There is a new way of thinking about wealth, its responsibilities and challenges that advisors must embrace, so the authors of a new book argue. One of FWR's regular contributors talks to the authors of "Wealth 3.0."
Regular Family Wealth Report contributor and family office advisor Joe Reilly talks to the authors of Wealth 3.0: The Future of Family Wealth Advising, Dr James Grubman, Dr Dennis Jaffe and Kristin Keffeler. They talk about the background of the Wealth 3.0 concept, positive psychology, and how to shift out of a fear-based mindset.
Joe Reilly: Could you briefly describe the transition
from Wealth 1.0 to 3.0?
Dennis Jaffe: Before the 1980s financial institutions saw their only task as managing the money, and they did not engage with families otherwise. If they did, it was with the primary family member. This we call Wealth 1.0. In the mid-1980s, a wave of change from young inheritors, professionals of all disciplines (finance, accounting, consulting, psychology, law) that the experience and activities of the wealthy family were an element of advising and managing their wealth. Advisors began to become involved with family concerns and dynamics, and engage the family in discussion of topics related to their wealth and what they wanted to do. These waves of change we labeled Wealth 2.0, and it transformed how advisors work. It did not replace Wealth 1.0 but added another layer of possibilities. Over time, however, the positive nature of Wealth 2.0 has given rise to an advisory culture that tends to cause families to emphasize anxiety about their wealth and how it affects their lives, and to fear-based advice and activities, that diminish the positive aspects of Wealth 2.0.
This concern, and how a few wealth advisors are challenging it, led us to propose that there is a new “wave” of change affecting the profession which begins with an affirmative, strength-based, and collaborative approach to how a family uses their wealth and expands its positive impact on their lives. This is what we call Wealth 3.0, and we see this as a renewal and refreshing of many of the principles that began with Wealth 2.0. We feel this shift is just beginning and our book envisions some of the ways that this can and should take place.
Joe Reilly: Wealth advising has come a long way in the
last 20 years. Why do we need to transition out of what you call
Wealth 2.0 attitudes?
Jim Grubman: Although a lot of groundbreaking ideas have been developed since the 1990s, some of those have needed updating based on new information and more modern approaches. Many of the oft-repeated pessimistic “facts” about wealth have turned out to be old, poorly-founded research findings or beliefs with more limited applicability than we have admitted. Consulting in general has shifted toward techniques that grow strengths rather than remediate weaknesses and problems. We also need to revise our attitudes about education, training, and professionalization of the field itself, which has remained a small cottage industry for too long. With the changing demographics of modern families, we need to build a more rigorous, robust, and scalable field that can deliver good advice about family dynamics, governance, philanthropy, and many other areas of family capital.
Joe Reilly: What role does positive psychology play in
Kristin Keffeler: Over the last 25 years, the research underpinning the field of positive psychology has greatly deepened our empirical understanding of human thriving. Positive psychology has many domains of application, including individuals, couples, families, and organizations. As the field of family wealth advising embraces the turn to Wealth 3.0, we can leverage the research, tools, and interventions from the various domains of positive psychology and apply them in our work with individuals, couples, and families.
Joe Reilly: How can families and advisors shift from a
fear-based mindset to one of engagement and growth?
Kristin Keffeler: The starting place for shifting from fear to engagement and growth is one of awareness. As advisors, whether consciously or unconsciously, many of us have been using fear-based techniques as a means of motivating clients for decades. As we consider how to shift the conversation with our clients, we need to first be aware of where fear-based language and perspectives are still lingering in our own worldview. For example, when a client states that he is concerned that the wealth he has created will ruin his kids, is the advisor’s first instinct to join her client in his concern or can she pivot and ask her client for an example of where his kids are showing strength and engagement in their lives? We can only invite clients into a space that we ourselves are comfortable with, so we have to be willing to see the strength and possibility in our lives and work in order to invite our clients to do the same.
