ELITE ADVISOR BEST PRACTICES

Ultra-High-Net-Worth Families Are Very Different From the Simply Wealthy

Advisors should thoroughly understand the distinction (and their own values) before taking them on as clients

By Gary Shunk and Jim Grubman

Key Takeaways:

  • Increasingly, financial professionals are turning to psychologically trained advisors to broaden, deepen and refine the services delivered to affluent client families.
  • To serve the ultra-wealthy, advisors must develop strong communication, listening and interviewing skills and understand the spiritual aspects of owning great wealth.
  • Advisors must also show empathy and be able to establish rapport with multiple family members in a jargon-free way.

As many of your clients are attending (or dreading) Holiday family gatherings, I thought about a recent discussion I had with my friend and colleague James Grubman, Ph.D. Jim is the founder of FamilyWealth Consulting and author of the book Strangers In Paradise: How Families Adapt to Wealth Across Generations.He is a psychologist and a pioneering leader in the burgeoning field of wealth psychology. In recent years, the financial services industry has discovered the value of engaging psychologically trained advisors, including Jim and me, to broaden, deepen and refine the services delivered by financial advisors to client families. We discussed his work with wealthy families and wealth advisory firms.

Jim makes a distinction between the skills needed by advisors to serve high-net-worth (HNW) clients who have perhaps $2 million to $20 million in assets and serving ultra-high-net-worth (UHNW) clients who have significantly more assets, particularly those with over $50 million. Fond of metaphors, Jim compared it to “managing gardens” versus “managing farmland.”

HNW clients are most often individuals and couples who have built up and own what might be a large garden of a few classes of assets, such as a small business, cash, securities and property. In contrast, UHNW clients tend to be families who have built up large assets similar to tracts of “farmland” that must sustain not only the current family but possibly future generations. Certainly both need tending and care in some similar ways. However, the magnitude and complexity of managing acres and acres of farmland compared to a garden require different sets of skills and knowledge for the UHNW advisor.

UHNW clients are much more complex: They’re potentially multiple-business owners, with unique and sophisticated wealth portfolios, domestic and international properties, complicated cash flow situations, and multiple trusts. And the clearest difference of all: They tend to have multigenerational family wealth. UHNW clients are often served by teams of advisors, sometimes within a multifamily office or even within a single-family office. Jim’s expertise is in coaching, training and consulting with those teams of advisors who are responsible for managing the farmland-level of complexity and the very successful families who are fortunate enough to have resources at that level.

Certainly all HNW and UHNW advisors want to be at the top of their game technically in serving their clients. However, due to the special complexity of the elements associated with UHNW clients, Jim recommends that family-office-level advisors develop and refine their “qualitative” knowledge and skills to a very high standard. What are qualitative skills and knowledge? These are the “soft-side” skills such as great communication skills, the ability to listen, the ability to show empathy, skill in interviewing and responding to multiple family members, and even skills in speaking clearly without jargon to all types of clients. Advisors need to be able to explore and integrate into their service offerings the full spectrum of individual and family values, needs, fears, joys and sorrows—the human and spiritual side of owning great wealth.

Want to work with UHNW clients? Understand thyself

Ultimately, Jim’s reference to a high standard draws on the commitment and “curiosity” that advisors need to bring to their work and the families they serve. Years ago I conducted a workshop titled “Advisor, Know Thyself.” The essence of this program was a deep dive into what drives an advisor to enter the wealth field. The advisors were invited to look at their judgments about “trust fund kids,” their opinions about heirs versus wealth creators, and their own values about money and wealth. When advisors truly look at themselves, take a deep inventory and challenge themselves about what they find, they are doing justice to themselves, their colleagues and the clients they serve. Self-knowledge brings mastery.

One of the ways Jim works with advisors (as do I) is by using the “case study methodology.” This approach may use a realistic but constructed fact pattern for the team to study and learn from in selected topics. It can also take the form of meeting with a group of advisors to discuss a client family they are serving, perhaps with some difficulty or confusion. An open, honest and confidential dialogue about what the advisors are encountering, including personality struggles and failures and triumphs in serving a family, are discussed in an atmosphere of total respect. The goal is to break the logjam in handling the case and move the client services forward in successful ways. The nuanced learning that occurs during these discussions is of inestimable value.

As I said in my review of Jim’s book, Strangers in Paradise, “Becoming wealthy is central to the American Dream. However, when the dream is achieved, then what? Most books on wealth focus on investing and preserving the money. Strangers in Paradise is very different. The primary concern in this book is on the person and family of wealth. Jim carefully addresses how to live with wealth in a whole and constructive manner now and for generations to come.

“Through rigorous research and his personal face-to-face work with the wealthy and their advisors, Dr. Grubman has discovered, tested and applied his unique approach with great success. His central metaphor of ‘immigrants and natives’ guides the reader on a wisdom-filled journey into the Land of Wealth. Whether wealth is acquired or inherited, there are many shadowy elements to consider. Strangers in Paradise is a guide filled with solutions to those unknowns.

“Grubman is a pioneer and leading practitioner in the field of Wealth Psychology. Whether you are a wealth holder, family member or an advisor to the wealthy, this book is an indispensable guide.”

Conclusion

When I asked Jim what he believes to be the most important process a family of wealth needs to undertake, he referred to the necessity for families to individually and collectively adapt to the complexities of becoming or being wealthy. As we have all heard, “with great wealth, comes great responsibility.” Often that quote is considered from an external point of view, focusing on managing assets. What Jim challenges families of wealth and their advisors to do is address the much more internal responsibilities of having great wealth. As families establish a clear inner sense of who they are as wealth holders, they will behave from their true center of integrated values, creating accord with the outer world and leading to the family flourishing.


About the Author

Gary Shunk, principal of Family Wealth Dynamics, consults with families in business, families of wealth and the advisors who serve them on the nonfinancial issues of intergenerational relationship dynamics, communication and trust building.He can be reached at www.familywealthdynamics.com or by emailing gary@familywealthdynamics.com.