Family office consultant and regulator contributor Joe Reilly interviewed the authors of a new book exploring the top questions that high net worth families typically ask.

Family office consultant and regular Family Wealth Report commentator Joe Reilly talks to Tom McCullough and Keith Whitaker about their new book Wealth of Wisdom: The Top 50 Questions Wealthy Families Ask. (See here for one of Joe's other recent interviews for this publication.)

Joe Reilly: Could you describe the book and how you picked your questions?
Tom and Keith:  In our travels around the world, we have heard from families of wealth, and their advisors, about the questions they wrestle with every day. Questions like:

• How do we raise responsible, independent, and productive children?

• How can we manage conflict in our family?

• How can we ensure the success of our successors?

• What return should we actually expect from our investments?

• How should we think about risk?

• How do I find a good advisor? A good trustee?

We wanted bring answers to these families in a way that would be helpful, practical and easily accessible to them. There is a lot of information already written on some of these topics, and very little on others; but it can be hard to find; is typically too general; and is definitely not all in one place. We decided to pull it all together into one volume so a family leader, family member or family advisor could sit down and review all of the key questions at one time.

We compiled a long list of several hundred potential questions and then further refined it through extensive research and conversation with other authorities in the family wealth field. We ended up with a list of 50 critical questions in nine distinct categories that reflect the most important questions that families of wealth ask, and offered insightful answers to each of them, courtesy of the leading experts in each field.  

What are some of the myths around wealth today?

There are actually quite a few myths around wealth. Many people think that wealth means leisure. In fact, the wealthiest people we know are often the busiest. Similarly, many believe that large and increasing wealth is all positive and makes life easier. Of course, wealth has many pluses, but it can also add complications, conflict and stress. Most families of wealth can attest to having experienced both the positive and negative sides of wealth. 

One of the common maxims in the world of wealth is ‘shirtsleeves to shirtsleeves in three generations’ - suggesting that the first generation creates the wealth, the second generation maintains it, and the third generation wastes it and depletes it, taking the family back to where it started. While this type of cycle is indeed common, the myth is that it is inevitable. In fact, it can often be mitigated by employing the insights and practices found in our book. 

Another myth that some families believe is that the management of investable wealth is easy and not much different from running their successful operating businesses.  Most ultimately find that it is more complex than they expected; requires a more specialized skill set than they imagined; and takes more time than they planned for, to do it well. 

Which of these questions do you hear most frequently?

The most frequent questions we hear are related to the next generation. How much money to leave them and when? How to raise and discuss difficult topics, such as financial inheritance and pre-nups? How to instill good values? These questions are top of mind for many families. 

It’s interesting. We have yet to meet a parent who wants to raise entitled, materialistic children, but they often do just that. They try to furnish a life of access and affluence for their kids, while at the same time attempting to instill values of frugality, humility, and good judgment. But, as we all know, wealth can be an amplifier of all things both positive and negative. If not properly managed, the very resources intended to build a family can be its undoing. Many wealthy families worry about unconsciously undermining their children’s chances of leading fulfilling lives of purpose and confidence by the decisions they make. 

The books contains many pieces of advice and practical ideas to help families proactively and productively prepare the rising generations for life and for wealth.

What questions do you ask your own clients to get them to open up about their issues?

Your question seems to presume that it is hard to get families to open up. It might surprise you to hear that families actually open up to us very quickly. Once they understand that they are talking to someone who is experienced in family wealth, is interested in their family story, and is objective and has nothing to sell them, they are often willing, and even anxious, to share their hopes and dreams as well as their fears about their family.  They tell us that they have very few people they can actually talk to due to their level of wealth, their notoriety in their community, and privacy concerns. 

Some of the questions we use to draw people out and ‘prime the pump’ for a substantive conversation include the following:

-- Why are you here today? What do you need? How do you think we might be able to help you?

-- What are the best three things you have done for yourself or your family in the last 12 months? How would you like to answer that questions 12 months from now? 

-- If you had the proverbial magic wand, what would you like to see happen with this money, these trusts, this business, this family, etc.?

-- What are your hopes and worries for your children? For yourself?

