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Don’t Let Newfound Wealth Ruin Your Family’s Future

James Grubman, Newfound Wealth

With Dr James Grubman, Psychologist, Neuropsychologist, and Author of Strangers in Paradise: How Families Adapt to Wealth across Generations

Steve’s guest, Dr. James Grubman, draws on his experience as a psychologist, neuropsychologist, and business consultant,  dealing with issues at the intersection of psychology, law, finance, medicine, and business. He is the author of Strangers in Paradise: How Families Adapt to Wealth across Generations,  a book that set Steve on a course to help his clients understand the nature of new wealth and how to handle it.

Holding On To Old Cultures and Values

In Strangers in Paradise, Jim writes of people who struggle to accept that they’ve reached a new point in their lives where wealth gives them a whole set of new freedoms.  For example, immigrants who come to the U.S. bearing different cultural values often hang on to their old frugal ways of living (such as buying apartments that resemble what they had in their old country) partly because they cherish and want to pass on their middle-class values to their American-born children and partly because they are afraid of the negatives that come with wealth.

The Party Pooper And The Miser

For instance, Jim speaks of one client, in particular, the patriarch of a very wealthy family, who continued to drive around in an eight-year-old car, wore clothes that were not the most up-to-date and continued living life as he had before coming into significant wealth.  He did not let himself or others in his household enjoy money to the degree he could have, nixing the idea of indulging a little on vacations and insisting that there were better uses for the money, much to his family’s frustration!

In such cases, Steve recommends working with your financial advisor on what you’d like to do with your wealth, in your lifetime and beyond (such as leaving inheritances, money to charity, etc.) which may help you come to terms with your wealth, relax, and enjoy it more than before.

Parents Worry About Teenagers Coming Into Big Money

In one instance, Steve’s clients (wealthy grandparents) were worried about how their teenage grandchildren might react when they found out they’d be inheriting a large amount of money after grandma passes away and weren’t quite on the same page as their daughter, the mother of those teenagers.

On the one hand, the grandparents were growing older and wanted to speak to their teenaged grandchildren about their inheritance.  On the flip side, the teenagers had no inkling of their upcoming windfall, and there was a communication gap between the grandparents and their daughter.

Money Talk—It’s A Process

Jim’s advice was to have the grandparents co-opt their daughter’s concerns into the conversation and gradually, over a series of family meetings, to talk to the grandkids about the values behind the family fortune, instead of having a straight-out conversation about the money.

The key takeaway from Strangers in Paradise: How Families Adapt to Wealth across Generations is that conversations on new found or newly-earned wealth should be gradual, well-thought-out processes, not one-time discussions, with details on the challenges and obstacles faced in the gradual build-up of wealth through the years, the hard work and values that led to success where others failed, and the frugality that led to wealth creation.

Jim likens the “money talk” to the “sex talk” where you can’t do it all in one conversation and must approach it as in an age-appropriate manner.

Younger Generation Cares More About The Social Impacts Of Wealth

Jim finds that younger generations aren’t as focused on material possessions as we often think.  Instead, they’re focused on social aspects such as how wealth affects friendships and relationships.  For instance, how do you know if someone’s dating you for your money or because they truly like you??

If you, or someone you know, has to deal with wealth issues, remember to navigate this as a well-considered process, and consider reading Dr. James Grubman’s book,  Strangers in Paradise: How Families Adapt to Wealth across Generations.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz: Sometimes a great thinker comes along that takes the things you already know, organizes them in a brilliant way, and leaves you with a fresh perspective and newfound wisdom. My next guest, Dr. James Grubman, is one such person. Dr. Grubman consults in situations where psychology, law, finance, medicine, and business all come into play to varying degrees, and he draws on his experience as a psychologist and neuropsychologist as well as a family business consultant. He’s the author of Strangers in Paradise: How Families Adapt to Wealth Across Generations, and it’s a pleasure to have him back on the show. Welcome back, Jim.

James Grubman: Thanks for having me, Steve.

Steve Pomeranz: A few years ago when we did our original, our initial interview, looking at this book, Strangers In Paradise, which I just thought explained so many things so well, and set me on, I think, a course to help my clients, and I’ve been using it in practice and getting them to understand the nature of new wealth and how to deal with it. I know that you’ve already … You’ve also been using it over the last couple of years in your practice. Let’s take it a step further now, and coming back together today to compare notes and see what new things have popped up. Tell us a little bit about what you’ve experienced after you wrote the book.

James Grubman: Well, Steve, the book has gotten an amazing reception that continues to be just so gratifying. I’ve had many people email me and come up to me and say how it changed their life and how they felt identified and validated in a way that they had not felt before.

