Let’s Talk Family Enterprise Podcast Episode #29

Host: Steve Legler

Guests: Dr. Jim Grubman

Host Steve Legler speaks with Dr. Jim Grubman about everything from “Wealth 3.0” and the Ten Domains of Family Wealth to the importance of having knowledge, skills and the ability to learn to play well with others.


Welcome to Let’s Talk Family Enterprise, a podcast that explores the ideas, concepts and models that best serve Family Enterprise Advisors in supporting their clients.

All views, information and opinions expressed during this podcast are solely those of the individuals involved and do not necessarily represent those of Family Enterprise Canada.


Steve Legler speaks with Dr. Jim Grubman about everything from “Wealth 3.0” and the Ten Domains of Family Wealth to the importance of having knowledge, skills and the ability to learn to play well with others.

underlying ideas, concepts and models that help family enterprise advisors better serve their family clients brought to you by family enterprise Canada. All views Information and opinions expressed during this podcast are solely those of the individuals involved and do not necessarily represent those a family enterprise Canada.

Hello, and welcome to another episode of The let’s talk family enterprise podcast. My name is Steve Legler. And it’s great to be your host once again. Today’s guest is someone who’s familiar to many of our listeners, as he has presented live and family enterprise Canada symposium. I’ve been a guest on our webinars over the years. Today I’ll be speaking with Dr. Jim Grubman, a consultant to families of wealth family enterprises, and the advisors who serve them. He’s the author of strangers in paradise how families adapt to wealth across generations, published in 2013, and the co author of cross cultures, how global families negotiate change across generations in 2016 with Dennis Jaffe, who was our guest back on episode 11. I continue to cross paths with Jim at various events from FFI to ppi and more recently, the ultra high net worth Institute. We’ve gotten a lot of ground to cover. So let’s say hi to our guest to kick things off. Jim Robin, thanks for joining us today. Welcome to the let’s talk family enterprise podcast.

Great to be here. Stay thank you so much for having me.

So I mentioned the ultra high net worth Institute, which I guess a couple of years ago didn’t exist or was just coming into being and I saw that through the ultra high net worth Institute, there was this new model called the 10 domains of family wealth, and I saw that I guess last summer and I was instantly intrigued and thought this would be an interesting subject to bring to our listeners, who are the hundreds of family enterprise advisors across mostly Canada but a few other places as well. Then we talked last week, you and I about this podcast, and we went all the way over to like playing well with others and how important that is and that all ties in. So where do you start?

Yes, it goes. It’s like that. Everything I learned in kindergarten is what I still use. Yeah, and sometimes in advising the families and and working with other advisors, you have to use the same principles as we learned in kindergarten, including how to play well with others.

It’s really interesting because the whole FBA program that our listeners have gone through is really all about learning to collaborate and how hard it is to have people from different domains of expertise all work together in service of a family because we all have a different business card, a logo on a business card we have sometimes, or we all have different ways we get paid. And this model about the 10 domains has one, the one domain that’s at the center of it all is the advisor client relationship. But really, that sounds like a singular thing of one advisor with the client, but really it should be plural because there are normally a bunch of advisers. And it’s also important not to think of the client as a singular entity when it’s a family.

But it’s funny because this is something that the Institute has been learning over the past 18 months as we have been working with the model. We’re probably going to change the wording on that to something more like what you just said, which is probably going to be something like the family advisors or advisory relationship to shift from the inadvertent emphasis on what seems like a single advisor and the single client to broaden it out to be much more about the broad family and the advisory team. So you know, you’re right on point with that.

So the 10 domains, so there’s that one in the center and of course, there’ll be a link somewhere so people can go and check this out or just go to the ultra high net worth Institute or Google the 10 domains of family wealth, you’ll you’ll get to the visual, but the nine domains that surround it are grouped into three different groups, wealth, creation and stewardship, which involves a lot of the stuff that we traditionally think of on the structural side. Then there’s cultivation of family capital and human advancement, each with their own three domains within within that and as someone who participated in last summer’s ultra high net worth Institute conference, I always amazed at how many people were in attendance from the first group. The people have never enough management and law and they sort of all act like they had everything covered and they were discovering all these other domains where they did not have the knowledge or the skills to act with their clients.

