Advisors must improve how they work with wealthy families – Investment Executive

Instead, firms and advisors would better serve ultra high-net-worth families by adopting a more positive approach to advice that encourages inclusion and collaboration, driven by intention rather than fear.

While the industry has made great strides in recent years developing holistic services for wealthy families, including emphasizing shared decision-making and promoting financial literacy across generations, it still assumes that future generations will likely squander away wealth, Grubman said.

However, the most cited study purporting to support the idea may be flawed.

The 1987 book Keeping the Family Business Healthy by John Ward argued that most family business transitions failed within three generations, but Grubman and his colleagues found that later work by other researchers suggests that while a business may fail, the founding family continues to thrive as it moves into other ventures.

The industry would serve its clients better by not basing its services on an unproven assumptions, Grubman said: “If we don’t know, let’s just say we don’t know. Let’s not use old data that is questionable — we need more rigour in research, more rigour in professional practice.”

Advisors could better serve clients through psychological training — including learning family dynamics — to encourage and support families. He also suggested advisors could teach financial literacy and establish charitable foundations in a way that engages the whole family in decision-making and management.

The goal is for the family to develop mutual trust and shared values, he said.

Grubman also emphasized the importance of allowing younger generations to give input into financial plans, rather than only allowing the wealth-creating generation to have a say.