-- What questions have I not asked you that you thought I would? 

-- What else do you think it would be important for me to know?

How do you know how far you can safely take a conversation?  Many small issues with families can be full of snakes.

If the conversation is with an individual, we proceed with empathy but determination, to help that person think and feel the matter through. If it is with a group, then we proceed only after speaking with each individual first, and then with ground rules in place that the group has agreed upon. It is better to proceed slowly than one step forward three steps back.

Why is it so hard to transmit wisdom about wealth?

Many reasons. It's hard to get hold of wisdom, period, much less transmit it. And wealth is a special case because it is a ‘means to an end’ that often pretends to be ‘the end’ itself. As St. Aquinas wrote, wealth is "virtual happiness," meaning that it makes you think you are happy because you say, "With this money I can buy this and that and, so, be happy." But in fact it is none of these things. By itself it can be a burden and a complication.

Also, wealth usually takes time to build, and the wisdom that comes from wealth (often based on mistakes made!) also takes time. But the requirement of transmission of wisdom - to children, for instance - becomes necessary before that wisdom is fully developed and refined.

And then of course is the age-old problem that many people - again, our teenaged children come to mind - have no particular interest in hearing what we have to say, about anything - wise or otherwise!

Do you have any specific advice for wealth managers and family advisors?  How should they use this book?

There are so many rich insights in this book, we think readers will be naturally drawn into it from beginning straight through to the end. 

But others may choose to enjoy the meal in bite-sized pieces. You might review the table of contents and make a list of a few questions that feel most relevant to you and your family. Make a plan to read one of those essays each week or month and to discuss it with a family member (e.g. a spouse or adult child) and your advisor. You could record specific action steps that come out of your own reading and conversations and encourage other family members to do the same. Soon you'll have an entire curriculum of readings, conversations, and actions.

At the end of each chapter, there is a set of Questions for Further Reflection and a list of Additional Readings that can be very helpful in delving deeper into a subject that is especially relevant to you. 

What did you personally learn from your many conversations that you didn’t expect?

We learned lots of things. Here are a few of them. 

-- Having money can make families feel they are special. But nature and society have a way of influencing everything we do. Be humble.

-- Many of the questions we address in the book have been vexing families for centuries. There are valuable insights to be found in the wisdom in literature, the classics, novels, plays and stories, not to mention our own family histories. Look back.

-- Too often families jump to solve what seem like the immediate problem, but would do well to find and focus on the root cause, which usually has more to do with values, goals, and relationships. Dig deep.

What do you think is the chief problem facing families of wealth today?

The world is moving fast and change is inevitable. Some changes will be good for us and some won't. Families rightly wonder how they will fare, what they should embrace, how they should adapt, and how they should prepare themselves. Some of the problems to be aware of include:

Justice. Why should we have so much when so many have so few? Not facing this question can lead to the experience of wealth feeling hollow, not to mention the societal instability it may induce. Christine Lagarde’s chapter (53) addresses this 

Leadership transitions. History shows that there is risk at key transition points, and there are lot of them coming up in families (e.g. business leadership, wealth etc.) as current leaders age. Handling them well is critical. Jay Hughes’ chapter (50) touches on this. 

Nimbleness. With all the change facing families, they will have to adapt but stay true to the values and principles that got them to where they are today. It’s a delicate balance. Jim Grubman’s chapter (52) has something to say about how to succeed. 

People are living longer and longer.  How do you think about aging and long-term family flourishing?

Patricia Annino has written an excellent chapter (11) on this topic in our book. She talks about grappling with the concept of competence – both sustained competence which are older family members who may live longer in good shape and choose not to step aside because they don’t have to; think Queen Elizabeth and Philip Charles. Contrasted with diminished competence which is older family members who may live longer with declining competence and may not be able to make decisions. These changes will redefine what it means to work, to be a decision maker, to manage a company, and to pass leadership on.

Still, even as we live longer lives, Mark Twain's statement still rings true: "There is no time, so brief is life, for bickerings, apologies, heart-burnings, and callings to account; there is only time for loving, and but an instant, so to speak, for that." Families who forget this, even if they have so much, end up feeling like they have so little.