Families new to wealth face different challenges than “old money.” Interestingly, psychologist and author James Grubman, Ph.D. says the challenges are similar to those confronting immigrants to a new land.

“Immigrants to wealth” is the phrase Grubman uses to describe G1 (first generation) millionaires. The parents have grown up in the Old Country of the middle class – struggling to establish themselves and succeed – while the children now live in the New World of riches, where the rules are different and can be baffling.

We first learned of Grubman’s work through Malcolm Gladwell’s latest book, David and Goliath. And we were immediately intrigued, since at LNWM we work with generations of families across the wealth spectrum, from G1 to G7.

Go FISH

James Grubman’s new book, Strangers in Paradise: How Families Adapt to Wealth Across Generations, came out about a month ago (November 2013).

One of Grubman’s main points is that immigrants to the New World of Wealth should consider their “capital” as not just their financial wealth. Here at LNWM, we’re big believers in this approach. We advise families to look beyond their financial capital to the life resources and values they have to safeguard and develop.

If you want to avoid squandering wealth after just a few generations, says Grubman, focus on all aspects of family capital. And we totally agree. He calls the four different types of capital FISH (Financial, Intellectual, Social, and Human), after the work of wealth psychologist Lee Hausner. Lee, by the way, is a fantastic speaker and writer whom we’ve had out to speak to clients.

The “H” Factor

For many families new to wealth, human capital (“H”) is the hardest to develop inter-generationally. It has to do with instilling core values focused on education, achievement, leadership, duty and obligation. Without money to act as incentive, parents have to work wisely and diligently to combat complacency and a sense of entitlement.

When kids ask for something perhaps a bit too extravagant, the adults need to be able to say “No, we won’t.” Kids like to test limits and push buttons. As parents some of us know this first-hand: It’s important to learn how to say no, in no uncertain terms: “Sure, we can buy that for you, but we choose not to. It’s not consistent with our values.”

Of course, this is easier said than done. It requires that families know how to articulate their values and know how to make these values real for their kids. All this is hard to do in any family, but especially those new to wealth.

We’ll have a full review of James Grubman’s book in a future post. In the meantime, we’d love to hear how your family is passing on its values to the next generation.