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Family Matters: Staying Wealthy, Happy and Wise in 2020 and Way Beyond

It’s not easy for a family to stay wealthy, happy and wise — through crisis years such as 2020 and generation after generation.  In one of his recent books, James Grubman Ph.D. presents a slew of ideas and suggestions on how to do just that. For some insights into Grubman’s book, Strangers in Paradise,  we sat down with LNWM Client Advisor Ross Henry to talk about Grubman’s work, especially as it applies to people who are new to wealth, the so-called G-1 (first generation) millionaires. As Grubman points out, an estimated 80% of the high-net-worth families in the United States are G-1.

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Q&A with Ross Henry, LNWM Client Advisor

Q: Ross, you’ve been a wealth advisor for a very long time. What struck you about Mr. Grubman’s advice to those new to wealth?

Ross: I really like his basic premise: that those new to wealth are like immigrants to a new land. And like immigrants, they have three major ways of living in the New World of Wealth:

Avoidance – basically, you resist any change to your life, including how you manage your money. Often, you remain distrustful of wealth advisors (and therefore continue to manage your own money). And you try to hide or downplay your wealth to your family and children. In the book, this is the story of Joan, who to please her husband goes all out to downplay the windfall profit from a business sale.

Assimilation – this is pretty much the opposite of avoidance. Here, you totally go after the “lifestyles of the rich and famous.” You forget or deny your middle-class roots and become vulnerable to bad advice and manipulation. The kids tend to suffer from what Grubman calls “a lack of grounded values and a distorted sense of self esteem.”

Integration — here, you’re embracing both where you came from and where you’re going. You’re definitely not in denial about your wealth, so you seek out advisors you can trust and then bring your children into the discussion about how to use and manage money. I think this is the best of both worlds, because it lets families carry forward their middle-class values and apply them to how they manage their wealth.

Q: Ross, the sitcom Arrested Development presented three different ways to deal with G-1 wealth – the mom and most of the kids are extreme assimilators, the father probably an avoider, and just the one son is an integrator trying to bring everyone together.

Ross: Yes, family members often have very different reactions to wealth. But it’s really important to come to some sort of consensus. As Grubman advises, wealth can help bring families together instead of tearing them apart. That’s because members of wealthy families, probably more so than others, need to work closely together. They have to stay self-motivated and independent as individuals, and at the same time embrace the inter-dependence that comes with deciding how to manage the family wealth.

For wealth to continue over the generations, it can’t be based on one person calling all the shots. To succeed, family governance should ideally be based on policy. So some families create mission statements that spell out the family’s values and establish the ground rules. At LNWM, we try to encourage policy based decision making, as much as possible.

Q: So how do you get all the family members on board to develop and implement a policy based approach?

Ross: I think a big part of that is a family narrative that helps to provide cohesion, purpose and values. As Grubman says, the narrative creates a shared sense of community and contributes to family’s ongoing success. This narrative is the story of the family’s wealth creation and the principles that bind the family. The purpose is NOT To pump up egotism and an attitude of “aren’t we special.” It’s to make the members focus on what’s important to them as a family.

Q: What else did you find useful in this book?

Ross: For me, one of the key things is the focus on getting family members involved, in meeting with advisors and getting an idea of how the family money is being used and invested. I have had some clients bring their children to meetings with me.

Family meetings with advisors allow for some interesting things to happen. The family members get familiar with what the advisors do, and they also start to get familiar with the vocabulary of asset management. This lays the groundwork for policy based family governance.

I also liked that Grubman talks about getting the kids involved in the actual decision making, in an appropriate way. This paragraph stood out for me:

“The industries of estate planning, philanthropy and wealth management stand at the ready with ideas and recommendations. But it is the successful acculturation of the family and its members that contributes to a good outcome, not just clever estate planning strategies that treat the money as the client.”

These words really resonated with me because that’s what we do here at LNWM. We don’t treat the money as the client. Our focus is always on the actual client and their family.

Ross Henry

Ross is a Senior Director, Client Services at Laird Norton Wealth Management. He has more than 20 years of financial services experience, with a special focus on family-owned businesses and closely held companies.