Absolutely. And I think that’s something that is not only what the institute is trying to foster has conversation, but I think it is representative of the development of our field. itself, which is wealth management, broadening out in the last 20 and 30 years, from pretty much a focus on the money to a full understanding of all of the 10 domains involved in serving families. And I think it’s a little bit of a struggle in the field of wealth management where the ones who focus on the money have traditionally thought of themselves as the people doing the work and others have had to either fight for their place at the table or remind advisors that families have many other needs. And I think that that’s part of what’s growing now. That emphasis on and skills for the other domains are really coming forward and taking their place around the table and getting good recognition.

So I think where you’re going with this now is to talk about wealth 3.0 And I know you present it on on a wealth 3.0 A couple of years ago at the PPI rendezvous, and I was on your website yesterday and I saw it looks like there’s a book coming out called wealth 3.0 Am I am I sharing a secret too early?

No, it’s It’s almost the other way around, which is I’ve had the idea for the book and to do the book for wealth 3.0 Probably for a year and a half. And I figured I would put it on the website to remind me I gotta be working on this. It’s a little bit of self management, maybe it’s like if it if it’s up there, then it’s real and I should fulfill it. So it’s a motivational kind of stimulus. Okay, basically

what’s been going on why website and add something about losing 20 pounds

you know, when we make public our aspirations then the research says that we’re more likely to fulfill them. In actuality, there I do intend and actually have been doing writing for a book about well, 3.0 and also Dennis Jaffe and Kristin Kessler, who you both know well and I are currently working on an article that will probably be the first in print discussion about the basics of wealth 3.0 Because if we wait around for my reading of the book to see the light of day, we could be waiting a long time and so busy with so many things. So we’re going to do an article that’s going to come out sooner and then hopefully the book will be out.

Yeah, books take longer to write than an article but but that sounds like an interesting group of people working on this fantastic to hear that it’s coming, but just is there a Reader’s Digest version? of what you mean by Well, 3.0

Sure. And it does relate to the Institute and the 10 domains. The basic ideas, I think that we are on the cusp of the next major paradigm shift, and in some sense, generational transition, just like with our families we work with, go through periodic generational transitions. I think that we’re going through a shift if we imagine that before about 1985 or so. The world was in what I call wealth 1.0. That was sort of a wasteland of not much discussion about the lives of everyday family wealth. It was mostly about dynastic wealth, what psychological things were written were very obscure in, you know, a psychiatric journal here or there. That really, pretty much wasn’t much of anything. And what most people thought about wealth was It was great. And rich people have it pretty easy. Starting in the 1980s, and through the 90s and 2000s. We then moved into what I was calling, wealth 2.0. And wealth 2.0 has been this incredible, dramatic transformation of the rise of the voices of inheritors and of the wealthy. From The Millionaire Next Door to significant, multi generational wealth. You know, Joni Bronfman and you may remember her dissertation on the experience of inherited wealth came out in 1987 was one of the first descriptions of the challenges of wealth. And then, you know, through the 80s and the 90s and particularly with J. Hughes, family wealth, keeping it in the family in 1997. was the first edition. Everything that we currently deal with was basically built and it was transformative, as I said, My point was in the keynote, and where I think wealth 3.0 is going now is we are bumping up against some of the limitations and hidden biases and downsides. That got built into wealth 2.0 The main ones number one are a lot of it is very fear based, exemplify exemplified by the admonition Sure, save district slaves and three generations, you know, and although shirtsleeves to shirtsleeves often has been a revelation. It also has a downer, a negative side. For sure. Like they are Willis, his book, The Dark Side of wealth, where it basically says, no matter what you do, you’re probably going to fail. It’s talked about as a curse. By saying it’s universal. It means you know, it’s inevitable. And the language of well, maybe you can escape the curse of short sleeved shirt sleeves. And the way it’s even phrased is it’s absolutely the the proverb doesn’t say, Well, you know, some people experience some degree of shirt sleeves to shirt sleeves. It’s like no short sleeve T shirts later, three generations, period, right? And the repeating of terrible research projects like the 1987 John Ward study about, you know, only 3% of family businesses survive to the third or fourth generation. The Williams and pressors study, which I have actually taken a deep dive into and turns out to be very poorly founded in its allegation of what it calls the 70% rule that wealth transfers will fail. There is no 70% rule. Actually. So there’s there’s a lot of things which basically, we have as advisors, repeated again and again to families that says, Your fears are actually well founded, and likely. And so let’s see what we can do to just try and offset it.

