“Yellow Light Family” – Proceed with Caution
Last week’s post (Happy to Be Wrong on FEX) talked about the great symposium I attended in Halifax earlier this month.
If you’re a regular reader (thanks!) you know that one of my best sources of blog material comes from these kinds of events.
I often do some sort of “Top 10” of things I picked up, but I’m going to devote this blog to one specific presentation I attended.
In coming weeks, I’ll likely dig in to a few other memorable sessions from the FEX conference.
Green, Yellow or Red Zone?
The symposium had a good mix of sessions; a couple for families only, others just for advisors, but most were open to all.
In this advisor-only session, Jim Grubman of Cambridge Family Enterprise Group presented “Green, Yellow or Red Zone Clients”.
He introduced the concept of the “Two-Axis Model” of wealth advising, with technical issues along the X-axis (horizontal), and personal and family dynamics on the Y-axis (vertical).
In each case, the model ranges from low complexity to high, from left to right and from bottom to top.
The colour-scheme was reserved for the family dynamics axis; green at the bottom, yellow in the middle, and red at the top end.
Technical Bread and Butter
Grubman mentioned that as you go from left to right on the “technical axis”, more complexity is usually seen as a positive for advisors.
A family with complex technical needs is often a plus, in that it allows you to showcase your abilities to solve their issues, and to charge accordingly.
The more people, entities, trusts, and jurisdictions a family has to deal with, the more the advisors will relish the task. At least the best advisors do.
The Family Dynamics Axis
The vertical axis, on the other hand, where family complexities increase, can be a very different story.
This is where the “traffic light” comes into play.
The low complexity families, with little of no conflict, anxiety, addictions, etc. are where most advisors prefer things to be.
Green is good, because there’s no family stuff to trip you up.
As you begin to see any of those issues, you leave the safety of the “green zone” and get into the yellow territory. At this point many who advise on technical issues (legal, tax, trusts, accounting, cross-border, etc.) quickly feel like they’re out of their depth.
Sometimes it doesn’t take much to raise the proverbial red flag, and get the advisors to scratch their heads wondering if they will be able to resolve the family issues.
Break It Down
Here’s where the real value of the presentation came for me. Rather than simply looking at the family dynamics question globally, Grubman breaks it down into several components.
In many cases, one thing sets off alarm bells, but others are hardly any concern.
For example, the sensitive issue could be the family’s level of conflict, their communication style, addictions, perceived fairness, or lack of governance systems.
When you can put your finger on it with greater detail, you’re much better placed to deal with it.
It can also help to look at “state versus trait” variables. There could be a situational factor at play, which may just be temporary. (Traits are fixed, while states are transitory)
Isolate the Issues
When the advisor team can share their views using this type of breakdown, they can pinpoint the issue more easily.
A family that looked red, or “very yellow” can look much less daunting once you see that there is really one key issue that is flashing, and that the others are pretty green.
Coordination and Collaboration
Now I’m gonna switch from what Jim Grubman was saying to Steve Legler’s take.
No single advisor will be able to handle a family with any complexity above green, on either axis.
Technical professionals work together to solve the family’s asset-related issues. On the family dynamics side of things, the same should also be true.
Families will benefit from advisors who can coordinate their activities at a minimum, and hopefully even collaborate.
Inter-Disciplinary Fluency Helps
FEX’s FEA Program helps advisors develop the inter-disciplinary fluency they need to properly serve families.
Knowing what families need, and how the pieces all fit together, is key. And so is being able to work together.
Tools like Grubman’s help us all do a better job for families.