I’ve continued to work with individuals and couples and families who say that they recognize many of the themes that strangers tend to bring out, especially those who are not that much recognized, which are the ones who are kind of anxious about, and avoidant about, really accepting their wealth and thinking themselves as anything but middle-class people who just happen to have a lot of money, so it’s been really amazing.

Steve Pomeranz: People assume that having more money, having a lot more money, leads to greed and it leads to materialism, but I think we both find that to some degree, it leads to more anxiety in people worrying how they’re going to handle this newfound wealth.

James Grubman: That’s very true. You know through your own experience also that a lot of advisors have found that this population of people with wealth has never been fully recognized, which are the ones who struggle to accept they’ve really reached the new point in their life that they have more freedom to maybe loosen up and spend some money on things and stuff and that the group of clients who just really struggle more than anticipated with the idea that they do have a secure, stable, and fortunate situation.

Steve Pomeranz: The metaphor in your book, this idea that when an immigrant comes to this country, and we’re not talking about money now, but we’re talking about culture, I’m talking about the way they live their lives, certain people act differently in certain situations. You might have the immigrant that comes over and gets an apartment here in the United States, and the apartment looks exactly like the apartment looked in the old country. They don’t really change with the new environment they’re in. They perhaps came from a place of scarcity, and now they’re in a place of more abundance, but they don’t really change. They’re always staying in this world of scarcity. Also, if they have children, the children are now coming into the American culture, and then they worry about, “Well, are they going to be spoiled,” or, “They’re going to be losing the values of the old country.” You’ve taken this metaphor of the immigrant and you’ve transferred it to those who maybe came, had no wealth as they were growing up, and maybe now that they’ve owned businesses, or they’ve saved well, they find themselves to be pretty affluent, but they haven’t made the change in their minds, having transferred now from having scarcity into abundance. What kind of examples can you show us, in your new work, meeting with clients, what has that led to?

James Grubman: Well, I can think of several clients that I’ve worked with, and also stories I’ve heard from advisors, of people who acted and behaved in a very modest manner in how they spent, which we all applaud as having good values. I can think of one client in particular, the patriarch in a very wealthy family, who did the classic driving around in an eight-year-old car, wore clothes that were not the most up-to-date. Everybody understood that he was living life the way that he felt comfortable with, and that he had grown up with. But, one of the things that his family struggled with was the idea that he also didn’t let himself enjoy the money to the degree to which he really could, that when they talked about reasonably taking a little bit better of a vacation, staying in better hotels, that he would always nix the idea and say, “There’s better uses for the money.” They were way beyond the point where they had to worry about that. The frustration that his family had, including, again, the advisors, who were trying to encourage him to enjoy the benefits of his success, were trying to get him to basically see that his circumstances were new, were okay, and that he had security, that he never really accepted, and it was a shame to see that happening.

Steve Pomeranz: Yeah. The way we look at it here is you have one life to live. You want to live your one best life. Maybe that does mean leaving money behind as a legacy, so we want to look at that, and make sure that after you’ve decided that you’re going to leave a legacy, what do you have left for yourself? Or, maybe you don’t want to leave a legacy, whatever’s left over is left over, but the bottom line is that if you can kind of measure where you are on this abundance scale, we’ll say, you can basically see whether you’re overfunded, or adequately funded, or underfunded for this one life that you want to live. If, in fact, you’re overfunded, and you’re not living your one best life, and you’re not spending a little bit more to make you happy, not that spending is the only way to make yourself happy, but if it can add to your happiness, you find that, “Hey, if I don’t spend this money, I’m just going to be leaving that much more behind, and that’s not really my goal.” So, this idea that, quantify these items as much as you can with an advisor, so you can figure out, “Can I afford?”

A woman came in to us many years ago who was well overfunded, 100% funded. There’s no way that she would ever run out of money, yet when she went to visit her kids in California from Florida, she would always look for the cheapest flight. She’d end up flying to Detroit, and then to Houston, then to San Francisco, and then down to L.A. I’m exaggerating, but you get the point.

James Grubman: Right.

Steve Pomeranz: Such uncomfortable traveling, when she could have actually traveled first class and really enjoyed herself, and if that’s the case …

One of the areas, one of the reasons that I called you is I was working with a client who had a specific issue, and I wanted to discuss that with you, and that is that they’re about to inherit a lot of money, and the parents, the grandparents, we’ll say here, have decided to give a fairly large amount of money to the children. My clients, the parents, are anxious about that, because they don’t really know how teenagers are going to handle the news that, oh boy, there’s an awful lot of money waiting for them when their grandmother passes away. So, I called you, and tell me what your response was.

