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Rules or Myths?
Episode 1 • 21st November 2022 • The Family Business Podcast • Russ Haworth
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In this episode of the show I am joined by Dr Jim Grubman as we discuss an article he has written for International Family Offices. In this article he explores the so called "70% Rule". This "rule" states that 70% of wealth transfers globally, fail. 

In the show Jim highlights which studies, evidence and statistics went in to the publication of the "rule" and why it is essential for practitioners and the families that we serve to ensure that we are not repeating so called "rules" as a marketing or fear tactic. 

We also look at what can be done in the future to ensure we are using accurate, robust and sufficiently well diversified research criteria to understand patterns rather than to create rules or myths that can be misleading. 

Useful Links

The articles that Jim references in the show can be found on his home page http://www.jamesgrubman.com/ or you can directly download the article using this link 

Jim also references an article that he write for The Practitioner, a publication from The Family Firm Institute (FFI). You can access that article here

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The podcast is entirely self-funded by me. I am not looking for sympathy as it is something that I love to do and I have a passion for providing great content for family businesses across the world. Some listeners have asked for ways in which they can support the show, be that through reviews, sharing with friends or a donation. As such I have set up a page that outlines all the ways that you can support what I am doing.

www.fambizpodcast.com/support

Work With Russ

If what I have spoken about in the show resonates and you want to discuss how I can help you and your family business drop me an email: russ@familybusinesspartnership.com or head over to www.familybusinesspartnership.com


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Transcripts

Russ Haworth:

Hello, and welcome to this week's episode of

Russ Haworth:

the family business podcast.

Russ Haworth:

And on this week's show, I am talking to.

Russ Haworth:

Uh, Jim Grubman who many of you may recognize from

Russ Haworth:

previous episodes of the show?

Russ Haworth:

Uh, if you haven't heard Jim speak before, then you are in for a treat.

Russ Haworth:

He is a fantastic guest, a fantastic speaker.

Russ Haworth:

And, uh, there is quite a bit of thought provoking.

Russ Haworth:

Uh, conversation in today's episode.

Russ Haworth:

Just a point to note, we're actually releasing this episode in November.

Russ Haworth:

And the recording was done in July.

Russ Haworth:

The reason pain is it's been pretty busy since, uh, I recorded.

Russ Haworth:

This episode.

Russ Haworth:

And so I've been a bit remiss in terms of doing things like

Russ Haworth:

editing and producing and.

Russ Haworth:

All of those kinds of things.

Russ Haworth:

So apologies to Jim for taking so long in getting our conversation.

Russ Haworth:

Published,

Russ Haworth:

The conversation today, centers around some of the statistics and mess and,

Russ Haworth:

you know, Proverbs that are used to.

Russ Haworth:

In my view, very often scare families into trying to take action

Russ Haworth:

to avoid becoming a statistic.

Russ Haworth:

Uh, and in particular, Jim takes a look at one, uh, study that centers

Russ Haworth:

around the so-called 70% rule.

Russ Haworth:

So we explore that.

Russ Haworth:

And then we move on to ask how we can add more rigor to research.

Russ Haworth:

. And Tim explains how he would approach this.

Russ Haworth:

And I guess it's a rallying call for anyone out there listening

Russ Haworth:

who wants to get involved.

Russ Haworth:

Please get in touch.

Russ Haworth:

Uh, Jim gives his contact details at the end, or you can come find me.

Russ Haworth:

Uh, on the fan biz podcast.com website or Russ at family business partnership.

Russ Haworth:

Dot com.

Russ Haworth:

So not for me.

Russ Haworth:

I will now pass over to the interview with Jim.

Russ Haworth:

Enjoy.

Russ Haworth:

Well, hello and welcome to this episode of the Family Business Podcast.

Russ Haworth:

I am joined again by, um, dare I say repeat offender or, um, maybe not

Russ Haworth:

the best phrase, uh, but, uh, regular guest on the show, Jim Grubman.

Russ Haworth:

Jim, firstly, welcome to the show.

Russ Haworth:

Great to have you here.

