#FA Success Ep 265: Connecting With Ultra-HNW Next Generation Heirs By Fostering Real Family Trust And Communication, With Amy Castoro

Resources Featured In This Episode:

• Amy Castoro
• The Williams Group
• Roy Williams
• 10 Question Quiz
• Strozzi Institute
• Bessemer Trust
• Institute for Preparing Heirs
• Dennis Jaffe
• Bridging Generations: Transitioning Family Wealth and Values for a Sustainable Legacy by Roy Williams and Amy Castoro
• “Wealth of Wisdom: The Top 50 Questions Wealthy Families Ask” (Wiley Finance) by Tom McCullough
• “The Soul of Money: Reclaiming the Wealth of Our Inner Resources” by Lynne Twist
• “Strangers in Paradise: How Families Adapt to Wealth Across Generations” by James Grubman
• Willing Wisdom: 7 Questions Successful Families Ask by Tom Deans

Full Transcript:

Michael: Welcome, Amy Castoro, to the Financial Advisor Success Podcast.

Amy: Hi. It's great to be here. Thanks for having me.

Michael: Absolutely, absolutely. I'm looking forward to the discussion today and talking a little in depth about what it really means to do work with very affluent clients. The traditional industry approach is...for a long time has been helping families of wealth manage that wealth. The larger the wealth, the more dollars that are at stake. And that takes you down a road of increasingly complex or sophisticated investment vehicles, the move towards alternatives, the move towards private equity and hedge funds and a lot of different things that get done with the portfolios of high-net-worth clients.

But the challenges in working with affluent clients, I know, are far beyond just talking about the asset management issues. Estate planning is commonly a big point of discussion, as well. And for most advisors that takes us down a road of tax planning and lots of different types of trusts and family limited partnerships and GRATs and IDGTs and all the different strategies that are out there, or at least as long as Congress lets us keep playing those games. But I know there's a whole other dimension to this that we are rarely really trained in in any particular way, which is just how to actually help clients handle just the transition of the money to the next generation and having that go well. Right?

In the purest sense, for almost any family of significant wealth that has children, "How do I leave all this money to my kids and not screw them up?" is pretty much what it comes down to. "How much of an inheritance is enough for them to be comfortable and not enough to be too comfortable? And just how do we make sure that the money doesn't ruin the kids or ruin the family and have it be a positive thing instead of a negative thing?"

And I know you have a company that does this, that works in this space, that lives in this space of, "What does it really mean to work with the whole family of a high-net-worth client and get into these issues?" And so I'm just excited today to get into these issues a little.

Amy: Yeah, thank you. More and more advisors are realizing that the conversation beyond the financials is really where the relationship lives. So, it's exciting for us because we're seeing more and more people step into this conversation and help families move the needle away from the 70% failure rate.

What's astounding to us, and we've been doing this for over 55 years now, is that there's this phrase out there called "shirtsleeves to shirtsleeves in three generations." Advisors are aware of it. It's a global phrase. Actually, in Italy, they call it "from the stalls to the stars to the stall again." In China, it's "teacup to teacup." And there's just languages...phases for it all over the world, but essentially what it means is that inside of three generations all the wealth will be lost.

Studies have been done through MIT and through The Economist-published studies where they look at what is that number, "Is it actually 70%?" We would say it's probably closer to 80%, maybe even 85%. The reason why is exactly what you've been pointing to. That if we only focus on the estate plan, we're missing the other half of the equation.

So, helping advisors step into those conversations requires, in often cases, a different sense of their role, a different sense of their level of comfort. And we work with a lot of advisors to help them get there.

The Psychology Of Passing On Wealth To Future Generations [6:39]

Michael: I have to admit I am fascinated that the "shirtsleeves to shirtsleeves in three generations" phenomenon is not only global. I get sort of that it happens around the world, but that there are literally sayings for it in local country, local dialects, local context for the same phenomenon that wealth is lost over three generations. I guess just something to the effect of first generation builds significant wealth, second generation inherits that wealth, hopefully was trained with perhaps some reasonable skills to be able to do something. Third generation was...never had much interaction with the first generation, has only ever lived in a world of this...with wealth and dollars, has not context about how it was built or how it got there or what to do with it. And just by the end of that third generation, they manage to not do good responsible things and it's gone. Is that basically the cycle?

Amy: It is pretty much the cycle. What happens when wealth transfers, we transfer not just the assets, but we also transfer the communication practices. And so in families that started with very little wealth, grew great wealth, that next generation is growing up inside of great wealth, but they may not have the grounding and the values that created that wealth. And so when they have their kids, they're pretty much burning through the wealth.

In some families, there are younger generations that are saying, "You know what? My job here is not to be a millionaire, it's to be a billionaire. And I want to be able to use these resources in a way that allows me to make a huge contribution in the world." So, that does happen. However, in all of what we've been talking about so far, the accent has really been on the assets.

So, when we start to shift the conversation into who are these next-generation kids, who are these first-generation people and the values that they built the money on, then we can start to have a more interesting conversation about, "Who are we becoming? What is the use and purpose of this? In what way can I pursue a career that's going to be rewarding to me, have meaning, and still generate wealth?"

So, we...our founder, Roy Williams, came out of the NFL. And when he came out, he looked around saw a lot of his peers were just burning through cash, right? Living that shirtsleeves-to-shirtsleeves scenario. And he wanted to know what was happening there because he knew the kids of this next generation, they were cut from a similar cloth, very hard-working, determined.

So, he went to all the top business schools and he said, "Guys, what is this 'shirtsleeves to shirtsleeves' all about?" And they said, "Well, there's this much money, there's this many family members. Inevitably they're going to run out." And that didn't make sense to Roy. So, they said, "Go talk to the psychologist." And he did and the psychologist basically said, "The families just don't know how to talk about wealth." The advisors in the insurance industry do a pretty good job of talking about what's going to happen when they're not here any longer. But, for the most part, family members are just uncomfortable talking about money. They'll talk about everything else, pretty much.

And so Roy said, "Let's ask the audience." And he did a 20-year study where he interviewed over 2,500 families and he asked, "What is a successful transfer and how do you do it?" And what he learned was astounding and really invented a whole industry on learning to take care of the client in a broader context so that advisors could differentiate themselves so they could access the next generation and so that they could create more value for clients.

And, if I can, I'll share with you what he learned through that research and looking at that 70% failure rate. He realized, and the research showed, that 60% of the breakdown, so 60% of that 70%, was trust and communication. In other words, Mom and Dad didn't want to tell the kids about the wealth because they were afraid it was going to derail their motivation. Or they didn't trust that the siblings were going to take care of each other. Or the next generation didn't trust Mom and Dad to do the transfer successfully.

The second piece he discovered was that 25% of the 70% failure rate was heir preparedness. And for many, many years advisors focused on heir preparedness as being they know how to read a portfolio statement, they know who their advisors are. While that's important, it actually isn't the central piece. The central piece is, "As an heir, how do I know when to say 'no'?"

We had a family here where the son inherited blocks of real estate in one of the big cities. Unfortunately, his parents passed away suddenly, he was about 30 years old. He went back to school, he found out that he's suddenly a multi-multimillionaire, he dropped out of school, he realized the only people around him were around him because they wanted access to his wealth, he realized he could have anything he wanted whenever he wanted it. And, regrettably, he took his own life because there just wasn't any purpose.

We're seeing higher and higher levels of depression and suicide rates in Silicon Valley because more and more young people are coming into great wealth. So, preparing heirs means for them to take a look at, "What am I up to? How do I be a contribution? How do I say 'no' to well-meaning friends? How do I speak truth to power?" So, it's more about who they're being.

And then the third piece we found was that 10% had to do with values and mission and, "Are we aligned on the use and purpose of this wealth?"

There was a 5% left over which had to do with maybe the business failed, it was no longer relevant. Or maybe the advisors gave not great advice, or could have been better. Or crazy things, like a pandemic, could happen. But, for the most part, these three variables, trust and communication at 60%, heir preparedness at 25%, and values and mission at 10%, are the core drivers that can reverse that shirtsleeves to shirtsleeves. So, our entire organization is committed to helping families build those three domains.

