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‘It's not just about the money’: An interview with author Jim Grubman

The revered thinker talks about multi-cultural Canada, the need for emotionally intelligent advisors and ‘Wealth 3.0’

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A clinical psychologist who has spent much of his career bringing psychological acumen to questions of family affluence, Jim Grubman has become one of the foremost thinkers in the wealth-management world.

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His pioneering ideas on how families do — and don’t — handle wealth have helped overturn old ideas and bring new complexity to the field. He has written two books, Strangers in Paradise: How Families Adapt to Wealth Across Generations and Cross Cultures: How Global Families Negotiate Change Across Generations.

Canadian Family Offices sat down with him for a chat about some of his most influential ideas, why a good wealth manager is also a little bit of an anthropologist, and what he’s working on next.

Could you describe how you came to start focusing your work as a psychologist on these ideas of family wealth, the way different generations relate to money, and so on?

It really began because I first had some contact with affluence due to my father. He was a successful businessman who died suddenly at the age of 60 in 1980, and he left our family with an unexpected inheritance. So while I was working in health care, I was also suddenly learning about trusts and estates and investments and that world. My wife and I had three children of our own, and I became curious about what was being written about parenting with affluence, especially sudden affluence.

This was also the dot-com era in the 1990s, and the psychology of wealth was becoming much more talked about — the term “sudden wealth syndrome” was coined, people were talking about “affluenza,” and so I just entered this field, by good fortune, when it was growing, and merged my psychology knowledge and my personal knowledge with what was developing from others in the field.

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What did that early marriage of psychology and wealth management look like back in the late ’80s or early ’90s?

Well, before then, we had what you might call Wealth 1.0, which was really kind of a barren wasteland. Very little was written that was overtly psychological. Then in the ’80s and ’90s you had the rise of Wealth 2.0 — this explosion of books, writings, scholarship. And out of that came these ideas focusing on the difficulties of wealth, that wealth is not always the blessing it seems for families, about the difficulty of wealth transfer across generations, this whole idea that wealthy families will go “shirtsleeves to shirtsleeves in three generations.”

A lot of this thinking was focused on overly negative biases. I think we’re now bumping up against some of the limits of that thinking and those negative narratives, and I’m really interested in putting forth a more positive, strengths-based approach, which I call Wealth 3.0.

Why do you think some of these truisms around intergenerational wealth — like “shirtsleeves to shirtsleeves” — have become so entrenched?

Everybody loves a statistic, even if it’s a pseudo-statistic, or a statistic based on bad research design. Rather than say, “We don’t actually know how common successful wealth transfer is,” we fill in the gap with a statistic that sounds good. That’s human nature. People love simple, clear narratives that tell a good story. And in Wealth 2.0, we built a good story: Wealth doesn’t survive, wealth destroys families, the children of wealthy families can’t handle wealth.

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One of your early contributions to this field was the 2007 article “Acquirers’ and Inheritors’ Dilemma,” which you wrote with your long-time collaborator Dennis Jaffe. Those ideas later became a book, Strangers in Paradise. Could you briefly describe the basic premise?

We were really looking at the demographics of wealth and found that most wealthy people come to it at some point in life, rather than inherit it. That made us pause. If people are born and raised in one economic culture, in the middle class or the working class, and then come to a new economic culture, they have characteristics of immigrants to a new culture.

That cultural model of wealth showed that wealthy families have many characteristics of immigrant families, where the older generation says, “You young people don’t know where we came from.” But the younger generation says, “Okay, but this is where we live now, and maybe we know more than you about this land.”

Practically speaking, what challenges does that culture shift present for family offices or advisors working with these families?

I think family offices that are very traditional and not considering these family dynamics are repeating a lot of these same old ideas over and over, and it becomes a self-fulfilling bias. As in, “I love working with G1 [first generation] entrepreneurs, they’ve got that ‘fire in the belly.’ G2s or G3s aren’t the same.” But there is a growing number of more astute family offices who understand there’s more complexity to this, and that many children of wealth are in fact quite capable of handling it.

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That itself raises difficulties. What if you’re a Wealth 3.0 advisor with a 2.0 client who just says, “I know my grandkids are going to screw this up, we need to tie it up into a trust. You’ll help me do that, right?” And then the opposite: What happens to a 3.0 family, with a smart and engaged next generation, when they’ve got a 2.0 advisor?

