealings -- and the community of Bryn Athyn, the product of his devotion to the Church of the New Jerusalem. There are about 20,000 Swedenborgians of different sects worldwide. The Bryn Athyn community, largest of several in the U.S., has about 2,250 members. Swedenborgians believe that God has a use for every person, and that the purpose of life on earth is to be useful. Perhaps more than any other, this tenet permeates the daily lives of the faithful. ''It does not mean that you have to be a research scientist,'' says vice chairman Junge. ''But it's very important that you commit yourself to being a productive person.'' Pitcairn's three sons, freed from the need to work, immersed themselves in a variety of activities. Raymond took part in Republican politics and also designed and oversaw construction of both the Bryn Athyn Cathedral and a stone castle that he named Glencairn, which housed his collection of Greek, Roman, and medieval art. Harold, the youngest, helped develop the autogiro, a gangly precursor to the helicopter. A highly religious man, he held weekly dinners in his home at which friends from the community discussed Swedenborgian doctrine. Theodore, the middle son, was a New Church minister who split off and started his own sect a few miles away. He was an avid collector of art, including works by Monet, El Greco, and van Gogh. THE THREE BROTHERS formed the family company in 1923 to benefit from pooling their $16 million inheritance. For 60 years it paternalistically ran not only the joint investments of the family -- principally the major stake in PPG -- but also the financial affairs of individual members. The third generation didn't have to balance a checkbook or haggle over the price of a home; the company handled it. The answer to any financial question was always: ''Check with the company.'' Some daughters even brought their prospective husbands to the company office, seeking a kind of tacit approval. To carry the wealth forward, the three brothers set up an array of generation-skipping trusts. By the early 1960s, the family was growing fast and new trusts were rapidly splintering the fortune. Harold was killed by his own gun in 1960. Theodore was busy with his church. Raymond found none of his children or nephews temperamentally suited to run the family office. He brought in his son-in-law, Jim Junge, a chemical engineer who had grown up dirt poor in a Swedenborgian community in Glenview, Illinois. Junge's humble demeanor masks bedrock business instincts. Now 69, he took over the family company in 1963. The company's investments -- then worth about $240 million, three-quarters of it consisting of a 30% stake in PPG -- had been drifting sideways for some time. Junge continued the company's paternalism, causing considerable resentment among some family members, including a number who tried to break free of the trusts. More important, he set out to build the family fortune, rather than simply to conserve it. ''As I saw my job,'' says Junge, ''it was to rekindle in the company the idea that it was fun to make money.'' With the help of a few key professionals, Junge, the father of Dirk, the present vice chairman, began to manage the PPG investment more actively through his seat on the PPG board. He helped improve management and strengthen R&D, and advocated diversification away from the plate glass business into other areas. Junge also sold blocks of the family's PPG stock and invested the proceeds elsewhere. The family fortune grew to nearly $1.2 billion by 1985. Among the notable successes during that period: a $200,000 investment in Quotron that ultimately returned $64 million, and a $3 million real estate venture in 1969 that was sold for $75 million in 1985. Kirk Pendleton, a straight-backed national wrestling champion at Lehigh, was Jim Junge's chosen successor in 1980 and seemed well-suited to the job. He hoped to continue building the family fortune. He also believed that the office was run too much like a country club, and tried to cut costs. He thought family members working at the company, and the trustees in particular, were putting their own interests ahead of those of other family shareholders. He says, ''I set out to run the company the way, as a professional investor, I wanted companies to be run.'' In a letter to the family last fall, Kirk's mother, Gabriele, 76, John Pitcairn's oldest living grandchild, offered a clear-eyed assessment of the family legacy: ''My generation inherited neither the great financial wealth of our fathers nor the capability and energy required to be creators and builders. We basically lived our lives looking back at a utopian kind of existence that prepared neither us nor our children for the realities of making it in the real world.'' Rich kids who fail to make it in the real world and are content to live off their money usually inherit their lack of direction from their parents, according to professionals who tend to the wealthy. ''Very simply, it's what your parents do with their lives that sets the example, not what they tell you about wealth,'' says Peter White, one such consultant. The handful of nonworking members of the Pitcairns' fourth generation who simply live off their trust income are passing down a pensioner's lifestyle to children who, having inherited a smaller piece of the family pie, won't have that luxury. Some in the fourth generation, one cousin says, ''fly airplanes, go fishing, play with their children. It's sort of like early retirement.'' AS A CONSEQUENCE, the family company is stepping up its efforts to educate younger Pitcairns, as well as the children of new clients, through investment seminars and five-day visits to the offices. With the help of a consultant, the 115 adult family members who have opted to stay with the company are working out a written plan to address issues of succession and governance. ''The family has mounted a fairly heroic effort to make the transition from a family patriarchy to a system where many voices can be heard,'' says Hans Ziegler. ''We'll either be very successful, or we'll go down in flames. I don't intend to preside over the latter.'' Duncan Pitcairn prefers to think long-term: ''Thirty years out, I'd like to be able to hand over a 50-story skyscraper crammed full of people working for the company, each one of whom is making $100,000 a year for the family.'' That wouldn't quite beat Malthus at his own game, but it might keep him at bay a bit longer.