A New Paradigm: Wealth Advising For The Future

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As an estate lawyer, how many times have I said under my breath to myself as my clients have exited the boardroom after an often lengthy...
Canada Family and Matrimonial
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As an estate lawyer, how many times have I said under my breath to myself as my clients have exited the boardroom after an often lengthy, revealing, intense, and always interesting meeting: "I don't need a law degree – I need a psychology degree!"

I am sure my sentiment is shared by many others in the wealth advisory field. Striving to understand our client's objectives, motivations and mindset is always fascinating, and raises the need for a broad-based multidisciplinary approach. Many professional competencies are necessary to successfully provide advice on family succession, and the psychology of wealth plays an important and growing role as a distinct area.

When I first started practice, this was not the case. There was an over-emphasis on tax planning and saving tax in isolation from other objectives. Non-tax considerations were secondary, and often an afterthought in family succession and estate planning, or even ignored. While tax minimization objectives might have been achieved, often it was at the expense of other often even more important family objectives because a balanced, holistic approach was not used.

Thankfully, family wealth advising has evolved and become an emerging field of its own. It is now a large umbrella under which a wide range of professional expertise co-exists. Alongside this progression have been the founding of many professional organizations and associations which have adopted a multidisciplinary approach.

A leading one is STEP – the Society of Trust and Estate Practitioners, founded over 33 years ago—whose members include legal, tax, accounting, trust, insurance, and investment professionals, among others. STEP's logo "Advising Families Across Generations" is the unifying theme that defines the essence of what its members do. I am proud to have been a founding member of STEP Canada.

With this evolution has come the need to emphasize a collaborative, multidisciplinary approach. No one advisor can have all the answers, or provide the needed advice, or even direct or shepherd it. To achieve the best results, each professional must adopt a team mentality and work together as a team. As the saying goes, there is no "I" in "team".

Technology has certainly helped to pave the way for effective collaboration among professionals and their clients. The marvels of video calls in which multidisciplinary advisors and clients, often located in different geographical areas around the globe can form unique teams for each matter and exchange information, discuss, synthesize, and problem-solve in a very cost-effective way has revolutionized professional practice.

Wealth 3.0

In their book Wealth 3.0, authors James Grubman and Dennis T Jaffe, both psychologists, describe the evolution of wealth advising over the last several decades and its integration with the psychology of wealth.

From "Wealth 1.0", an era which they describe as a barren wasteland that prevailed up until about 1980, and which was "all just about the money" and little else, to the '80s and '90s and the rise of what they call "Wealth 2.0", where there was a proliferation of books and scholarship focusing on wealth, often using a negative narrative of the difficulties of wealth transfer to the next generation, and the worn out phrase "shirtsleeves to shirtsleeves in three generations", to what the authors espouse as the vision for the future of "Wealth 3.0".

Wealth 3.0 incorporates a new paradigm and rejects the negative approach that prevailed before to wealth succession, in favour of a positive, strength-based, collaborative approach.

Even the notion of the over-used term "trusted advisor" which suggests that one person can be the lynchpin or quarterback who "controls" the client relationship as the primary relationship manager is being replaced by the notion of the "trusted team", as suggested by James Grubman, involving a group of diverse professionals who collaboratively best serve the interests of clients.

Wealth 3.0 uses positive psychology and integrates it with solutions-based strategies and good advice to provide the best options and choices about wealth to family members, to create good outcomes in a positive way in which wealth is used for the family, future generations, the community, and the environment.

The Wealth 3.0 paradigm also includes family wealth advising as an agreed-on body of knowledge and set of multi-disciplinary competencies that looks at the family, the psychology and the integrated services necessary to provide the best succession advice.

Interesting times lie ahead as family wealth advising continues to evolve into a distinct field of its own.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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