Jim Grubman:

glad to be here Russ.

Jim Grubman:

Always a pleasure to do a podcast with you.

, Russ Haworth:

we are gonna be talking about improving outcome research

, Russ Haworth:

in family wealth advising today.

, Russ Haworth:

But before we get into the kind of number of the topic, it'd be great

, Russ Haworth:

for anyone who's listening to the show that either hasn't come across

, Russ Haworth:

our previous episodes or haven't come across the work that you've been doing.

, Russ Haworth:

If you could just provide us with an intro to who you are and what you.

Jim Grubman:

Okay.

Jim Grubman:

Um, I'm Dr.

Jim Grubman:

Jim Gruman and originally trained as a psychologist and sometimes, uh, I'm

Jim Grubman:

called a family wealth psychologist.

Jim Grubman:

Um, I'm a family wealth consultant family.

Jim Grubman:

Business consultant that's been working in this field, uh, since the notorious.com

Jim Grubman:

era of the late 1990s, um, after having spent the first part of my career in

Jim Grubman:

healthcare and, uh, I work with, um, Significantly wealthy families and family

Jim Grubman:

enterprises, um, predominantly North America, but I've also done work globally.

Jim Grubman:

Um, and I also, uh, speak, right?

Jim Grubman:

Uh, I'm connected to the wonderful ultra high net worth institute as you are Russ.

Jim Grubman:

And, um, uh, continue to collaborations with, um, Dennis

Jim Grubman:

Chaffee, who I've worked with.

Jim Grubman:

20 years now.

Jim Grubman:

So a wide variety of things in the field of family wealth.

Russ Haworth:

Fantastic.

Russ Haworth:

And although we are recording this, um, virtually, we, uh, we're fortunate enough

Russ Haworth:

to be together in the same place, uh, as each other last week as we are recording.

Russ Haworth:

Uh, this at the wonderful PPI conference as well, and it was very good to be able

Russ Haworth:

to catch up face to face rather than via a Zoom screen or as we're using here, the

Russ Haworth:

podcast recording software we're using.

Russ Haworth:

So,

Jim Grubman:

Yes, uh, we were at the Renez VU in Denver, Colorado

Jim Grubman:

and had a great week with a lot of great speakers and sessions.

Jim Grubman:

Uh, and it was just fun to like sit next to you and make snide

Jim Grubman:

comments here and there and to joke and, uh, just enjoy being together.

Russ Haworth:

Absolutely.

Russ Haworth:

Um, as I said at the outset, we're looking at improving

Russ Haworth:

outcome research in family wealth.

Russ Haworth:

Advising.

Russ Haworth:

This kind of speaks back to a, to part of what we were discussing in the episode

Russ Haworth:

we recorded on, um, firstly World 3.0, but also the Family Wealth Integration

Russ Haworth:

episode that we recorded with Tom McCullough around the usefulness of

Russ Haworth:

some of the statistics that are used.

Russ Haworth:

Talked about the ward study and the shirt sleeves to shirt sleeves, uh, kind of

Russ Haworth:

rhetoric and, and myths that's utilized.

Russ Haworth:

Um, you, you've been doing some work on, on kind of adding some more, um, detail

Russ Haworth:

to some of the, uh, statistics and, and myths that are, are utilized out there.

Russ Haworth:

Could you kind of, again, give us a feel for what you've done

Russ Haworth:

and, and before we move on to how we can improve, um, outcomes?

Russ Haworth:

Let, let's have a look at where we are current.

Jim Grubman:

Sure.

Jim Grubman:

Um, what we talked about in articles on Wealth 3.0 and uh, discussion

Jim Grubman:

about the roots of the field and what we tell clients and other advisors.

Jim Grubman:

There sort of have been three legs of the stool that always

Jim Grubman:

have been talked about as proofs.

Jim Grubman:

For why we know.

Jim Grubman:

Um, and I will resist the temptation to do air quotes in a podcast.

Jim Grubman:

Um, but basically , um, there's always been three things

Jim Grubman:

which would be cited together.

Jim Grubman:

One was the Sure Sleeve dish.