Michael: So, I'm fascinated by a lot of this. Again, as you frame the trust and communication dynamics, right? Just the, "Do I even tell my kids about the wealth? When do I tell them? At what age do I tell them? How much information do I give them? What do I tell them so that," as you put it, "it doesn't demotivate them?" And recognize the flip side, that if you don't tell them, they just...they find out when someone reads your will. Which usually isn't better.

Amy: Right.

Michael: If only because now there's a bunch of resentment of, "I can't believe Mom or Dad didn't even tell me about all this stuff. I might have made some different choices in life, maybe some positive different choices in life, had I known there was going to be more optionality around this."

As well as I'm struck by your discussion around heir preparedness, as well. Because I do feel like, in advisor world, we have at least started showing up in ways in this space. Advisors that try to do financial literacy education for heirs of clients, particularly if they work with more affluent clients where just they can put a little bit more dollars towards supporting them on that. I do see some of that cropping up, but it is still typically, I would think of it as, kind of money and financial literacy training. Like just, "Here's how money works and stocks work and bonds work and real estate works," and just all this different stuff. Because you're going to inherit a lot of it, you probably need to understand how it works. But not necessarily at the level that you're talking about, because most of what you were talking about in heir preparedness is not their preparedness with...for the money itself, it's preparedness for the social dynamics of what happens when you have money.

Amy: Living well with wealth. Yes. That is absolutely true. Silence, not talking to the next generation about the wealth, is probably the biggest indicator of risk. It puts the entire portfolio at risk. Because exactly the story I told is...happens all over all the time.

There was another situation where there were two brothers. The grandfather started penny stocks and he passed that portfolio on to his son. His son then went on to have two of his own sons. Their father passed away. So, the two sons looked at each other and said, "Wow, this is a sizable amount of wealth." One of the brothers said, "You know what? Market is all-time high, we've got kids in school. Let's pay our debts, let's get into some decent housing and sell this stuff." And the other brother said, "Whoa, not on my watch. This is legacy money. This is to go to our kids." About six years later, after they settled it in litigation, they ended up owing the attorneys money.

So, that's another one of those moments where silence was the great destroyer of wealth. And that happens more often than not.

Understanding When To Communicate Accumulated Wealth With The Next Generation [16:13]

Michael: I'm struck, as well, that just this phenomenon, as you articulated it, of not knowing how to say "no." I still remember a conversation I had heard many years ago of a family that had grown up of limited wealth, had reached the point of some very substantial wealth, were trying to instill good financial habits in their children. And so their kids wanted to buy, I forget what it was, something that was relatively expensive and just the gut response that they had said, what a lot of us end up saying to kids when they want a thing and have no actual understanding of money and cost yet, is like, "Well, no, sweetie, we can't afford that." And had said, "Oh, we can though, we have tens of millions of dollars. My baby could ask for a Maserati, I could just go get it tomorrow. We've got tens of millions of dollars."

Just that whole mechanism of, "Well, one of the ways that you just say 'no' to your kids is, 'We don't have the money, we can't afford that.'" And when that breaks as a filter, it starts messing with your conversations, it starts messing with your mind, "I can't say that. Or if I say that... I can say that because I'm a parent and I'm going to say whatever I'm going to say, but it's not true. It's not actually an accurate reflection of what's going on." And explaining why we can afford it but we're still not going to buy it is a much harder conversation.

Amy: It is. We worked with a family where the dad was a billionaire. They flew everywhere on private planes. They went on vacations and were with a bunch of friends that walked into a retail shop somewhere. And his daughter, who was pretty young, maybe she was nine, said, "I would really like that," and it was a stuffed animal. And the dad said, "Let's see if you've earned your allowance by the end of the week." All of the friends, their jaws hit the floor. And he was like, "Yeah, of course I can buy it. But that's not the values I'm raising her with."

And so it starts at a very young age. Even though people aren't, or families aren't, talking about how much wealth there is, I interview these next-generation kids. And when I ask them, "Hey, what's your guess on the family's net worth?," they're pretty close most of the time. Maybe it's because Dad's income is public or maybe it's because they can google.

Michael: I was going to say I suspect that's very different over the past 10 and 20 years than it probably was for the, I don't know, preceding century. There comes a point where the wealth is high enough and high-profile enough that there's a decent chance the Internet will actually tell you at least what neighborhood you're going to be in.

Amy: Well, it's not even just that. Right? These kids go on vacations, they go back to school, they're the only ones coming back with a tan. Or they're talking about "my other house," or "houses," or how parties happen at their house all the time. So, the kids figure out that they're wealthy. I think what's important for advisors and for moms and dads is to realize that the kids are always watching, and that to start the conversation about entitlement when they're teenagers is almost a little bit late.

So, one question I always get is, "Well, what age do you tell kids about the wealth?" And honestly, it's not an age, it's a readiness. I have clients in their 50s and 60s that still aren't really ready. So, I would suggest the advisors and the matriarchs and the patriarchs have a conversation about what is ready, "Oh, 'ready' means you've held summer jobs and you know how to save some money." Or "ready" means you've gone through school and you're able to hold a full-time job. So, what do we mean by this idea of readiness, I think, is a family conversation, and a really great one that advisors can help their clients walk through.

Michael: And the idea being, ultimately, what constitutes readiness may still be a little bit specific to the client and the circumstances, but that you can literally have the conversation with a client to say, "Look, I understand you're concerned about talking to the kids about the wealth and the dollars. But, hey, just wondering, at what point do you think they would be ready to have that conversation? Let's just talk about that. It's not now, not pushing you now. But if you were going to think of what 'ready' means in the future, what would that be?"

Amy: I think that's a great question that the advisor can have with the mom and dad. I also suggest that if the advisor is going to have a conversation with each of the next generation, which I highly recommend, ask them, "Hey, what do you think 'ready' means? How would you know when you're starting to be ready to manage wealth, or make decisions about it?"

Another piece I want to mention here is that when we work with families, we're often not talking about the dollars. We can see that the dollars change, circumstances change. It may not be appropriate for the family to know the number, but more important for them to know the plan.

So, for example, when we talk to families, we use a football analogy. Partially because Roy came out of the San Francisco 49ers, but it works. So, if we think about the conversation this way, we can say, "Oh." So, there's an offensive line. There are financial advisors, there are estate planners, there's the bank, there's the CPAs, there's the lawyers. There are all these people who know their job, and they know everybody else's job, when it comes to the estate plan. They do it really well. And when that day comes, that the heirs receive the wealth or the estate is passed, the heirs are the ones that have to go out and catch that ball. But they have never been told about the plan. They don't know where the locker room is. They don't know where to go or what to move. And yet they're playing against those other team members, which are the Bernie Madoffs, a well-meaning college friend, a well-meaning church attendee.

In another situation, we had a son who suddenly inherited a great deal of wealth. He went back to school and said to one of his friends, "Wow, I suddenly find myself in this position." His friend said, "I know a little bit about what you care about. I've got a brother who works for a company who does some great stuff in social impact investing. Why don't you go do that?" And he lost, I think, two-thirds of his wealth within six years.

So, there, again, right? Silence was the great destroyer, and not knowing how to assess the competence of people around him was the missing skill, not how to read a portfolio.

Michael: Yeah, I'm struck, as well, at just all the interpersonal dynamics with others that crop up is the great challenge here. You had framed it early on as just if you've inherited significant wealth, knowing or learning how to say "no" to your friends when they start asking for money, just that alone becomes a significant challenge and blocking point.

Amy: Oh, absolutely. That conversation for "no" shows up when they all get in an Uber and everybody looks at that kid and says, "Well, aren't you picking it up?" Or there's another dynamic that happens here where very often the kids of these wealthy families are very motivated, they are trying to move up in the world.

We had a situation where a next-gen person didn't get the promotion they wanted to get. They were talking to one of their friends and their friend just said, "Why are you even working?"

So, the living well with wealth is really an essential conversation that's missing in families because Mom and Dad are afraid of the conversation. And rightfully so. The same skills that create tremendous wealth are not the same skills that give up control to someone else, or even share it, for that matter.

