Independent family office consultant Joseph W Reilly Jr talks exclusively to James E Hughes about his new book, The Cycle of the Gift: Family Wealth and Wisdom.

Here, family office consultant Joseph W Reilly Jr talks to James Hughes about his latest book, The Voice of the Rising Generation: Family Wealth and Wisdom, co-authored with Susan Messenzio and Keith Whitaker.

Hughes was the founder of a law partnership in New York City representing private clients globally and is now retired from the active practice of law. He has spoken frequently on the avoidance of the “shirtsleeves-to-shirtsleeves” phenomenon and the growth of families’ human, intellectual, social, spiritual and financial capitals.

Among other commitments, Hughes is a counselor to the Family Office Exchange, an emeritus member of the board of the Philanthropic Initiative; and an emeritus faculty member of the Institute for Private Investors.

Joe Reilly:  Word is that your new book, The Voice of the Rising Generation: Family Wealth and Wisdom, written with Susan Massenzio and Keith Whitaker, is a bit controversial.  True?

Jay Hughes:  Not if advisors of all types pay attention to the human, intellectual, social and spiritual capital concerns of their rising generation clients, students and patients.  We use the term rising generation in place of the overused phrase next generation.  Advisors need to see them as their clients rather than as their financial capital.  As we explain, often the founder’s dream collapses into a black hole, which leaves the family with only financial capital and the advisors with only the founder as their de facto client—perhaps just as he or she desired.  The book makes clear that helping a family avoid the shirtsleeves-to-shirtsleeves proverb requires process, process and process as a family experiences together how to make good long-term decisions over a very long period of time.

No tax product or strategy or subject matter education on stewardship, financial literacy or anything else offers any utility for this long-term decision making issue, especially if the persons using the advice can’t themselves make the non-natural, non-human tax structures that emerge work without being dependent on their advisors to do so - thus adding to the entropy of the whole system - or can’t use the subject matter education because they didn’t pay for it and are there not because they want to learn but because they were sent.  We only learn and use what we can experience and to experience something we must come to it with an open heart and mind.

Learning to steward the founder’s dream at the expense of learning who one is and individuating to become who one is will make the shirtsleeves-to-shirtsleeves proverb come true.

Joe Reilly:  How do you separate the founder’s dream from the family’s dreams?  In other words, how do you explain to dad that his children might have different ideas about the family foundation?

Jay Hughes:  There is a concept of the “black hole” in the new book.  The founders are god-like in that they take energy and make it material.  All such actions in our universe eventually decree that that which is matter will, as the law of entropy defines, eventually go back to energy.  My co-authors and I believe that most such enormously realized dreams do not disappear with their dreamer but, just as with the deaths of great suns, become black holes into which most other dreams will be extinguished as they enter the immense gravitational field.

Since founders’ dreams are so enormous it is not statistically reasonable that the rising generations’ dreams will be similarly realized.  Still every dream is precious and for the dreamer to mature; to individuate; to become creative and generative; to become his or herself; he or she must bring his or her own dream to life.  As we say find his or her “voice” and let it be heard, felt, seen, touched and appreciated for itself.

How sad it is in so many families that the only dream anyone cares about is the founder’s dream; the black hole that demands stewarding at the expense of all others dreams—most fundamentally at the expense of the families’ long-term well being as it overwhelms and interrupts individuation and thus maturation of the members of the rising generations.

The patriarch founder has to understand this reality and, at the moment he understands that this is the principal path for long-term success of his family, he must work actively as his primary work for the rest of his life, seeking to help to bring his children’s personal dreams to life.

Sadly for long-term family success and for individual family members’ well-being and happiness my experience is that it is the rarest of patriarchs who cares primarily about bringing others’ dreams to life, since it must necessarily be at the expense of continuing to grow his dream. Since this founder will not likely do this, a reasonable alternative is to assure that every rising generation member has a true mentor interested only in that individual’s well-being and individuation completely apart from the founder’s advisors.  Much as, in Homer’s Odyssey, the young son of Odysseus, Telemachus, had Athena.

Joe Reilly:  In your last book, The Cycle of the Gift, also written with Susan Massenzio and Keith Whitaker, you talk about trusts for children as “a meteor.”  Could you explain?

Jay Hughes:  Essentially when a human being receives something into his or her atmosphere that is not a product of his or her own dream and creation then just like our planet receives meteors from outer space into its atmosphere that person is receiving an alien object—a meteor from outside of her atmosphere.  Whenever such a person receives a transfer from another then it must be such a meteor.

The core question of The Cycle of the Gift is: what does the sender put in the meteor? Does he or she endow it magnanimously, big heartedly, with love and with the hope that it will enhance the life of the recipient, or pusillanimously, grudgingly, with a desire to control and not even trust the recipient; worse, does the sender seek to accomplish some goal of his own by making the recipient a robot for the sender’s desires; or worst, does the sender seek to solve a tax issue, without even considering the recipient as an individual worthy human being, thus making the recipient a consequence of that decision and in fact a non-human tax deduction?