Jim Grubman:

Sure.

Jim Grubman:

Sleeves and three generations proverb.

Jim Grubman:

Uh, the second would be the study by John Ward and Associates, uh, discussed in

Jim Grubman:

a book in 1987 in which he, um, looked at family businesses to determine how

Jim Grubman:

much they lasted across generations.

Jim Grubman:

And then the third leg of the stool has been the Williams and Pressor material.

Jim Grubman:

That number one would always cite what they call the 70% rule.

Jim Grubman:

Um, and once again, Russ, I will resist air quotes on that.

Jim Grubman:

Um, uh, and as well as their own research, uh, looking at the causes or factors

Jim Grubman:

that they were curious about as to why supposedly 70% of well transitions failed.

Jim Grubman:

In recent years, there have been more writings looking

Jim Grubman:

skeptically at church sleeves and at, certainly at the Ward study.

Jim Grubman:

In fact, um, more than 10 years ago, uh, John Ward himself would

Jim Grubman:

always said that it went way beyond.

Jim Grubman:

What the study actually showed, how people interpreted, and he was very

Jim Grubman:

solid and cautious about the findings.

Jim Grubman:

Um, but he would say, or the study would be quoted as saying, um, that, uh, 30% of

Jim Grubman:

family businesses only survived through the second generation 13, I think.

Jim Grubman:

Through the third 3% make it into the fourth.

Jim Grubman:

And so those were always cited as, uh, family businesses

Jim Grubman:

just simply don't succeed.

Jim Grubman:

The problem was, um, as information came forward indicating we need to

Jim Grubman:

move on from those, no one ever really looked at the Williams and press.

Jim Grubman:

Allegation that 70% of wealth transfers fail, uh, which was also again, the

Jim Grubman:

basis for them trying to figure out why.

Jim Grubman:

Um, and so I began to be interested.

Jim Grubman:

What really is the foundation for what is almost universally repeated?

Jim Grubman:

Uh, uh, just about every journalist who gets an assignment from

Jim Grubman:

their editor, uh, goes to the.

Jim Grubman:

Google's family business and up pops the saying that 70%

Jim Grubman:

of wealth transitions fail.

Jim Grubman:

So I decided to take a deep dive into it and I found some very interesting things

Russ Haworth:

Fantastic.

Russ Haworth:

And I, um, know that we, we've obviously mentioned a little bit around things

Russ Haworth:

like shirt sleeves to shirt sleeves, and there's an article that, um, Rob and

Russ Haworth:

Josh from, um, And Global have written that highlights again, the, um, whether

Russ Haworth:

they believe that's to, to, to be true or not, and kind of deep and busts that

Russ Haworth:

myth, uh, if you like around to show.

Russ Haworth:

So I'll, I'll link that up in the show notes.

Russ Haworth:

So if anyone's interested in, um, reading that they can go off and, and

Russ Haworth:

find that, um, you've specifically written a paper and some articles

Russ Haworth:

around the kind of process that you went through in, in trying to understand.

Russ Haworth:

The validity of the 70% rule.

Russ Haworth:

Um, and it's, I've, I've read it and it's kind of a, an intertwining of, um, sort

Russ Haworth:

of various different sources that tend to lead back to a broadly similar source.

Russ Haworth:

Could you kind of explain, um, where your research on this has taken you

Russ Haworth:

and, um, that then we can start looking at, you know, what we can be doing

Russ Haworth:

going forward to try and, um, define what current statistics might look.

Jim Grubman:

Well, uh, starting, oh, I think over two years ago, but particularly

Jim Grubman:

accelerating the last year, um, I pretty much pursued almost virtually everything

Jim Grubman:

that had been written, um, by Roy Williams and Vic Presser and their associates.

Jim Grubman:

I looked at the most recent book, um, of Roy Williams and Amy Castor.

Jim Grubman:

Bridging generations all the way back to their very famous book,

Jim Grubman:

preparing Heirs in 2003, I think.

Jim Grubman:

Uh, and, um, I, I just got my hands on whatever I possibly could.