Bridging Generational Wealth Through Open And Honest Communication [24:02]

Michael: So, now talk to us a little bit about how we start getting into these conversations, from the advisor. And I'm imagining there are sort of two layers of this. There is talking to clients about having this conversation, right? Trying to get them there, trying to get them comfortable with it, trying to explain and show them why it's still better to have this conversation now than to not have this conversation. And then there's also the, "No, no, literally, how do we have this conversation? What are we supposed to say to our kids? When are we supposed to say it? How are we supposed to say it?" Right? Because all of this, I think, comes back to just a very core fundamental thing as a parent of just, "I don't want to screw my kids up."

Amy: Yeah.

Michael: Right? It's not like anybody... I suppose there's an exception. But it's not most parents who are hiding the wealth from their kids are trying to do it out of anything negative or malicious. They're doing it because they're afraid that the conversation is going to "screw up their kids."

Amy: Yeah.

Michael: Demotivate them.

Amy: Yeah.

Michael: Or something to that effect. So, it comes from a good place. Which means if we're going to get someone comfortable enough to have the conversation, we also just have to actually help them figure out how to have the conversation.

Amy: Part of it is education and part of it is having the parents realize that the estate planning they're doing is half of the equation. That's only half. The estate plan was written to take care of the assets, not the relationships. Legacies are built on relationships. And relationships are built on communication skills.

And so for advisors to move the needle on this conversation, it is a specific conversation about education and awareness. Educate them about shirtsleeves to shirtsleeves, give them literature. We have a book called Bridging Generations that speaks directly to this whole space. And there are plenty of books out there that are very good. Have them walk through... We have 10 questions. But, to name a few, a great way to start the conversation is to say, "We've done a great job preparing the assets for your family. Now, we'd like to pivot the conversation and talk about how can we start preparing your family for the assets."

And so there we work with an estate attorney who says, "I've been writing estate plans and trusts for many years. And I've learned that I cannot write an estate plan that 'fixes' your kids." Which is kind of funny, but that...they are hoping that that's going to take care of demotivating them. But that's not the game that the estate plan plays.

Michael: Right. "We're...we'll avoid demotivating them because the money is going to be held in trusts and not outright. And they're only going to get it in limited increments over time, so we're not going to push too many dollars to them at once because that's not good."

Amy: Yes. And so where the challenge of this conversation is is actually with the advisor. Because the families know this is a concern. They lay awake at night saying, "How am I going to transition this without screwing up the kids? How do I make sure they're going to take care of each other?" So, the challenge is with, and the opportunity is with, the advisor.

When many of the advisors we speak to got into the space, frankly, because numbers don't talk back, because they can go in with a very formulaic approach, they can use the Monte Carlo analysis to do the talking.

Michael: Hey, I do like me some Monte Carlo analysis, yeah.

Amy: They can use that and just say, "Here's the plan," and the numbers work. But when we're in this conversation about family dynamics, it's a whole other ball game, it's a whole other skill set, where the advisor no longer has the answers but are able, skilled, and being able to ask really powerful questions. Questions like, "When this wealth transitions, how would you like it to impact your family?" Questions like, "What concerns do you have about your next generation living well with wealth? How confident are you that the wealth you've amassed will bring your family closer together?" All of those are questions that the advisor does not have the answer to. However, they open the door to more meaningful and deeper relationships with your clients.

I have an advisor who says, "Financial advising is my side hustle. It is the differentiator." So, he has found more joy in his work by paying attention to this side of the asset equation.

We actually have 10 questions that we designed for advisors so that they can start to raise families' awareness on these topics. And those, you can see them on our website. But one of them, for example, is saying, "Heirs understand their future roles, have bought into those roles, and look forward to performing those roles."

We worked a family recently where we said to the daughters, "What happens if Mom and Dad can't come back from their trip to Africa?" And they both looked at each other and one said, "Well, I have power of attorney. So, I can call the bank and get all the money we need." And then the other daughter said, "Wait, I think you're the medical power of attorney." "Oh, so that means I have to pull the plug?" So, it was they had no idea what their roles were. We said, "So, if you had to call the executor, who would that be?" And they said, "I think it's Aunt Mary."

And Mom and Dad, their color is just draining from their face because they thought they had this conversation, "You're this, you're that." But what was missing in the conversation is that that next generation didn't understand what it meant, but they didn't know how to say "no." It wasn't safe to say "no" because this conversation about wealth is never on the table. It's not normalized.

So, that would be a great question. And if the mom and dad said "no," then the follow-up question is, "How do you see we can go forward to start clarifying that?" The advisor might have resources within the company itself or they might be able to say, "Hey, let's have a family meeting, let's talk about some of that."

How Financial Advisors Can Begin Wealth Transfer Conversations With All Generations [30:12]

Michael: So, how do we as advisors start getting comfortable in this conversation space?

Amy: Great question.

Michael: Because just what you're describing, this is...very literally, this is not what we're trained on.

Amy: Yeah.

Michael: We train on the estate planning strategies, we learn about the wills and the powers of attorney, and we can do some advanced programs to learn more about GRATs and IDGTs and family limited partnerships. We learn the techniques and the vehicles. In part because just it can produce some very material real tax dollar savings, so shows well when explaining and justifying our fees. It's also...I think, as you described, it's very teachable. Right? There are concrete rules that give due to concrete outcomes, we can learn the technique and the stuff that it takes and get to an answer. A lot of the conversations you're talking about are... I was going to say, not conversations, but the answers. I guess they have answers. The answers don't come from us. We ask the questions, we don't answer them in these.

Amy: Right. Yeah.

Michael: And we don't get taught very much about what questions to ask and how to ask these questions. I feel like for a lot of us as advisors I'm sort of envisioning this warning sign that says, "Here there be dragons."

Amy: Yeah!

Michael: "Beware walking past this point. Beware opening these doors," because you don't quite know what you're going to find on the other side of them. And we're not necessarily trained or prepared about how to handle those conversations once we open the doors. So, the easiest thing is not to open that door and to go back to the conversation about the IDGTs and the GRATs and the family limited partnerships and the rest.

Amy: Exactly. Yeah, they're leaning back on the comfort zone, for sure.

Michael: So, how do we get into these conversations and not cause more harm than good in the process?

Amy: Well, first, and a great question, "Where's the threshold of my comfort level in the conversation?" Some advisors are naturally inclined to ask questions that they don't know the answer to so they have a higher level of comfort in that space. And they know, "Oh, okay. So, you're talking about the relationship between your two kids and maybe it's not where you want it to be. That's a little outside my wheelhouse, but we have experts that we can bring into the conversation to make sure that those relationships are as solid as possible so that, when the wealth does transfer, it's not an added stressor on top of an already difficult situation."

So, they bring in experts at whatever point they think is important. But that doesn't release them from the responsibility. They may just be skilled in saying, "We see that this family, I'm the go-between. I'm the person that has to relay information between family members. To us, that's not necessarily a good thing. We would like to see your family be able to have some of these conversations directly."

Or another, I'll call it a, yellow flag might be that the parents are unwilling to share the estate plan. And that's a huge door-opener. Because you can ask, "Have you reviewed the estate plans with your family?," and they say, "No, it's going to derail them." Then you can say, "Well, what would you like to put in place so you have more confidence that it's not going to derail them? And do you see a way to talk to them about the plan? Not necessarily dollars, but communicate your intentions, your expectations, so that you can avoid misalignment or anger later on."

Another great question is, "Hey, when everybody is not on the same page, how does that typically get resolved?" And they might say, "We just don't talk about it." And that's an opening for the advisor to say, "Well, trust and communication represents 60% of the 70% failure rate. So, how about we bring in some experts that can look at how your family communicates today and take it to the next level of performance, have it get even better?"

So, I went to the solution there, but the real question for advisors to stand in is, "For the sake of what do I want to open that door?" Because if they open the door with a string of questions that they're not sincere about in an environment where there's a lot at stake, the families are going to sniff out insincerity. "Oh, you're just asking the questions because it's on your list of 10, you don't really care."

So, in this place, the advisors have to really ask themselves, "Who am I being for my clients?," as opposed to, "What am I doing for my clients?" And this is the opportunity. And I would suggest the requirement as advisors go into the future, because clients are getting more sophisticated and this idea of just managing the wealth for many is not enough, they need to know that you have a bigger sphere of concern for not just the assets, but the family, as well.