Yeah, then the advisors take that to the extreme and scare the clients into thinking that they must adopt these these structural solutions. So this terrible fate does not a wait, though.

Exactly. This is why trusts are designed in a controlling way. It’s like well, you don’t want to give money to your grandchildren because hey, they tell you about your sleeve t shirt sleeves. And so there’s so many things that are taken as a foundation for doing really tying up the money. Not talking about it. Don’t tell people it’s coming that we now realize has a big downside.

Okay, so that’s that’s wealth 3.0 And you’re talking about generational changes and I think there’s probably some demographic basis to all this as well. And maybe some of those advisors who have been, you know, selling these solutions these past few decades are closer to the exit door of their career. And there are new or younger people who look at things much differently, that are slowly coming in to take their place and that the client families as well. The rising generation are finding a bigger voice and a better seat at the table to drive things. Are you seeing that as well? Yes,

exactly. And that’s part of why I was saying that. I think we’re moving into 3.0 because 3.0 is based on other new paradigms like the rise of positive psychology that says essentially, be careful what you attend to because it’s probably what you will find if you look for the disasters, you will find them. If you look for successes, you will find those. Also, wealth 2.0 was wonderful for starting the field. But we’re bumping up against the fact that we’re a little bit of a victim of our own success. If you go back 30 years, you know the rise of advisors like people with FDA designation, the presence of mental health professionals embedded within financial firms. It has been a cottage industry without professional standards, catches catch can apprenticeship type training, that really has not become much of a professional field. And what we’re finding now is there are more positions needed in financial firms, wealth management firms are embracing family dynamics, governance, succession planning, things like that. So well, we now need professional training programs. We need professional standards. We have to become a real field and that’s part of my call to arms in wealth 3.0 as well and FDA designation is a wonderful movement consistent with that.

And it should not hopefully be taken as the be all end all and well now that I have this designation I’m done and I’m good and I can do everything. There’s still a lot more to learn individually among us and as an industry and that cottage industry of you know, different things going on in different places. Despite the fact that there are these organizations like the the ultra high net worth Institute and FFI and finally enterprise Canada and the purposeful planning Institute. Are there too many organizations out there or do we have to get our act together? How does this coalesce into something with higher standards or more consistency?

Well, you make a good point there, which is it’s not that there are too many. Ironically, there’s too few. That it this is actually normal development. In a professional field, which is in the early stages of the field. There are a variety of grassroots organizations, peer networks, you know, it has helped form community and it has brought people together. The problem, though, is that we have not yet as a community agreed upon standards. Everybody’s sort of doing their own thing. And so the next step is, as you say, to use the word coalesce to distill and coalesce things into agreed upon standards of what is the knowledge base that you need to have, if you’re working in this field. And as an aside, that’s where I think part of the 10 domains model is going to be useful is in curriculum development. You know, you don’t need to be fluent in all 10 domains, but you need to be conversant in all 10 domains. If you’re really going to be working at the top level in this field. There has to be agreed upon standards for skills and competencies. There needs to be some assessment so that the end user has some idea of quality control that says, you know, I’m spending a lot of money on this does this person really know what they’re doing? Is anybody taking a look at that? So the next phase of moving from just community to true professional field with standards is part of wealth 3.0.

So the 10 domains model when I saw it, I instantly said Oh, my God, I think, you know, just as the the three circle model from the 1980s We’re still using it today. And people still talk about I think that this model, hopefully will be something around which all the whole field can coalesce and help us to at least be talking about the same things. But I want to talk a little bit about your distinction between the knowledge and the skills and you’re you’re talking about that we don’t need to be fluid but we need to be conversant and and Dean Fowler used to talk about interdisciplinary fluency. And maybe he was overstating it and really just being conversant is enough, but you have to be aware and have the knowledge that those other fields exist and know your lane, to just make sure that you’re staying in your lane but but knowing that sometimes you need someone in the other lane and be able to bring them in as needed.