Jim Grubman:

Turned out that there were several books that Roy had written in

Jim Grubman:

the 1990s of a similar nature.

Jim Grubman:

There have been many articles.

Jim Grubman:

Uh, and, uh, uh, in preparing heirs, which is what most people know they

Jim Grubman:

saved, uh, in the beginning, that there is this presumably global

Jim Grubman:

rule of what is the failure rate of family transitions across generat.

Jim Grubman:

And they talk it as universal.

Jim Grubman:

There are multiple sources, um, and they say, um, you know, that,

Jim Grubman:

uh, essentially family wealth.

Jim Grubman:

Does not last very well or very easily, at least through the second generation,

Jim Grubman:

and often gets worse beyond that.

Jim Grubman:

So I tracked down, um, pursuing every reference, every citation.

Jim Grubman:

I went back to the original sources, which actually I had to order

Jim Grubman:

some things that were outta print, uh, find books on the internet.

Jim Grubman:

Um, I discover.

Jim Grubman:

Uh, one of the problems was there was never really any detailed

Jim Grubman:

description of either their own research or, um, where they got that

Jim Grubman:

70% rule from in any detailed way.

Jim Grubman:

Uh, and I discovered there was an article.

Jim Grubman:

That was written in 1997 in the Journal of Business Ventures that laid out the

Jim Grubman:

exact research protocol, talked about the demogra, uh, the, um, specifics.

Jim Grubman:

Um, and so I, I really tracked everything I possibly could, and

Jim Grubman:

what I discovered was that basically despite multiple references going

Jim Grubman:

here, there, and everywhere, everything could be traced back.

Jim Grubman:

To what you and I discussed of that John Ward 1987 study

Jim Grubman:

that I just made reference to.

Jim Grubman:

Um, all they did was they took this study of, uh, family business.

Jim Grubman:

Transitions, um, which was very limited in nature.

Jim Grubman:

Uh, he studied 200 family businesses, uh, in Indiana, I believe.

Jim Grubman:

Um, uh, very limited study.

Jim Grubman:

And that basically all Williams and Pressor did was invert the statistic.

Jim Grubman:

Instead of saying 30% survive through the second generation, they said 70%.

Jim Grubman:

There was nothing more.

Jim Grubman:

Um, also they made the leap from family business transition

Jim Grubman:

to family wealth transit.

Jim Grubman:

Uh, and in the article I talk about the demographics of, you know, um, how they

Jim Grubman:

describe whether it was just wealth or business and everything, but ultimately

Jim Grubman:

looking at everything, there were a lot of indirect references to, you know, only

Jim Grubman:

a third of family businesses survive in the second generation, which was written

Jim Grubman:

around the same time as the Ward study.

Jim Grubman:

Um, some other general comments by early family business consultants.

Jim Grubman:

There really was nothing else of any substance or validity beyond

Jim Grubman:

the war 1987 study, and that was, um, pretty remarkable to find

Russ Haworth:

Yeah.

Russ Haworth:

And my, my understanding of the board study as well is that, and we'll dig

Russ Haworth:

into this a bit later on as well, uh, is if say a family enterprise doesn't

Russ Haworth:

transition from G two to G three, but is sold as a big liquidity event,

Russ Haworth:

and a net wealth is utilized to help everybody live a fantastic, fulfilled

Russ Haworth:

life and do whatever they want to do.

Russ Haworth:

Under the sort of, um, statistical approach for of the ward study that

Russ Haworth:

would be deemed as a air quotes failure because the business entity itself

Russ Haworth:

didn't continue on to future generations.

Russ Haworth:

But the family, and this is a fictional family, so we can't ask them, but,

Russ Haworth:

but the family in that situation might feel that that's an entirely successful

Russ Haworth:

outcome because they've been able to.

Russ Haworth:

Create a liquidity event that allows people to do what they want to do

Russ Haworth:

rather than focus on a single legal entity that we refer to as a business.

Russ Haworth:

Is that right?

Jim Grubman:

That is correct.

Jim Grubman:

Uh, there were a lot of limitations in the ward study.

