One of the least broadcast realities about serving affluent investors – but one that studies have confirmed for years – is that for 90% of wealthy families, their fortunes are gone by the end of the third generation. Even worse than the loss of riches by heirs who squander them, the family itself implodes.
In an interview with ThinkAdvisor, coach Courtney Pullen, president of The Pullen Consulting Group, and a former counseling psychologist, explains how he helps ultra-affluent families nationwide keep both their wealth and a strong family system through the generations.
Researching his book, “Intentional Wealth: How Families Build Legacies of Stewardship and Financial Health” (Pullen Consulting 2013), the Denver-based coach, 59, discovered that the 10% of families who made it past the third generation did so by deliberately investing as much time and energy in the family as in creating wealth.
Facilitating unique family meetings, Pullen typically works with two or three generations at once. Instead of focusing on flaws, he builds on family strengths.
“Shirtsleeves to shirtsleeves in three generations” is an age-old, culturally wide phenomenon whose concept is referenced in the Bible. It occurs because the older generation is so busy accumulating money that it overlooks ensuring that successive generations know its vison for maintaining the wealth long term.
Pullen starts his process with a “values retreat” for each generation, who meet separately to determine family values, the purpose of their wealth and how they’ll carry it forward. They then craft mission and vision statements.
Subsequent meetings are usually held in hotels or at retreat and convention centers, unfamiliar surroundings that discourage folks from falling into old family roles.
As a management consultant, Pullen works with family businesses, concentrating on such areas as strategic planning and leadership development.
ThinkAdvisor recently spoke by phone with the versatile coach and consultant, who, as an FA trainer, is a faculty member of The Legacy Companies. For ultra-affluent family clients, he is using the approach of best practices to keep wealth in the family far beyond Generation Three. Here are excerpts from our conversation:
THINKADVISOR: Money is power, but it’s also powerful and can bring negative consequences to families. Why does that happen?
Wealth can be like an emotional tsunami running through the family, especially if there’s a big change. Wealth exacerbates pre-existing family fault lines and disrupts the family’s homeostasis [equilibrium]. This occurs both with new, or sudden, wealth and old wealth. With new money, people may go through an extraordinarily large amount of it in just a few years, as you see with lottery winners.
What about families with old wealth?
If the money has been in the family for two or more generations, the difficulty, typically, is that they deal with a lot of isolation: They have their own little tribe and tend to be non-trusting of outsiders. And for good reason – people are always trying to exploit them, like bringing them new investments. Or they live in fear that the only reason someone likes them is because they’re wealthy. What most troubles individuals who grew up in wealth?
There’s the classic psychological struggle around developing a sense of identity separate from the family, which is a challenge for emerging adults. If you grow up in a family that has a lot of money and your only identity is that you’re a wealthy person in the Smith family, it’s very hard to separate from that family and be your own person.
What’s the environment within the family for children reared in old money?
The family tends to do a lot of enabling, unconsciously, as does the system around them. For example, when Mom and Dad drive new Portias and fly private planes, if their child says, “Dad, can I have a new car for my 16th birthday?” it’s harder to say, “You can have it if you go out and get a summer job and are willing to pay half.” Those conversations are more challenging in affluent families.
How can external factors upset a rich family?
I’ve had a number of clients who grew up lower-middle class and held onto those values even as they worked hard to become “the millionaires next door” [i.e., no one is aware they’re so wealthy]. But when they took their companies public, all of a sudden everyone knows how much money they’re worth. Boy, does that significantly disrupt the family system because their whole identity is turned upside-down.
In training advisors of family offices and financial planning firms, what do you focus on?
I’m teaching them relationship skills to hold onto clients and families long term. Advisors bring a very analytical bias to the engagement – they think about asset protection and how to save on taxes and so on. But, quite frankly, that isn’t as important to the family as the legacy of the family – how they’re doing, what their dreams are, what their purpose is.
A specific example of what you teach advisors?
How to build in [systems] early, such as a robust discovery process where they really listen and communicate, and understand their clients.
How do you work with affluent families so that they retain their wealth generation after generation?
I help them invest time and energy into building and defining what it means to them to be a legacy family. I have them define their values, and develop mission and vision statements. It’s helping them come up with their own best practices and focusing on governance and how they’re preparing the next generations for their wealth. And it’s about communication.
Do less-wealthy families have fewer money issues than wealthier ones?
To a degree, there’s a correlation: The more wealth, the more complexity of problems. There’s a much higher degree of complexity if the estate is $25 million or $100 million than if it’s $1 million to be divided among a few kids.
What’s central to how you help affluent families?