You really, I mean, Steve, you’re touching on some of the really fundamental aspects of this. For example, I have sometimes dealt with colleagues who do the mirror image of what I have heard from financial advisors about things like family dynamics, which financial advisors will say, well, that’s really interesting, but it’s not my area. It’s not the core thing. I leave that to other people. I have sometimes dealt with consultants in the field, who knew remarkably little, for example, about trust design. And when we would discuss different things, they would say, Well, I leave that to the estate planning attorney. You know, I’m not trained in that. I was trained in other stuff. That’s not my job and I don’t want to wander the end of that area, because, you know, they have experts for that. And to my thinking, you know, it’s limited to basically somebody who says, Well, let me put it a different way. To me, if you work in this field, you need to have a working knowledge of trusts. You don’t need to be fully trained a state TNA attorney, but you do need to have the knowledge base and a reasonable skill set around working in situations where either a generational issue is going to bump up against the trust design problem, or particularly in Canada. The complexities of estate freezes, you know, all the different things about the unique aspects of estate planning in Canada compared to the US are really important. You cannot, you know, just thanks that done.

You know, I’m thinking about the difference between the generalists and the specialist as you talk about this. And I think a lot of specialists are happy being specialists and only want to stay in that lane because it’s their comfort. Zone, and that’s what they’re trained for. But we probably could use more people who play the generalist role. And maybe that’s where let’s loop back into the playing well with others. And we talk about everyone wants to be the trusted adviser and everyone wants to be the one who’s the quarterback. And there are some different skill sets required for that. And that’s, that’s also now bridging your knowledge versus skills, knowing about things and being qualified to work in those areas are not necessarily the same thing.

Yes, that does bring us kind of full circle to the issue. And this is what the institute is actually focusing quite a bit on now is the concept and the practice of integration to do truly integrated service with families goes beyond just well you know, we do one stop shopping and have financial management and legal and tax planning under one roof. So we do it all. It’s like no, to be a trusted team. And I think that’s what we’re hearing from families and we’re looking at some of the multifamily offices and single family offices that are most successful. They do truly integrated work, where the problems of a single trusted advisor in terms of ego, lack of collaboration, competitiveness, the world is becoming too complex, with ultra high net worth families, for one person to just be the quarterback so to be able to be around the table with accountability and be able to know for example, that when somebody is talking about estate freezes, that the people dealing with family dynamics don’t say what is that they have a working knowledge of it, but they’re able to collaborate with other advisors knowing what the basic principles are in service of the client family. That’s always where we come back to. And it’s

the client family, which is usually a number of people. And so what we’re seeing I think, in many cases is one person let’s call him dad goes to see one person let’s call him or her the estate lawyer and figures Well, I’m going to take care of everything here, one to one. And what we’ve been talking about is a number of different advisors. So now maybe it’s one person from the family or hopefully a couple and now they are dealing with a team of advisors but really what’s often missing is the other family members that are being brought in because they’ve been scared by the three circle by the shirtsleeves to shirtsleeves they they’re afraid to divulge things like how much wealth they have to their to their offspring. We need to get everyone around the table.

You just put your finger on the how well 2.0 intersects in this way, which is the beliefs that particularly the elder generation and what many advisors would call as a primary client. Yep. The beliefs that that person or the parents have flow and dictate what will happen with the rest of the family and have dictated in some cases, some pretty negative actions by the advisors. And so yes, moving toward an integrated model, seeing the client as the family and not the patriarch, working together across domains to achieve solutions. That are proactive and plan for complexity to get the input from the rest of the family from the people who are going to be living with these solutions over time. This is much more of what we’re looking at and wealth 3.0

So you mean you want to have the people for whom you’re making the decisions be part of CO creating what what you’re going to do for them? What a novel.