What goes into the meteor determines whether the recipient can adapt to it and grow from it or whether it reduces his or her capacity to do so.  Knowing how resilient the recipient is before sending the meteor is a critically important act of love for every sender, as knowing this will have much to do with the capacity of the recipient to adapt to it.

Biology, especially evolutionary biology, advises that the quality of one’s resilience determines one’s capacity to adapt.

An even deeper act of love by the sender before acting is knowing how resilient the entire family system is and its capacity to adapt will be.  The deepest act of love comes with the awareness that when one sends a meteor that contains dynastic requirements one will be acting on people one will never meet, a seriously upsetting and daunting responsibility.  The possibility of doing harm when one is acting on people one will never meet is truly frightening and has to be or we fail entirely to appreciate what our role a sender implies when we act. In every case “hastening slowly,” being seriously patient and asking many questions will help a transfer become a gift.

Gifts enhance.  Transfers subsidize and diminish.

Joe Reilly:  There is no shortage of wisdom about how to live with wealth out there.  Everything a person needs to know is probably in Plato, Proverbs or Poor Richard - yet families struggle.  Why is it so hard to transmit wisdom about living with wealth?

Jay Hughes:  Dr James Grubman’s book Strangers in Paradise: How Families Adapt to Wealth Across Generations helps.  Appreciating wisdom lies in experience, intuition, and questions about how to live a life; not answers. One can’t usefully offer “how ”if the listener doesn’t know “why”? Why is what matters to positive useful action. Freud reminds us that happiness lies in learning to love and to work; work as calling vocare, not labore, a very good place to start.

Joe Reilly:  What role on the stage do you see for the family office?  Should a family’s professionals aspire to foster the family’s vision or just stick to things like maximizing returns and putting the fires out?

Jay Hughes:  A great family office, no matter what else it does, is primarily, always and forever seeking to help grow these four capitals toward the family members higher capacity, as individual human, intellectual, social and spiritual beings, to make inspired longer term choices, and thus likely higher order systemic choices, individually and then collectively.  This process continuously adds enhancing generative energy to the family system as a whole and thus to its capacity to make even better choices and thereby postpone the entropy and coming apart of family that the shirtsleeve proverb foretells.

I believe that the best definition of the role of the family office is that defined and described by the Family Office Exchange in its 2006 white paper, The Family Office as Chief Risk Manager.  Kelly Rosplock’s book, The Complete Family Office Handbook, adds much useful practice to this paper.  The white paper reminds us that families have four pillars of risk, all of which relate to the family growing its human, intellectual, social and spiritual capitals, supported by its financial capital—not led by it.

Why?  Because the greatest risk to the family’s capacity to avoid the shirtsleeves proverb is that it doesn’t have, or can’t make work, its joint decision making system (Homage to Willams and Preisser and their book Preparing Heirs).  All members do not in fact affirm the current governing generation’s horizontal social compact. As a result, that compact then isn’t capable of being renewed by each rising generation.

Joe Reilly:  If you could tell an advisor one thing about landing wealthy clients, what would it be?

Jay Hughes:  Apprentice yourself to a master deeply steeped in work in family systems and experiential governance as joint decision making, whose work is “qualitative,”  “right brained,” and very broad, multiply disciplined, attracted to positive psychology, absolutely about service to others, most importantly who seeks to know before you start how you learn (Structures of Intelligence), who you are as a personality (Enneagram), what your spiritual path is (The Spiritual Paths Foundation) , and what your vocation is (Pro-D)—by the way all of these can be ascertained by existing assessments that I routinely ask family members on their paths to individuation to undertake.  “Getting to your beginning” can be very useful before searching for the master.

Also I warn you the path of the personae de confiance is the path less taken; the path of the displaced professional in modernity - still it makes all the difference. Forego the path of the expert who sees his or her path as quantitative.

Joe Reilly:  Rising Generation will be your fourth book.  What shape are you hoping to see with your own legacy?

I am a sixth generation counselor at law—my hope is that I am honoring my forbearers in our family profession. Each of us has been committed to the well-being of those we served rather than to the growth of our individual financial capitals. We have each loved being number twos to help number ones be more awake and aware, more mindful, than they might have.

In my case my hope is, that in my now sixty seven years of contending with the shirtsleeves proverb, that I first heard from my mother when I was four, that what I have learned about it will prove useful to those families who have a deep intention to avoid and postpone its edict.  To learn to work with “mother nature’s” rule “That while the proverb will always come true in my universe, such is my law of entropy, every family in my universe has free will as to when.” 

I add that my greatest hope is that I have and will change the vocabulary of the various professions that serve families toward words that express ideas of positivity, gratitude and compassion—qualitative words that enhance one’s journey of life and happiness and that offer families of intention ways to speak their vision.