So, we would suggest to advisors, "Why? Why is it important to you?" Land on that for yourself, and then start asking yourself, "How can I get more comfortable in asking questions I don't have the answer to?" And that's where they have to learn to be curious, not critical. And that's a whole new skill set. It's actually easier than they think it is, but it is a paradigm shift.

And a practice they can be in is just asking questions without reloading an answer. Noticing, when somebody says something, how quickly do they go, "Oh, they're saying this and I'm going to say that." Instead, just be more present. And, unfortunately, it isn't...there isn't more specifics I can give you on that. That's the age-old way to become an expert listener. Not reloading while you're listening, but listening for the sake of curiosity and see what questions that opens up from there.

I'll say one third piece here. And if the advisor sets the context for the conversation, instead of showing up as an expert, they can say, "In talking about the family, I want to open the conversation up so that it's a more mutual place of curiosity so that I can really learn what's important to you." And now the emphasis is on the client, not on the advisor having answers.

Michael: What are we trying to get to when we open this door? Are these just questions and conversations, I'm just trying to put some questions out there, it's going to make my clients think and go, "Hmm," and then they'll want to do something by the end of the meeting? I'm going to cue them up to wonder, and then I'm just hoping at some time in the next 6 to 12 months, as it germinates in their brain, maybe they'll come back to me and say, "Hey, we want to start having more of these conversations that you put forth"? Am I supposed to be trying to build this up? I know advisors that work in the space that conduct family meetings, that conduct family retreats. Am I trying to get my clients to run a family retreat, and then am I supposed to be administering that family retreat? What am I trying to get to if I open this door beyond kicking it off with some hopefully good questions?

Amy: Exactly. So, that first question I ask, "For the sake of what?" Why does the advisor care about having these conversations in the first place? Does the advisor even buy into this conversation about shirtsleeves to shirtsleeves? Do they agree that family harmony or disharmony will make or break the transition of the estate? Do they see that this is a bridge directly to the next generation and having more deeper, meaningful conversations?

So, first, I would have the advisor answer, "Why do I care?" And that might then drive the next action. So, it could be, "Let's get educated on this and have a family meeting where we start talking about those 10 questions I mentioned." And they're just really listening. Maybe they're making a list of key conversations that show up, and that becomes touchpoints for the future. Maybe the kids say, "I just...I don't even understand what the word 'trust' means." And so there's an opportunity to bring in a trust expert or to have another conversation about what a trust is at the next family meeting.

So, it could be that they want to deepen the relationship with the next generation and this is a direct line to continue to have meetings with them. It may be simply, and this is probably what we would recommend, is bringing in an outside person who's going to partner with the advisor to help build this stronger foundation of relationships so that when the family has to make a decision about estate planning or when assets start to transition or, let's say, the family wants to start looking at distributing wealth and have a conversation about the alignment of the use and purpose of it, maybe they want to say, "Yeah, like we referred an estate attorney to you, we're going to refer an expert in family dynamics," or, "We're going to refer an expert in wealth transition and coaching families through that."

So, it may be that they want to have a family meeting and keep the relationships going or it may be that they just want to raise this area of concern and say, "Here's the expert."

We had a meeting with a family where they worked with Bessemer as a client. And we said to the kids, "Hey, we're going to bring Bessemer to the next family meeting," and suddenly all of the kids had something else to do. So, we said, "Hey, guys, what's going on here?" And they said, "Well, the meetings are great with Bessemer, they're really informative. However, we don't understand a word they're saying." And so that was an opportunity for us to include Bessemer in the meeting with the kids and say, "Okay, let's figure out where are we missing each other and have more meaningful conversations."

By the end of that meeting, the advisor had a deeper relationship and set up future meetings with each of the spouses as well as the kids. One of the spouses raised his hand and said, "I've got this 401(k), I have no idea what it means. Is that part of what you do here?" And they said, "Absolutely." Another one raised their hand and said, "I know you guys can get us tickets to Broadway plays, I'd love to see "Hamilton." Is that a possibility?" And she's like, "Absolutely."

So, the point is that oftentimes these meetings, especially if you bring in an outside facilitator, can help the advisor build a different kind of relationship with the next generation that's way beyond the assets.

Michael: And so it strikes me, as well, just the...there's a common factor in all of this, which is time. This takes a lot of time. These are just...these are time-consuming, messy conversations, and just messy conversations take time to get through.

So, from the advisor's end, I guess sort of indirectly this is why you see us spend a lot of time doing this work with particularly affluent clients with a lot of dollars at stake. Because just there are more dollars on the table, there is a capacity for clients to be able to pay the fees that it takes to do this work, because we have to charge for our time to be able to have these conversations, as well. And that, I guess just sort of processing, this is why we end up spending a lot of this time particularly with the most affluent clients. Because I could imagine families of almost any level of wealth where you can still manage to leave enough money to create challenges for your kids. Yes, there's probably an initial layer of it when you've got an 8- or a 9- or a 10-figure net worth, but plenty of people can be messed up just fine with a good old-fashioned million-dollar check, too. We don't have to have tens of millions. But we need to have enough dollars on the table that we can charge for our time to actually have these conversations and do this work.

Is that a fair way to think about it?

Amy: I think it is a fair way to think about it. And I suggest that these conversations don't need to be held by the advisor, it may be enough for the advisor to open the door.

So, for example, if somebody says, "One of my kids is great with money and the other is terrible." You don't have to have millions of dollars for that to be a concern.

Michael: Right.

Amy: So, that could be a moment where the advisor says to the client, "Is that something you want to do something about now? Is that a conversation we want to focus on?" Because from the advisor's standpoint, there's...that's the tip of the iceberg, that's what's happening above the surface. What's going on below?

And so I would say to the advisor in that instance, "Why do you care? And do you have resources that you can bring to the table that the client would then engage?" Or is this something where they just want to say, "Let's have a family meeting and talk about what it's going to look like for everybody to trust each other being...working well with money"? Maybe when the parent says, "One of my kids is great with money, the other is terrible," that's an opening for the advisor to say, "Hey, let me meet with them." And then the advisor can say, "Okay, great, let's have a family meeting on what it means to save money. How do we know if we're being good with it or not."

So, it depends to the extent that the advisor wants to get involved here. It may be just that they raise the awareness and they put that back into the client's pocket and say, "Great. Well, this is an area that we can be of service as a facilitator, or we can have a family meeting to talk about financial education, or we can bring in an expert."

Michael: Well, and you make a fair point, that just there's a lot of areas where we introduce conversations to clients about issues to address, but we're not necessarily the people who are doing the hands-on work to solve it. At the end of the day, we highlight estate planning issues. Most of us are not drafting the will. We highlight a lot of tax issues, most of us are not preparing the tax return.

Amy: Exactly.

Michael: So, there can certainly be a door that we open to say, "Hey, we see some family dynamics issues that we think could actually be the biggest adverse impact to your family wealth and your legacy. Let's talk about bringing in some folks who can help us work on this together."

Amy: Perfectly said. Yes. Exactly.

How The Williams Group Serves Their High-Net-Worth (HNW) Clients [44:22]

Michael: So, in that vein, can you now share with us a little bit more about just the Williams Group, your organization, what you guys actually do in this context?

Amy: We partner with advisors. Because we don't manage money, we don't have the background of what you know. And so advisors call us and say, "I've got a client here where she's concerned that her and her husband aren't on the same page. And now they're getting ready to talk to the kids about the wealth, but there are just too many pieces moving. Can you have a conversation?"

So, we will get on the call with the advisor, Mom, and Dad and help them see what's possible with where they are today and where they want to go. If they decide to engage us, then we will do what we call the family readiness assessment. That family readiness assessment is 50 questions, 5-0, and those questions are distributed to the spouses and the next generation, as well as Mom and Dad. And we can then benchmark those answers against the 3,000 families, or the 2,500 other families, that are in the research and say, "At this level, your trust and communication look really solid, and there's an opportunity here to improve alignment of values and mission."