I always remember one client where I was talking about this, oh, maybe 10 years or more. And in a fairly predictable fashion. He looked at me and he said You want me to give the keys to the inmates for what’s going on. You’re kidding. It’s like why should I let them dictate what’s going to happen with the money they’ll just, you know, do bad things with it. They’re not trained. They don’t know. Why should I do that? Well, I

can tell you I’ve been working with a lot of different sibling groups where they are living with the results of what their parents had done for them. And let’s just say I’ve been doing more mediation in a lot of cases than should have been the case. But that’s what happens. When one well meaning advisor recommends some structural old fashioned solutions to one person from a leading generation. And then they think it’s all taken care of and can move on to the next thing and meanwhile, their offspring are sitting there in the dark waiting to find out what what fate is waiting for.

Well, you know, it’s funny because, again, we come full circle. playing well with others is not just on the advisory side. So what you’re talking about is families, especially sibling groups and cousin groups, from early in the family’s life need to learn how to share, to collaborate, make decisions together and play well with each other as a family group. And I think that was one of the downsides of 2.0 of really not emphasizing enough how much the importance of you know, legitimate things that came forward of you need to build trust, you need to have communication. You need to be able to talk about things but too few of the older generation and families really got that message and they perpetuated a single leadership model that’s not transparent and that is afraid.

And these sibling groups really what they need is practice in working together and solving problems together and communicating together and playing well together and doing things as a group because when that generation that’s ahead of them is no longer around. The wealth that the family has accumulated will be entrusted to this group of people. And it’s not the best time to start learning how to work together after the funeral.

Yes. So there’s, I think there’s a Japanese proverb, I saw one place that basically the best time to when you are thirsty is not the best time to be digging a well.

Jim, this has been really interesting and I want I need to thank you for being here today. Unfortunately, we are getting to the end of our time together. And as usual, I have a couple of final requests for our guests before we wrap up. And so I need to ask you for one book recommendation, something that you’ve read that helped you somewhere along the way in your career. And then the last thing is the one piece of advice from one experienced advisor who works with families to others who also are working with family. So can we start with a book recommendation, please?

Well, Steve, when you told me I was going to need a book recommendation, I gave it a lot of thought and I have a somewhat surprising book recommendation. It is not in any way related to the family enterprise field, but it is read related to what helped shape me and guide my thinking about helping others and the importance of doing well in the world. Both my parents were Holocaust survivors and concentration camps and things. And my mother’s sister, my very beloved aunt Marya went through World War Two in a different way she helped a what’s called righteous Gentile. Save many, many Jews. He was a German, Christian, and together, you know, little known story. They saved quite a few choose and there’s a book. It’s an amazing story about this called the Moses of Rovno ROVN Oh, the Moses of Rob No. And it details some of what happened. And the idea that you need to behave ethically. You need to do well with others and for others, and that sometimes in circumstances you need to stand up for what is right, even when there’s risk in your own life. These are some of the principles that have helped shape me and that I live by.

Well thank you for that. And I’m looking at it right now on Amazon. It’s from 1990 and and it’s still available. And that’s great because it almost feels like some of these lessons of history. We should be reminding ourselves of them at this point in time in our society. So it might be very timely,

but it is it speaks to issues of justice, and social justice and remaining vigilant during difficult times.

And now I need to ask the question that I really don’t like to ask for people who’ve been working in this field for decades. But yeah, what’s one piece of advice because I’m sure you could, you know, have a long list. But let’s just give us one and something we can we can walk out on?

Well, my one piece of advice is be curious. We’ve heard that around lately quite a bit, but I find the components of being curious, listening, interest in trying to understand and being open to learning. Those are fundamental. So always be curious, and you will be able to do great things in the world.

I love it. Um, yeah, curiosity and seeking, seeking first to understand before seeking to be understood is still one of my favorite of the seven habits. So those are some of the skills we can all try to work on. Jim, thank you so much for sharing your expertise with our audience today.

Well thank you for having me. Steve has a great conversations always wonderful talking with you about these things.

listeners. If you haven’t already subscribed, please do so make sure you never miss any of these monthly episodes. Thanks again for joining us. I’m Steve Legler. Until next time.

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