Jim Grubman and Dennis Jaffe recently worked with Angelo Robles of the Family Office Association, Guiding Governance: Clarifying the Practice of Family Enterprise Governance. In this illuminating Q&A format whitepaper, Jim and Dennis discuss the importance of developing a family governance plan to assist families of wealth with decision-making and long-term planning.
Adaptation to Wealth
Adaptation to Wealth
The central concepts outlined in depth in Cross Cultures: How Global Families Negotiate Change Across Generations are summarized in two articles by Jim and Dennis from late 2015. The STEP Journal article provides an overview of the three main global cultures and the implications for advisors working with global family enterprises. The second, published in Tharawat magazine, focuses more on the implications for families themselves.
Part I outlines the many problems inherent in incentive trusts and offer a groundbreaking alternative: the Financial Skills Trust (FST). This new approach to trust design integrates estate planning with what experts have learned over the past thirty years about the most important financial skills needed in adult life.
In Part II, we further delineate the principles and procedures behind the Financial Skills Trust and the Results-Oriented Trust Environment™ (ROTE™).
A surprising statistic is that typically 75% - 80% of wealthy households have come to wealth within their lifetime. Only 20% or fewer of the wealthy have been raised with inherited wealth. First-generation wealthy families ("New Money") are much like immigrants, having traveled from the economic culture of their birth to a much higher economic level, what we might consider "the Land of Wealth." Affluent individuals born into wealthy families and raised in fortunate circumstances are akin to "natives of the Land of Wealth" and have different perspectives on money, life, and identity. Many of the stresses experienced by individuals and families of affluence are similar to the stresses found in immigrant families, including the strains between first-generation parents and their native-born children and grandchildren.
This analogy has been explored in a series of articles for families and wealth managers, with recommendations for approaching these issues by the trusted and thoughtful advisor. For a quick overview, see:
James Grubman, Ph.D, Dennis Jaffe, Ph.D and Keith Whitaker, Ph.D. Private Wealth Magazine, 2009
An article from the Journal of Wealth Management in 2007 is the first detailed explanation by Jim Grubman and Dennis Jaffe of the major differences in life experience, outlook, needs, and goals for those who acquire wealth versus those who grow up with wealth. It is a comprehensive review of the literature on the psychology of wealth up to that time, with an extensive list of references. It also contains the initial allusion to the now-accepted “immigrants and natives” metaphor. This article’s depth and detail were later significantly expanded in Jim’s 2013 book, Strangers in Paradise: How Families Adapt to Wealth Across Generations.
Many families tend to avoid talking about money, unfortunately with wide-ranging consequences. Children can be left in the dark about how to think about money or handle their finances, creating needless mystery and anxiety around money. Wealthy families are not necessarily more adept at talking about money than middle-class families. They may in fact communicate less, due to a culture of secrecy around wealth. Yet affluent parents possess much information which the children eventually need to know. All too often, this information doesn't come out until circumstances force the issue.
There are ways to understand the differences between healthy privacy and unhealthy secrecy. This article can help clarify know how and when to face anxieties and break the silence around money.
The broad population of affluent families contains many high-achieving individuals with ADHD and/or learning disorders (LD). In one of the few published articles on this important topic, Dr. Jim Grubman and colleague Dr. Jerry Schultz discuss one family's situation and how the strengths and stresses of ADHD/LD can be managed successfully in wealth management.
Great role models can help foster crucial skills and attitudes about money for the next generation. This article for the Pitcairn Family Offices client newsletter provides down-to-earth advice for grandparents wanting to do the best they can for their grandchildren in learning about money and ultimately about wealth.