So, when we move through that step with a family, they have a really good picture of those three pillars, trust and communication, heir preparedness, values and mission, and where they want to focus. We haven't actually hired them yet, that's really just the first level assessment. We have two criteria. The first is that everybody in the family, especially Mom and Dad, are willing to learn. The second is that the family cares more about each other than they do about the assets.

If we can check both of those boxes after that assessment, we move into the first phase of our work, which is teaching these skills of how to communicate more effectively, of how to build, manage, repair trust. How to have conversations where maybe you don't both disagree, but can come out of the conversation in better shape than you went into it. So, we teach those fundamental skills. The family has a list of missing or pending conversations. So, in the next meeting, we're using those actual conversations as the platform to apply the skills that they've just learned.

After we've done step two, we go to step three, which is helping them create their values and their mission. When they create their mission, they might say something like, "Education is important." We then have to partner with the advisor where they say, "Okay, we want to pay for education for the next 100 years. And it's going to be grammar school, private school, we'll go all the way up to grad school," say. We then say, "Okay, let's get your advisor in here and make sure you've got funds," or, "you've got transfer money," or how that's going to operationalize.

Another example of where we partner with the advisor is maybe through that process the next generation says, "We'd like to do something called impact investing and we don't know what it is." Again, that conversation goes right over to the advisor and the advisor takes it from there.

So, we come in, we do our work, and then we leave. We never leave 100% because there's always things that are coming up where the family can call us and say, "Hey, this one is getting married, can you indoctrinate them back into the skills that we've all learned?" But, for the most part, we partner with the advisors, do the work that needs to be done, and then we work ourselves out of the job, basically.

So, that's kind of our process. Those 10 questions I mentioned earlier are where the advisor can start the conversation. They can say, "Through these 10 questions, according to the Williams Group research," if you have four or fewer yeses in those 10 questions, then the natural progression is to say, "Hey, let's talk to the kids and see how do they line up in these three domains." So, it's sort of a graduated assessment. And then we do that 50-question assessment at the end of the process so the families can actually see, "Oh, this is how our levels of trust have increased, heir preparedness has increased, and values and mission have increased."

The 10 Williams Group Questions For Advisors To Evaluate Relationships [48:39]

Michael: So, now that we have more context for this overall, can you come back to the 10 questions and just share them, or share more of them? Just so now I think we can start visualizing a little bit more while we're building up to when we start asking some of these questions and opening this door.

Amy: So, the context to set up these 10 questions is, like I said earlier, "We've done a great job preparing the assets for the family, now we want to pivot and start preparing the family for the assets. We know that estate plans take care of assets, not necessarily relationships. And in the 70% failure rate, it's because of trust and communication, heir preparedness, and values and mission. So, I'd like to ask you 10 questions that will help us gauge how we're doing. The first question, 'Our family has a mission statement that spells out the overall purpose of our wealth.'" And you would invite the matriarch or the patriarch or both to say "yes" or "no," and they mark it down on this card. These cards can be purchased off the website.

"The entire family participates in the most important decisions, such as defining the mission for our wealth." That would be a "yes" or a "no." In many cases advisors just say, "Hey, Mom and Dad, answers these questions about values," and, boom, there's your mission statement. But the problem is the next generation hasn't bought into it. So, when the wealth transfers and the advisor brings up that mission statement, the kids are pretty much saying, "Thanks, but no thanks."

Number three, "All family heirs have the option of participating in the management of family assets." That could be how are they going to maintain the family vacation home, it doesn't have to be the portfolio.

"Heirs understand their future roles, have bought into those roles, and look forward to performing those roles." As I mentioned, that could be an executor.

"Heirs have actually reviewed the family's estate plans and documents." Not necessarily amounts, but they have a bird's-eye view of what Mom and Dad would like to see happen. We just did that conversation again with another family and the kids were shocked to learn that their father's sister was a 50% partner in a business that he had. So, that was...that would...that's a key piece they needed to know up front. They also didn't know he had a lawsuit pending on that business.

"Our wills, trusts, and other documents make most asset distributions based on heir readiness, not their age."

"Our family mission includes creating incentives and opportunities for our heirs." Incentives could be things like, "If you have a summer job, we'll match whatever you made into your account," for example.

"Our family mission includes creating incentives and opportunities for our heirs," that's number seven.

Number eight, "Our younger children are encouraged to participate in our family philanthropic grant-making decisions." And people say, "Wow, how little?" And we are working with a family now where there's a 6, 9, and 12-year-old. And the mom came into some wealth, husband passed away, and the coach said, "Hey, what's important to you, six-year-old?" And she said, "I saw this show about sea turtles and they don't have a place to go and get healthy." So, the mom is like, "Oh, wow. If we could find a way to put some money towards," I don't know what you'd call it, but, "animal health experts that care of sea turtles, maybe that's something that we could have a conversation about over dinner."

In another family, we had young, young kids who went to Africa. They saw that there were elephants that needed help. They started a cookie drive. And that bake sale went on for about 15 years, and the money went back to Africa. So, that's how they were able to participate.

"Our family considers family unity to be just as important as family financial strength," that's number nine.

And number 10, "We communicate well throughout our family. We meet regularly to discuss issues and changes." And when I say "we meet well," when I interview the next generation of families that seem on the outside to be doing very well, we find out that when Mom and Dad do talk to them about the family, the conversation is one-sided and very limited in scope. So, they don't really feel like they have a voice, they don't really feel like they're being heard. But a great way for the family to introduce the expert, is to say something like, "We've been thinking a lot about our estate plan and we'd love to hear what your thoughts are. We'd love to hear how would you like to see the wealth impact your lives." Just by asking the question doesn't mean they're going to change anything, but it suddenly opens the conversations so that now the next generation has a voice. And that is really a very effective way for families to start these conversations.

Michael: So, for advisors who are listening, this is episode 265. So, if you go to kitces.com/265, we'll have a link out to the Williams Group website that just kind of has the list of 10 questions that you can go see from them if you were...so you don't have to have been scribbling those down or rewind to scribble them down. We'll give you a link so you can track them down if you want to see them written out.

So, Amy, I'm... So, a couple of questions, even just around these 10 questions. So, on the one hand, I'm struck in listening to them. I don't think I missed this anywhere. We never actually talked about the dollars. Right? I don't think there were any of these questions that were like, "My kids know how many zeroes they're going to inherit," here. This is much more around the systems and structured around it. We are asking, "Have they reviewed the plan, and do they know their role, and do they know where the documents are, and do they understand the mission?" But not necessarily, "Do they actually know what they're inheriting and have they started changing their life plans based on their $52 million-dollar inheritance?"

Amy: And the reason for that is because we don't have a solid enough context to even begin to talk about the dollars. We're working with a family now where the eldest son refuses to participate in the process unless we're going to talk about dollars upfront. And so he's not included in the process. Because he's telling us the assets are more important than the relationships in that requirement. So, you're right.

Michael: No, I do feel like, as well, that, I don't mean this in a bad way, but the questions feel a little loaded to me. That I'm just envisioning the average client of some significant wealth and I feel like most of them are probably going to get somewhere between zero and one yeses to this, maybe two, right? Just I'm thinking average...a client who has not already spent time doing work in this space, right? They've created their wealth or had their liquidity event or done whatever, their thing. We're going to get to question one, "Our family has a mission statement that spells out our overall purpose of our wealth," and be like, "Nope. What's a family mission statement? I haven't had that conversation." And then it starts going downhill from there.

Again, I don't mean it negatively, but just I feel like we're sort of setting up, "Here's basically all the things that you probably should be doing as a family of significant wealth that you're not doing that we're going to subtly hint that you should be doing by asking you all the questions about what you're not doing, and then that's going to lead you to the conclusion that you probably need to do more work with us to do it." Which is great for actually engaging clients in, but just does anybody have a significant number of yeses to this who haven't already done a lot of work with an advisor or a family dynamics coach around this?

Amy: More and more families are clicking more and more of these boxes. So, these conversations are happening within your clients. Whether or not they're happening with you as the advisor is the essential question. But there are more and more families clicking more and more of these boxes.

And what's interesting about that first question, "Our family has a mission statement that spells out the purpose of our wealth," the husband will say "yes" and the wife will say "no." And so...

Michael: So, we give this quiz separately to both members of the couple?

