Families stewarding wealth in all its forms across generations need advisors with a broader set of skills than in the past.
Excellence In Family Business Advising Is Essential
First word: we have deep respect and appreciation for those who serve as professional advisors to families in business. Investment options, tax and estate planning, and legal issues are becoming ever more intricate and complex. People seeking to earn the credentials required to advise business families in any of these areas must first undergo rigorous training. Quality service from a number of professional advisors is crucial if families in business are to remain successful and thoughtfully steward their wealth. Some entrepreneurial families engage with advisors individually, and handle whatever coordination is required themselves. Other families take a team-based approach with more direct, consistent, and open collaboration among the professionals serving their needs – perhaps through a family office.
However, the technical, discipline-specific training received by many advisors is proving inadequate to the needs they are encountering in some client families.
A Whole New Set of Skills Is Needed
Wealth Advisor Raj Sharma writes, “In my opinion, the emerging new frontier for advisors is family dynamics. … You are no longer just a financial or wealth advisor, you are truly a life advisor, and your goal is to help families sustain wealth through generations and guide them with purpose and intention to accomplish meaningful goals.
“To be effective in this new field, you need to develop a whole new set of skills – you need to master the new language of family dynamics, become a better communicator, and understand the best practices of some of the most successful families in the world.” (The Purposeful Wealth Advisor, p. 177)
Here’s how we believe that cashes out.
New Skills – To Equip Families to Become Generative
Some of the most successful families in the world were recently studied by Dr. Dennis Jaffe. He knew that only a small fraction of the families that create businesses sustain them for more than a single generation. Nevertheless, Jaffe found that some successful family enterprises can be long-lived. Among the 750 largest global family businesses, 230 are older than one hundred years, and another one hundred or so are older than 75 years. How did these families deal with success and move across generations?
He calls them “generative” because of their creative achievement in sustaining a sense of family connection and a profitable family business or group of family operations. “Generative families are masters at blending the best features of business and family. The family nature of generative families … influences the values and the culture of business to take a longer-term and broader view of its purpose and policies. The business in turn influences the many family members, not only by providing wealth but also by offering opportunities to take on roles in society that aim at the greater good. In generative families, there is a virtuous circle of family and business influence.” (Borrowed from Your Grandchildren: The Evolution of 100-Year Family Enterprises, John Wiley & Sons, 2020. p. 19)
New Skills – To Help Families Use Financial Capital to Cultivate Non-financial Capital
James E. “Jay” Hughes is, like Dennis Jaffe, a senior statesman in the field of family wealth advising. He and two co-authors recently updated a classic book for advisors to create Complete Family Wealth: Wealth As Well-Being, 2nd Edition (Wiley, 2022). In the Preface he writes, “Finally, perhaps the biggest change to this edition is also the smallest: the inclusion of the word ‘well-being’ on the title-page and at strategic points in the text. We have long believed in the importance of learning from the etymology of the word ‘wealth,’ which derives from ‘weal,’ with the original meaning of ‘well-being.’ Our decades of experience helping families have convinced us that perhaps the most beneficial step a family can take is to shift their understanding of wealth from finances to well-being – all else that we write about, speak about, and do stems from this reorientation in consciousness.” (p. xvi)
In interviews, Hughes emphasizes the importance of wealthy families using their financial capital to develop their non-financial capital. Here’s a 60-second clip in which he uses his hand as an illustration. The downward-pointing thumb (financial capital) is rooted in the earth, supporting the growth and development of his four fingers, which represent four types of non-financial capital: spiritual, social, intellectual, and human thriving. (Click here for the 80-min extended play version.)
Families who think of wealth solely in financial terms and fixate exclusively on preserving financial wealth are often unable to uphold their coherence, partnership, and family connection against the tides of dispersion and separation. They never become generative. As the old adage puts it: “Shirt sleeves to shirt sleeves in three generations.”
How We Can Help
Professional advisors to families in business can learn the new skills being demanded by families seeking to steward wealth in all its forms across generations. Unfortunately, most won’t have a teachable spirit until they undergo what Jay Hughes calls a “reorientation in consciousness.” If you or your advising firm are seeing this need and embracing the implications of understanding wealth as well-being, contact us to help with your training needs or client services.