Joe Reilly: With this perspective, how can advisors
balance the needs of different family members with competing
interests and priorities?
Dennis Jaffe: We don't see one path but rather several practices that can allow this to happen. The first is to listen to the voice of everyone in the family, help them define their concerns, and suggest what might happen. This does not change the realization that certain, primarily elder, family members have formal authority, but creates an environment where the voices and concerns of young family members who will become formal deciders in the future, and also voices of married-ins, can be heard and considered. The focus is on making the family open to ideas and more transparent about sharing information and creating policies.
A second activity is to organize the disparate voices in-to family groups that work within an organized and clearly defined family governance system, whereby each part of the family can get to know each other, build connections, and find a way to share ideas and propose actions. They create a more transparent and open family system.
This entails helping the leaders to see that while they have formal authority, the family will be more connect-ed, stronger, and more effective if they listen and engage everyone and now act on their own. This involves a considerable shift of attitude and learning on their part.
A third path is for the family to acknowledge the pull of its legacy, values, and traditions, but to look ahead and ask “What is different that is needed and might happen for the rising generation?” Not rejecting the past, but adding new voices, possibilities, and paths, allows the family to become resilient and reinvent itself with the voices, energy, and creativity of its future leaders.
Joe Reilly: How do you see this implemented on a granular
level? What am I doing in a client meeting that is
Kristin Keffeler: We know that the biology of fear and distress is different than the biology of possibility. We cannot consider a wide range of possibilities – thinking in creative and adaptive ways – if we are emotionally triggered. Building psychological safety can be a game-changer when it comes to more productive and engaging family meetings. One of the most powerful concrete practices that I’ve found to quickly enhance the psychological safety of a group is to start with having all family members name a “superpower” (or strength) of the family member to their right. The advisor makes sure that everyone has time to share a strength they see in another and be seen for a strength that someone else sees in them (but does not otherwise interject any commentary). The advisor completes the opening exercise by thanking everyone and then moves into the meeting content. This simple practice changes the stress biology of every person in the room and creates the space for all family members to more fully show up.
Joe Reilly: Does there need to be a credential for this?
How do you think about defining the actual competencies
needed for this work?
Jim Grubman: Dennis, Kristin, and I do believe that a formalized education and credentialing process is long overdue. Not only does the field need better quality control and evidence-based practices, but it frankly needs to scale up dramatically to serve not only ultra high net worth families but the wider clientele of high net worth families. In our book, we outline three areas for developing competencies: multidisciplinary knowledge, improved client relationship skills, and enhanced advisor collaboration skills. The UHNW Institute shares this view and is a leader in all three of those areas. It is already having discussions with other organizations with experience in training and credentialing to help implement the vision. The Institute’s Ten Domains of Family Wealth model is a great curriculum for any formalized training.
Joe Reilly: What is the role of financial therapy in all
Jim Grubman: Financial therapy is likely to be a great partner in the build-out of Wealth 3.0 at the mass afflu-ent and HNW levels of wealth. It inherently emphasizes a multidisciplinary approach, and many of its practitioners already utilize positive psychology and strengths-focused techniques. They have not been as active in addressing significant wealth, but I see them as highly aligned with where the entire field is going.
Joe Reilly: What do you see as the future of wealth
advising for ultra high net worth families and family offices?
Dennis Jaffe: That's the question that led to the book and what we pose to the profession. We see the possibilities that we gather into the 3.0 package at an early stage, and there is a huge need for the wealth advising profession to step up and develop its capability, its pipeline of practitioners, and its practice and presence as a new hybrid profession. The second half of the book lays out a vision we have of how this new profession can grow and develop and we pose many possibilities and steps that we hope to be part of implementing that will make for a more expansive and creative future for families of wealth.
Through groups like the UHNW Institute, and others like FFI, PPI, FOX, Family Wealth Alliance, FBN, and so many others, we want to see them grow and have a greater impact on our practice and ultimately, the health of families and their wise use of their resources.