Amy: You could give it to them separately, that would be interesting. Or you could use it as a conversation point in your next meeting and say, "Hey, guys, let's answer these 10 and see how we show up." You want them to answer "no" to these questions because that's where the opportunity is to broaden the value proposition that you're bringing to the relationship.

Michael: And you had mentioned, as well, that, I think you had said, you would encourage giving this to the client and also giving this to kids and heirs and see how they respond from their end, as well, right? It's one thing when Mom and Dad say the heirs have reviewed the family's estate plan documents, another thing when you actually give it to the heirs and see if they still say "yes" to the same question or whether there's a gap. Am I understanding that right, that the idea is this is parents and heirs, or are we only at the parent level first?

Amy: This is only at the parent level.

Michael: Okay.

Amy: And this is the top-down perspective.

Michael: Okay.

Amy: We do have another assessment, and that's a $5,000-dollar investment, where we ask 50 questions, 5-0, that are an expansion of these 10, but focused on trust and communication, heir preparedness, values and mission. And that is for...

Michael: So, that's the whole family readiness assessment, that goes to everyone in the family?

Amy: Right. If they score, say, less than four yeses, then there's an opportunity to say, "Well, let's see how the kids stack up in some of these questions that we're asking." And then at that point, after that meeting, it's usually a two-hour Zoom meeting, they can decide, "Yeah, we...these are the things the advisor can support us in and we're going to go in that direction." Or they might say, "Let's have a meeting or two about trust and communication, heir preparedness, values and mission."

So, it's kind of an easy way to wade into the topic, but it's graduated, 10 questions, then 50.

Michael: Okay. And 10 questions with just the parents, with just, presumably, the mom and dad, or the patriarchs and matriarchs of the family. And that's what's opening the door for them to say, "Okay, we scored 3 out of 10. Would you like to do some work in this area to see if we can make positive changes in the score for your family?" And if the answer is "yes," then, "Okay. Well, then let's start going down this path."

Amy: Mm-hmm. Exactly.

Michael: I feel like there's also a family dynamic that has to change, at least if we're talking about the family that has not been having these conversations. Because, "Money conversations are uncomfortable and I don't want to screw up my kids," and all the things that we talked about as to why a lot of parents don't tell kids much, or anything, about the dollars in the family wealth.

So, how does this...how does the readiness assessment even get introduced? Because if you don't even realize Mom and Dad have significant wealth, or you don't really have any context for how significant it is, I'm going to presume that a family readiness assessment with what presumably is just even deeper questions than all of these, that's basically going to be the start of the conversation with the kids of, "We may have a lot more wealth than you realize." I guess it's one thing if they're younger kids, but I'm envisioning by this point we're talking, probably talking, about young adult children who are maybe late teens or into their 20s or even into their 30s by the time Mom and Dad are old enough that they're driving this conversation. They're going to realize pretty quickly, "Something is up and apparently there might be a lot more dollars than I realize."

So, does that start the process? Do there even have to be pre-conversations before the family readiness assessment to prepare for the fact that everyone is going to start realizing there might be more money on the table than anybody realized?

Amy: Well, first, they have a pretty good idea that they're wealthy. And usually, the next generation is relieved that the conversations are starting. Mom and Dad are relieved that the conversations are happening with somebody who's not connected to the wealth that is a third-party facilitator and can manage the conversations well.

Usually, there's an introductory letter, so they do these 10 questions. Mom and Dad might read the book that we have, or another book, and then they send a letter out to the family or they have a conversation with each family member and it says, "As we consider our legacy planning, we're interested in hearing your perspective on wealth, philanthropy, succession. And to start those conversations, we're inviting everybody to take the family readiness assessment. That will help identify some core areas that we want to focus on." And they might also say that this process is about ensuring a successful transition of wealth, which means, "We want to make sure our family relationships stay strong and that we all maintain control of our assets."

Michael: But part of the key there that you'd said at the beginning, I know the media likes to highlight sort of these scenarios of a quiet mild-mannered person who was always a janitor and never did anything flamboyant and passed away, and it turns out they had millions and millions of dollars that nobody ever knew about. Which is a fun media conversation and media story, but I feel like part of the point you're making here that you touched on earlier, as well, is there's a lot on the Internet, kids aren't dumb. They almost certainly know. They might even actually know the neighborhood of the dollars pretty well. But we're probably...or our clients are probably fooling themselves imagining that they've kept the great family secret that they have wealth. It's not a secret, they know.

Amy: They do usually know. And the other conversation that happens in families where there is wealth is Mom and Dad say, "Yeah, well, you're not getting any of it, I'm giving it all away." And then the day comes where Mom and Dad are no longer there and this money lands on the kids' heads. And so you can...

Michael: Oh, because they said they're going to give it away so that the kids don't get "spoiled" by expecting and waiting for the wealth.

Amy: Right.

Michael: But they weren't going to give it away, they leave it to the kids. And the kids don't find out until the reading of the will.

Amy: And suddenly we have the sudden wealth syndrome, look at all the lottery winners, and those kids end up divorced, they end up quitting their jobs, they end up finding a life of gambling. So, yeah, that's why we want to start these conversations while Mom and Dad are this side of daisies, no matter how much wealth there is. Because even when families have great wealth, and let's say something crazy happens where they find themselves bankrupt, that family that had great wealth very often can rebuild the wealth. And the way they can do that is, A, they have the family name, so they've got symbolic capital that's opening the doors. But more importantly is they have a really clear set of values, they know what it means to work hard, they know what it means to work together. So, they've got that really strong foundation of relationships and identity and ability to work together that allows them to rebuild the wealth.

So, the focus...if the focus is on the money, then we've got the accent on the wrong syllable. The focus really has to be on, "Who are we as a family? In what way do you see you could be a contribution to the family wealth?"

We have a family where both sons really didn't get along with each other at all. One barely came out of the house. The family has great wealth, but Dad only gave them enough to afford studio apartments. And so they found a way to sort of suffer through. And in the last conversation, unfortunately, Mom's health has taken a turn for the worst. And so that has brought the family closer together, where now the brothers are saying, "Okay, how are we going to work together to make sure that this family legacy prevails?" We had to shift the conversation away from money because for them money was a bad thing, it's what took their father away from their relationship, it's what set these expectations that they never wanted to jump through those hoops.

So, really, if we keep bringing the conversation back to, "How can the next generation be a contribution? How would you like this wealth to impact your lives," then we're suddenly building a stronger foundation of a successful wealth transition so that the family relationships remain intact and they maintain control of the assets.

How Amy Helps Her Clients Build Trust And Communication Skills [1:04:55]

Michael: So, now that we kind of understand the assessment's dynamics, the, "Where are you as sort of Mom and Dad? And then where are we as a family overall?," talk to us more about what actually happens in the skills-building phase. You had kind of articulated this as stage two of the process. We get into the...we get through the family readiness assessment and we understand where the gaps are, because presumably then we know whether we're focusing our skills-building around trust and communication or heir preparedness or values and mission. So, what is the actual skills-building process, just what are you doing at this point?

Amy: Yeah. So, we're teaching skills around trust, for example. I can say to you, "What is trust?" Right? Trust...we know trust and communication represent 60% of the 70% failure. So, what is trust? You could tell me. Go ahead.

Michael: What is trust? I think of trust as having a comfort and confidence to be able to have vulnerable conversations with other people.

Amy: Yeah. A comfort and confidence to have vulnerable conversations with someone else. So, for you, trust has to do with, what we would call, sincerity, that people are saying what they mean. Right? So, when we look at trust, we talk to families about being able to observe trust. One measure of trust is sincerity, do people mean what they say. Like, "Mom says she's going to come to my soccer game. Does she?"

The second one that we pay attention to is reliability. When I ask someone to do something, can they recurrently do it? I ask my 25-year-old son to take the garbage out. Can he recurrently do it, and do it to the standards that I need it done? Iffy on that one.

On the third one, we look at competence. Would I ask my 10-year-old daughter to cook Thanksgiving Day dinner? No. Would I ask my 25-year-old eldest son who's taking over the business to offer suggestions on how we can improve our social media? If he went to school for marketing, probably. So, we look at what are the standards of competence. When Mom and Dad are saying, "I don't trust that this wealth is not going to derail my kid's motivation," that's a competence question. That's a conversation about standards.

