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Joe Reilly Interviews Jim Grubman On The "Thorny Side" Of Wealth Management

Joe Reilly, President, Family Office Association, 22 May 2012

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Joe Reilly, president of the Family Office Association, recently spoke with Dr Jim Grubman, of FamilyWealth Consulting, about resentment of clients, thorny family problems and whether wealth managers should have full time family governance experts on staff.

In a guest interview for Family Wealth Report, Joe Reilly, president of the Family Office Association, recently spoke with Dr Jim Grubman, of FamilyWealth Consulting, about resentment of clients, thorny family problems and whether wealth managers should have full time family governance experts on staff.

JR: Are there unsolvable family problems?  Is that the wrong question to ask?

JG: I do believe there are some family problems that do not respond even to expert consultation. Despite the availability of good facilitation or even some family members with decent communication skills, some people in the family system will either refuse to participate in solutions or will actively sabotage or escalate problems in ways that are highly disruptive to the family. My colleague Dennis Jaffe and I wrote a paper where we talked about “Red Zone” problems and “Red Zone families” in which severe addiction, poor communication, extremely poor governance and decision-making, and a longstanding history of injustice creates situations that are essentially “unsolvable” by standard definitions.

JR: How can you determine when you need to engage a family on tough issues, such as intergenerational wealth transfer?  

JG: The key issue here is being able to assess when a family is becoming stuck and having trouble moving forward, particularly when decisions need to be made. Many families either are procrastinating or are running into such consistent conflict that decision-making has become stymied. Here the advisor needs to have a conversation with the main decision-makers to assess whether the advisor can facilitate the process or perhaps outside experts are needed to get the process moving again. Most families have issues they need to contend with - but these can linger for long periods of time without major impact on wealth management or with the family. Knowing when the family has become stuck in an objective sense is a necessary determinant for becoming more active on the part of the advisor, either as a facilitator or as a resource for a referral.

JR: Do you think wealth management firms should have a full-time family dynamics person? How large does a firm have to be before this becomes necessary?

JG: I would guess that less than 2 – 5 per cent of top wealth management or family office level firms have family dynamics staff available on a regular basis at all. Full time in-house family dynamics personnel are still extremely rare in the industry. If the role is defined as providing direct service to the firm’s clients, then I think mostly the larger wealth management firms need to have a full-time family dynamics person. You have to have a certain minimum number of clients in order to make this financially feasible. A firm needs to be at least at the moderate level (approx $8 - $10 billion dollars of assets under management and above) in order to make this viable.

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