James Grubman: Well, what was interesting was we talked about the fact that there’s both good and bad in what the grandparents were trying to say. The grandparents in your description were feeling the ticking of the clock. They were feeling like there’s not a lot of time left, and they, themselves, wanted to have the conversations with the teenagers to talk about the money that was going to be coming forward, because they wanted to let the grandkids know how much they loved them, to discuss with them what was coming. The problem was that this was kind of out of the blue. It bypassed the daughter in generation two, her concerns about the kids not being prepared, and there was no context. There had been no other discussions about the money. It would have come completely out of the blue for the grandkids. So, what you and I talked about was how to seek a middle ground where, first of all, the grandparents needed to accept that they needed to collaborate with their daughter, more than just preempting her in saying, “Well, we got to have this conversation.” They really needed to work with her, and accept that she had some valid concerns. Number two, what was interesting was that the daughter, in the middle, also had to realize that she did need to begin to work on some family communication and to let the grandchildren, her children, begin to know that the family was a fortunate family, which she had never done, because she, herself, was kind of afraid and avoidant.

What we eventually moved toward was the idea that the grandparents and the parents would begin to, together, talk with the third generation in a series of family meetings, to see this as a process and not just an event, where the family could begin to talk about the good fortune of the family, how the money was made, but not in quite the precipitous way that the grandparents wanted to do because of their own circumstances-

Steve Pomeranz: Do you think in this first-

James Grubman: … And it seemed like it was going to be a better approach.

Steve Pomeranz: Do you think in this first meeting, let’s say, that an amount should be mentioned, or just general statements about how the money was made, and the good fortune of the family?

James Grubman: Well, it’s a very good question. In general, I would say that if there’s been very little conversation, you don’t need to start with talking numbers. That can be difficult. It’s out of context, easily misunderstood. What I would add in there, however, from my experience, is that sometimes, kids in the modern era know more than we think.

Steve Pomeranz: Oh, yeah.

James Grubman: With a few clicks of finding out the network of grandma and grandpa’s house, maybe houses, a company, other stuff, kids can make some amazing guesses, and so sometimes, what I will do in facilitating a family meeting, is have the children guess, without necessarily confirming. You’d be surprised how often they’re actually making guesses that aren’t too far off from the ballpark.

Steve Pomeranz: Is this the idea that you want to start … I think the key takeaway is that this is a process, not a one-time discussion. The daughter, the parent, let’s say, and the grandparent should get together and talk about, kind of devise a plan on how this is going to be presented, at least an outline. Then, sit down and make this a two or a three-step process so everybody can get used to the language, and get used to the message that’s going to be said, and also, really, what the money could be used for in a positive way. It’s not like, “Hey, you’re 21. You’ve got a heck of a lot of money, now go party.” It’s not going to be like that.

James Grubman: Absolutely. I think you described it very well, that in a way, the money talk has been compared to the sex talk. You can’t do it all in one conversation — talk about all the terms, all the activities, all the skills, and then you’re done — that it’s a process of having age-appropriate conversations that also are interactive. Parents and grandparents often focus on what they’re going to tell. What they really should be doing is listening also.

Steve Pomeranz: Like what?

James Grubman: Well, I think one of the things, for example, that I find is that the younger generation is not as focused on material possessions as we often think, and other stuff. What they’re often focused on are things like what it’s like having some level of affluence, or abundance, in relationships? The fact that if they do come from a wealthy family, how do they know who likes them for who they are, and not just because they can buy things or do things or spend money?

Steve Pomeranz: That’s one of the [crosstalk 00:15:06]

James Grubman: They worry about how they’re going to disclose it to people that they may be dating. They don’t know when. They don’t know how. There’s very little discussion in the family about the nitty-gritty of wealth in relationships, and for teenagers and people in their 20s, often those are much more important issues than the particular numbers that are coming down the road someday.

Steve Pomeranz: Yeah. You see, with money, it can sow doubt. It’s this idea that if you marry someone when you had no money, and you grew up with them, so to speak, as an adult, and you attain some money, you at least know … You would not be worried that they married you for your money, because you didn’t have any. But, later on in life, you have to wonder, how do I know that someone truly likes me for who I am? Unfortunately, we’re out of time. These questions can go on and on and on, but anybody who has this kind of issue, I invite you to get Dr. Grubman’s book. It’s Strangers in Paradise: How Families Adapt to Wealth Across Generations. I know, unfortunately, we could go on another hour on this, but we’re out of time. Jim, thank you so much for taking the time to explain this all to us.

James Grubman: Thank you very much for having me, Steve.

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