So, when we say we don't trust someone, as in that conversation, it's a global assessment. And it keeps them locked in this little box. And that prohibits productive conversation about moving action forward.

There is a fourth leg of trust, which we call care. So, what's the horizon of time that I want to be in a relationship with? When I look at advisors, I remember nearly falling off my chair that one of the biggest complaints that clients have is that the advisor doesn't call them back soon enough. Just yesterday I was on the call with my mom. She called her advisor, the advisor called her husband back. My mom hit the roof.

And so in that conversation, there's a trust component that was broken.

Michael: Right.

Amy: And so trust, when we can... So, rather than my mom saying, "Damn it. I'm going to find another advisor because I don't appreciate the way she treats me," like a global assessment of trust, the conversation with my mom was, "Hey, Mom, why don't you give her a call and say, 'Hey, I need to know that when I call you, you're going to reliably call me back.'" So, she had the conversation, everything is good. I even called the advisor to make sure it was good because I need my mom connected to that woman at 85.

So, the point of the story is trust can break down into these domains, and then we can say how we can work with it, we can observe it, we can repair it, and we can manage it. That's one example.

Another kind of tool that we teach has to do with vision questions. So, rather than saying to somebody, "Boy, what do you think you should do to get more skillful in managing your assets?," another way to ask that question would to be to put them into the future and say, "Hey, how do you see you could become more competent?" So, instead of the thinking which is going to say, "Well, maybe I should have another conversation with my advisor," or, "Maybe I should go to financial boot camp," they might say, "Honestly, the way I see this working best is we bring my siblings into the conversation and we all learn together." So, there's a slightly different focus, but an important focus, where we move towards the future.

So, those are two examples of what we do when we have family meetings. It's teaching them the fundamental infrastructure, or architecture, of language and action.

Why Amy Encourages Her Clients To Hold Frequent Family Meetings [1:09:35]

Michael: And is family meetings the anchor point around this, just this teaching framework? Just these trust-building skills, it kind of sounds like you've got just various exercises that you build in going through, right? Like, "Let's look at these four pillars of trust." So, you're organizing periodic family meetings where everyone comes together and these are part of the exercises of the family meeting, like, "Okay, this time we're going to spend an hour or two in the afternoon talking about blank," and that becomes part of the family meeting process?

Amy: Actually, for us, the entire first family meeting, which is often two days, back-to-back, is introducing new tools for trust and communication. We're going to look at what methods of communication they're currently using that are working well and we're going to look at bringing in some new ones so they can add them. Remember earlier I said we don't just inherit assets, we inherit communication practices. So, Mom and Dad learned how to talk about money from their parents, and they from their parents. So, those communication skills transfer. And so we want to take...hit the pause button and say, "Hey, what's working and what are some new skills we can add?" And that's our first meeting.

The second meeting is engaging some of the key conversations the family wants to have, like, "Whoa, whoa, whoa. You're going to tell me that my oldest brother is my executor, but growing up all they ever did was cheat in Monopoly? So, I'm not sure I have the trust level I need."

Michael: Man, it's chilling how those board games come back and haunt us in the later years.

Amy: Exactly.

Michael: So, how often do family meetings occur? What framework do you build or encourage around this?

Amy: Because we really are a learning program, we like to keep the meetings fairly close together so that they can build on each other. And between meetings we're giving the family members some new practices. So, for example, if Dad says, "I want to work on my listening skills," then he's going to have a specific set of practices to work on between meetings, and then in the next meeting he can report back.

So, generally, we're looking for four to six weeks apart. If we're working virtually, then we can have those meetings happen closer together, maybe every two weeks. And those meetings would only be about three hours long.

Michael: And how many meetings are we talking about? How long is this process to go through?

Amy: It does depend on the complexity of the family and how many of those important conversations they want to get through. But if we're meeting in person, then it's probably three to four two-day family meetings. And those two days might start a little later in the morning, might end a little bit earlier. Sometimes they're held in nice places so that the family doesn't mind bringing everybody together. Sometimes it's nannies included to watch the younger kids. But if we're doing it virtually, it could be three months, six months, or nine months, it depends. But usually, it's in that time frame.

Michael: So, that's pretty...at least by my perspective, that's pretty intensive. You're talking about three to four meetings, each that are maybe as much as two days, that are all occurring four to six weeks apart. We might do four two-day meetings each over the span of six months, in coming back together to kind of build through this work as a family.

Amy: That would actually be aggressive, especially if the family is not all living in the same place.

Michael: Okay.

Amy: We did happen to work with a family where we worked through three meetings in six months. So, we work on whatever time schedule is going to work for the family. There are very often kids in school. So, and they're coming from all over the country or even the globe. So, it really depends. But the fastest we can probably do three two-day meetings is in a three-month window. The average amount of time for three meetings is probably closer to six to nine months.

Michael: Okay. So, again, in the context of this overall, when the family says, "Okay, we're ready to tackle this and we're going to get our family money stuff figured out, or at least start making some meaningful changes in the family," this is a family-wide, "Game on, we're doing some stuff over the next couple months here."

Amy: And spouses are included. And usually, it's not met with much resistance. The next generation is eager to have these conversations. Their future is what they're helping to formulate, so they like it.

Michael: Because, at the end of the day, they know money is there almost certainly. They may not know how much of the details, but they know money is there, they know it's coming. They have huge uncertainty because they don't actually know what's coming and how much is coming and when and how and under what terms. And so just to create more understanding and certainty for them settles them.

Amy: Exactly. Many of them are really very much intimidated and terrified by this idea of wealth transitioning to them and they're not going to be able to manage it as well as Mom and Dad. So, the sooner these kinds of conversations can start to happen, the more runway they have to learn from Mom and Dad and see them as a resource. It also allows the next generation to move out of that child role into an adult role. So, the nature of these conversations is we start to put people on a more even playing field in the sense of coordinating action together. It's not birth order or "my kids" anymore.

Michael: And then you talked about sort of a third pillar around this, of creating their family values and their family mission. So, is that part of this three or four family meeting process, some of this is skills-building, and then the last meeting is, "Let's culminate this into creating family values and a family mission"? Or does that happen separately and that's a whole other stage of this process?

Amy: It is. So, the first meeting is learning the trust and communication tools. The second meeting is working through the important conversations a family wants to have. And the third meeting is this family wealth mission statement. So, those mission statements, an example of one would be, "We are committed to family bonding, community outreach, and fun. We grow the family assets and provide for the family's education, growth, and security." So, that would be an example of a mission statement, and then we say to the advisor, "Okay, for them, security means they're going to buy their own homes," or, "Security means Mom and Dad are going to pay for their healthcare. Your job to figure out whether or not the assets can accommodate that or if they have to transfer money or whatever, how does that get paid for."

What The Williams Group Charges Their Clients, And Why [1:16:26]

Michael: So, as this comes together overall, what does it cost a family to go through this process? What expectation should we set with clients to say, "If you want to get your money stuff figured out, there's a system to it, there's a multi-meeting process. We can go through it"? But what does it cost to take clients through this?

Amy: I would say, "If you want to prepare the next generation, what's the cost of not doing it?" So, notice I'm not focused on if you want to get the money stuff figured out, I'm focusing on, if you want to prepare the next generation, what's the cost of not doing this. The general cost, we work on a meeting-by-meeting basis. So, if they're going to do the family readiness assessment and a first family meeting, they're probably looking somewhere around $15 to $20 grand. If they want to keep going, maybe by the end of the process, depends if they're meeting virtually or in person, but the average is probably somewhere between $90,000 and $120,000, ballpark.

I do understand that for many this is a tax-deductible expense because it has to do with management succession planning. If they're looking at concerns around the family foundation and who's going to step in there, or family office, or...

Michael: So, to the extent we can tie it to the family business, if there's a family business, you might be able to pay some of this from the business as a business expense by claiming it as a succession planning expense for business continuity.

Amy: Exactly. I'm not a tax accountant, so I can't say 100% sure. But that may be a possibility, yeah.