I’m coaching them, not giving them therapy. My early training as a therapist helps inform me, but the difference is I’m not focused on healing childhood wounds or talking about old history. I’m focused on: Where do you want things to be, and how can we build in that direction? It’s a much more forward-looking approach than rehashing old conflicts. It’s building on the strengths and vitality of a family rather than [dwelling] on what’s wrong with them. Where does the process start?
I have a values retreat with the parents, the senior generation. We discuss: What are your values and where did you get them? Why is it important to you that they’re carried forward? What’s your vision for the family’s success over the next 20 or 40 years? A lot of families have worked so hard creating their wealth, but they never stopped to think about what they want it to serve beyond wealth accumulation.
At what point do you meet with the next generation, who may be in their 20s or 30s or even in their 40s for 50s?
It could be the next day, or it could be six months later. I do a version of that same values retreat with them. Then we compare what they’re saying with what Mom and Dad produced.
What do you typically get?
Usually the parents are surprised to find out that they’re very similar and are happy that the next generation actually came up with some elements that were even better. So we combine everything: the values, mission and vision into a unified vision of the purpose of their wealth. All the governance decisions, financial decisions and emotional decisions are to be in service to that.
What, for instance, do you cover in the meetings that follow?
So that the family can understand one another and their communication and thinking styles, I do a training session on how to create an online psychological personality assessment profile. The most user-friendly one for families is called Emergenetics, which I’m certified to train people in. It’s online and takes only 20 minutes. They can learn about each other in a very engaging, almost playful, manner; it’s the lead-in to talking about communication.
When shared with financial advisors, I imagine such assessments of their clients can be helpful.
Yes. A few years ago, I was meeting with a husband and wife, and their advisor. The couple recently did Emergenetics assessments. The wealth creator was classic left-brain dominant [analytical]; the wife was very right-brain dominant [intuitive]. Halfway through the meeting, the financial advisor asked her: “How are we doing in communicating with you? Are the reports valuable?” She teared up: “I haven’t understood a word you’ve said for five years.”
How did the advisor react?
He said, “From looking at your Emergenetics profile, that’s what I was afraid of.” Then he did a fabulous job of apologizing and asked, “What can we do differently?” The wife said, “I get lost in the details. I just need big-picture visuals and for you to ask how I feel about things, and what my fears are.” The advisor said, “I get it.” So, on one hand, he’d been making a critical mistake; but on the other, it was remarkable that he didn’t get defensive. He asked the right questions and changed how he worked with her.
What’s your coaching technique, “Appreciative Inquiry,” about?
It’s a beautiful model of how to move people forward, as opposed to looking back on wounds and trying to heal them. It’s predicated on the belief that change occurs in the direction of our intention. So rather than saying, “Tell me everything that’s wrong with you guys,” it’s, “Let’s talk about where you’ve been at your best as a family, where you’ve overcome a challenge and felt really good about how you did it.” Then we go back and deconstruct how they pulled that off so successfully and what it would look like to have more of that happen in the family.
Does every member of the family usually want to participate in these meetings?
Seventy-five percent of the time the majority of the family members are relieved to have them because they know that, left to their own devices, things may not turn out very well. About 10% to 20% of the time a family member will be stubborn and say they don’t want to be part of it: “The only reason I’m showing up is because my dad told me to come.” But once they’ve had the experience, they’ll go, “OK, I get the value of this.”
What if there’s one person that’s screwing things up for the entire family? How do you handle that?
I’m very clear when I’m hired that my client is the family because I don’t want to be co-opted by one member. My job is to support the health and vitality of the family system. But many families have that one problem child or a dad that’s having a hard time letting go or a mom that’s doing something that can sabotage things. So I’ll work with that individual privately to move them in a healthier direction. Sometimes I’ll pull away two siblings that are at odds, and which is affecting the entire family. I’ll meet privately with them to help them heal the rifts so they can go forward in a positive manner. What’s one of the biggest points of resistance to your process?
All financial advisors to these families need to be very aware of the fundamental dynamic of resistance, especially avoidance. Many families say they know they need to talk to their kids about their inheritance wishes or the estate. They mean that; but then, psychologically, as they get close to dealing with it, they start avoiding it.
What’s the greatest challenge to you as a coach working with these families?
Lots of times the family’s homeostasis, which I spoke of earlier, is protecting a dysfunctional pattern. I’m asked to change that pattern, but the family will resist me because that’s all they know. From time to time, I’m so concerned about the potential threat of what’s going to happen that I end up feeling overly responsible; and I work on change harder than the family does. But when I feel a little of that urgency coming on, I take a breath.
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