But I think we’re on the cusp of a new paradigm where these old ideas start dropping away more quickly. In part I think that’s thanks to modern parenting, more open family communication and better advising.

A related but more recent idea you’ve described is that idea of the “fourth culture,” that global families of affluence, whose members live and work and study around the globe, merge influences from many cultures — including the “honour” cultures of Latin America or the Middle East, the “face” cultures of East Asia, and the “dignity” cultures of the West. Could you describe how this idea developed?

Dennis and I have worked globally, and we were seeing cross-cultural patterns, behaviours and themes in the families of wealth who are more global. And when we ran across the honour-face-dignity paradigm, it was like the lightbulb went off, our heads exploded, whatever metaphor you want to use. All of a sudden, the traditional view of East versus West, which never really captured it, changed.

When Dennis and I wrote Cross Cultures in 2016, we actually put together the new honour-face-dignity paradigm with works like Erin Meyer’s book The Culture Map, which uses eight different cultural dimensions to map out differences between cultures. We began to work with these ideas, and it has been incredibly powerful. In many ways, it was a coalescing of different threads, taking the complexity of cultural anthropology and applying it to global families of wealth.

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This raises all new complexities for wealth managers in a country like Canada, who are likely dealing with a more global clientele all the time. Are we seeing an understanding of this new complexity yet in the wealth-management world?

We thought there would be five to 10 years before people could really start to see it, but it’s happened faster than we anticipated. I’ve worked with some multi-family offices who say, “Well, we haven’t really seen that in our clientele,” and so they’re kind of not interested in the idea as much. But others are saying, “Oh my God, we’re seeing it all over the place a lot.”

What we see is that some families run into cultural stress across generations because they’re not prepared to adapt. I remember one family where the patriarch and matriarch really encouraged the kids to be educated globally, but when the kids returned they discouraged change to the family business based on what the kids had learned abroad. The mother, in fact, said, ‘I’m afraid our children will lose their soul when they become Americanized.’ But then I’ve seen other families that are more open. And of course, this isn’t just kids bringing Western ideas back to their parents or their family businesses. Sometimes it’s the opposite influence, from East to West. It’s much more complicated.

So I think that’s a phenomenon that’s going on now. In Toronto, Vancouver, Montreal, increasingly Ottawa and some mid-sized cities, you see more and more cross-cultural clientele. So if you work in some geographic areas, chances of running across the global citizenry and the development of the fourth culture in the next generation is going to be very strong, and it’s important to become familiar with these ideas.

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Related to that, you’ve written about how closely wealth managers should be integrated in family dynamics, and how to advise a multigenerational family having different and contrasting ideas and values. Have you seen ideas around this change?

This is changing hugely. In fact, it’s part of the problem that we are facing right now, which is that the demand for psychologically minded advisors and consultants who understand these things is far outstripping supply. At the Ultra High Net Worth Institute [Grubman is chair of its Content and Curriculum Committee], a lot of the discussions that we have are basically about the difficulty in finding emotionally intelligent advisors who can serve families in a way that is attuned to family dynamics, because the desire is to do so much more than ever before.

In part, that’s what’s led to the development of the new model of the Ten Domains of Family Wealth, a new roadmap the institute has put out to advising UHNW families.

It was done in a radical way, in which we basically created a model that is completely divorced from, and agnostic to, service delivery. It’s the purest model that’s ever been developed, just looking at the family. All other approaches by family offices or whomever has always been through the lens of, “What are we delivering to the family?” So we started with a clean sheet of paper, which is why we really came up with the 10 domains. And what we’re now moving back to is, “Let’s look at the ‘how’ of delivering services to the family to fulfill what its needs are.”

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And so now we’re looking at practice management in a very detailed way. We’re looking at integration, at business models if you work in a family office versus an institutional private bank, and how firms can deliver services the family needs.

It’s groundbreaking because it’s not just about the money. I think in Wealth 3.0 the future lies in integrating services, truly family-centric services, driven not by fear but by purpose and optimism. It’s incredibly exciting.

This interview has been edited and condensed.

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