Michael: So, having been through this over the years with clients and with advisors that do work in this area, what do you find, what's the biggest gap of what most advisors don't understand when they're working with ultra-high-net-worth clients on these family wealth issues?

Amy: That heir preparedness is not a number. It's not at 30, it's not at 20, it's not a number. What I think they don't understand is that estate planning is designed to take care of assets, it's not taking care of the family. And unless they are focused on the integrity of the family relationships, everything they're doing for estate planning is at risk.

Michael: And from the flip side, for just those who are listening and thinking about, well, that these are messy conversations and this takes a lot of time and this takes a lot of focus, I find it striking, Amy, to go back and hear that your work with families all the way through the process, this could be a $90,000 to $120,000-dollar engagement to go all the way through it, which I would take from the advisor. And if that's what the market is bearing, that means that that's what it's worth to them. These conversations are a six-figure value proposition for very affluent clients.

Amy: I would ask, "What's the cost of not doing it?" What's the cost of being in the 70%?

Michael: Right.

Amy: What's the cost of their kids losing their way, or falling out of relationship? When we see these conversations not being held, we find one kid moves to Australia or another one is no longer speaking to the family. So, what's the cost of that? So, for us, there's room to increase the fee or tie it to the asset size, but we don't. Because we don't want to do that. Yeah, so, for us it's sort of a drop in the bucket. But only families know.

Another way that I've seen... There's a review on Amazon for our book where one family actually went through the book chapter by chapter. And so for the cost of the book on Amazon, which might be $29, families can take this on themselves if they think that they can...if they want to take a shot at it. The worst thing that can happen is they say, "What this process is telling us is that we need a third-party facilitator. So, let's do that."

Amy’s Journey Into Coaching HNW Families [1:20:28]

Michael: So, share with us for a moment just your journey of how you came to doing this kind of work in the first place.

Amy: A fascinating way, actually. I started out with a degree in organizational psychology, and found my way into retained executive search. And in that role, I started to look at how do we determine the right people are in the right jobs and how do we create the kind of culture or team that they need to have around them.

From there, I went to work for The Walt Disney Company, or as part of the Disney University. And there I learned how to create those cultures, I learned how to coach leadership and management.

And from there, I went into Grant Thornton, a management consulting firm, where I could take that knowledge of do we have the right people in the right seats and how is that affecting the overall performance of the business. We worked with small- and medium-size family businesses.

And then while I was getting my coaching certification, I have a master's in somatic coaching from the Strozzi Institute, I met a coach who said to me, "Hey, we're doing something interesting over here, do you want to join Roy Williams?" And I did meet Roy and at that point I learned, "Wow, this is really pretty phenomenal work that they're doing." So, I found that my background really lent itself directly to working with families and family unity and how families become a high-performing team. I was lucky enough to get into an organization that's got 55 years behind it, so well established.

Michael: So, what is the greatest challenge that you find in doing this kind of work with affluent families?

Amy: My skill as a coach is tested pretty regularly. I think the biggest challenge is people think they can walk into these conversations and that it's as simple as coming up with a solution. But the skill in being able to have the family solve their own issues, have the family truly learn so that they re-weave the pattern of communication. I think when we really get our head around what this work is, when we can help these families stay together, their wealth has an opportunity to change the world through their philanthropy and for many generations to come.

So, the challenge is the risk of the conversations not going well and trusting ourselves that the process will work. We've developed this process, as I said, over 50 years and we have a lot of confidence in it. But it's also our skill as coaches that makes it work so well. Which is why I don't recommend advisors necessarily get into these conversations. You've used the word "messy" a couple times and you're absolutely right. So, better for advisors to just open the door and say, "Here are some yellow flags. There's an opportunity here for us to pivot and work on that. Here are some experts we recommend."

Michael: So, just sort of reflecting, if you're going to open this door, be prepared to walk through it.

Amy: Yeah.

The Advice Amy Would Give Her Past Self [1:23:41]

Michael: So, having now done this for so many years, what do you know now about the process and how to have these conversations that you wish you knew back when you were getting started?

Amy: I think it is to trust the yearning inside families that they really do want to work better together, that that's what they want, and to get out of their way and allow that to happen. In families of great wealth, sometimes there isn't a lot of practices around expressing care and love. That what shows up very often is gossip and judgment and misunderstanding. And so how do we clear the decks for their love to come through and be able to see each other for who they really are? And that, when we get really good at this, as we are, that is what happens. That is what happens. They trust themselves and their relationships a bit more.

Amy’s Advice For Financial Advisors Who Want To Engage In Family Wealth Dynamics [1:24:36]

Michael: So, what advice would you give to advisors that want to actually get deeper into this space themselves?

Amy: I would ask why do they care and what's important to them about getting into this space. And once they have that, the purpose, then they can start to figure, "Okay, how am I going to do that? I've got the why. What's my how? Am I going to introduce a third party? Am I going to walk them through the 10 questions, and then say, 'Great. Let's see what resources we have internal'?"

So, have a clear sense of their why, and then figure out their how, but do it. Because the joy that comes from this side of the asset equation of really helping families and their kids, in many cases, gives advisors a whole new reason to get out of bed and do the work that they do. They find tremendous joy in it. It also has a way of expanding their business that most of the advisors we work with say, "Yeah, my business is growing because of who I am being for my clients. I'm being a stand for their families, not just managing their assets."

Michael: And for those who want to learn more just about family wealth, family wealth dynamics, where do you go to start learning, or what do you start reading to get more up to speed?

Amy: There really are some excellent books out there to start with. I've mentioned ours, but there are many others. There's also we put out a lot of content, our website has a ton of articles for advisors as well as for families. So, we're published in Harvard Business Review, WealthManagement, Trusts & Estates. So, you can find out just reading that.

Michael: Other books you suggest? Again, for those who are listening, this is episode 265. So, if you go to kitces.com/265, we'll have a link out for Amy's book with Roy on Bridging Generations.

Amy: Yeah.

Michael: But there are other books for those who like to grab books and read them?

Amy: Yeah, there's quite a few out there. I'm thinking of the Wealth of Wisdom is good. Lynne Twist's The Soul of Money is very good. Those are some that are coming to mind just off the top of my head that I've found really valuable.

There is another organization that we have done some work with. There was a sister company to the Williams Group for a long time called the Institute for Preparing Heirs. And they do some advisor training typically for advisors that are maybe not at the ultra-ultra-high-net-worth, but they have a pretty good program, as well.

Michael: Okay. Okay. And I will say from my end I'll also, on the books end, give a shout-out for Jim Grubman's Strangers in Paradise.

Amy: Yeah.

Michael: Which is probably actually a little bit more on still working with Mom and Dad, and not necessarily getting down to the conversation with the children and heirs. But it's kind of built around this thesis that for families that create wealth, right? That might have started middle-class, and then now with some really, really big dollars. Living in an ultra-high-net-worth world is so different. Everything from the financial dynamics to the interpersonal dynamics, that for a lot of people that get there they basically feel like immigrants in a strange land. Thus, the Strangers in Paradise titling.

Amy: Yeah.

Michael: And just provides a really interesting perspective for anyone that works with clients where the wealth creation actually happens at that client level, and some perspective on what actually may be a lot of internal challenges that they're going through or processing in trying to figure out how to handle their newfound wealth in this new place that they find themselves.

Amy: Yeah. I think that is an excellent book, definitely. Dennis Jaffe has a lot of work, a lot of material that he's produced recently. And I think his work is also really solid. And then I've recently come across Tom Deans, D-E-A-N-S. He has a book out called Willing Wisdom, and I found that book to be really helpful, as well. It's seven questions successful families ask.

Amy’s Definition Of Success [1:28:43]

Michael: Okay. So, as we come to the end here, this is a podcast about success, and one of the themes that always comes up is just the word "success" means very different things to different people. And so you work with this organization that's been very, very successful in working with very successful people. But I'm wondering how do you define success for yourself at this point?

Amy: I am truly grateful and honored that families let us into their lives to the depth that they do and allow us to really support them to move their family in a whole new trajectory. The reward I get is seeing them do that, and do that well.

Michael: Very cool, very cool. Well, thank you so much, Amy, for joining us on the Financial Advisor Success Podcast.

Amy: You're so welcome, Michael.