Jim Grubman:

Uh, all they did was they looked at family businesses that existed in 1924, and

Jim Grubman:

then they looked at the records to see if those businesses still existed in 1984.

Jim Grubman:

Um, and if they did, they consider that success.

Jim Grubman:

And if they didn't, if it disappeared, they consider it.

Jim Grubman:

Uh, again, ward was actually more responsible than others.

Jim Grubman:

Took it the wrong way, but, uh, yes, uh, the research protocol was not very good.

Jim Grubman:

Taking it a step further, Um, uh, when Williams and Pressor, uh, discussed their

Jim Grubman:

own criteria for success or failure, for example, in the, uh, book Bridging

Jim Grubman:

Generations published, most recently, they talk about the criteria success,

Jim Grubman:

and they have, it's like two paragraphs.

Jim Grubman:

Worth of detailed descriptions that says they considered a success if the family

Jim Grubman:

stayed together was cohesive, if the assets were still under family control,

Jim Grubman:

if they had harmony, lost all sorts of stuff, and under a research protocol that.

Jim Grubman:

You know, would be, uh, uh, strict.

Jim Grubman:

If a family didn't meet all the criteria that they stated for success, then

Jim Grubman:

that would be considered a failure.

Jim Grubman:

And that's just not the way that life works.

Jim Grubman:

And, um, it's, it's kind of shaky in terms of, uh, a binary

Jim Grubman:

measure of success or failure.

Jim Grubman:

Uh, and as you and I have had conversations, Um, that, uh, I think

Jim Grubman:

we moved beyond a rather simplistic approach like that, um, to understanding

Jim Grubman:

something a little in more depth.

Russ Haworth:

Yeah, it reminds me of, um, an early podcast episode.

Russ Haworth:

Um, I did with Greg McCann, where we were looking at how to define

Russ Haworth:

success and redefining success, and I think that's such an important.

Russ Haworth:

Element and such an important conversation with families is rather

Russ Haworth:

than, again, being defined by what a research study may state as success.

Russ Haworth:

How about you define your own success and we work towards

Russ Haworth:

that as a potential outcome.

Russ Haworth:

But before we go a bit more into detail on, on success, perhaps,

Russ Haworth:

I'm also reminded within the war study of the timeframe that the.

Russ Haworth:

Study was conducted over and with regards specifically to the shirt

Russ Haworth:

sleeves, to shirt sleeves, there's various connotations that you can

Russ Haworth:

find across different cultures of the same kind of myth or, or saying

Russ Haworth:

that I believe dates back to, in some cases, sort of the 15 hundreds.

Russ Haworth:

And again, if you look at.

Russ Haworth:

The world then.

Russ Haworth:

And the world now, even in the last 20 years.

Russ Haworth:

How so?

Russ Haworth:

Very, very different.

Russ Haworth:

Everything is, I think what we're also highlighting at there is that

Russ Haworth:

there hasn't been a really in depth study on what these statistics may be.

Russ Haworth:

Today, and that's part of, I think what we are saying in terms of how we

Russ Haworth:

can help move the field forward is to start looking at those, um, studies

Russ Haworth:

in, in more recent terms, rather than, again, relying on sort of 16th century

Russ Haworth:

folklore and, and studies that be began in the the early 19 hundreds.

Jim Grubman:

Absolutely Russ.

Jim Grubman:

Uh, part of what we're talking about is, you know, I think for everyone who

Jim Grubman:

works with, uh, the wealthy, the idea that wealth is difficult to sustain and

Jim Grubman:

families struggle across generations, certainly is not, uh, To be disputed in

Jim Grubman:

total and that, um, it realistically, it is difficult for families to sustain

Jim Grubman:

some things for a variety of reasons.

Jim Grubman:

The issue though, is this false narrative and idea that somehow we know.

Jim Grubman:

That not only do we know, and this is where everybody starts to fall back

Jim Grubman:

on, did I tell you about how there's this saying in every culture around

Jim Grubman:

the world, but also, uh, in America we love data, we love statistics,

Jim Grubman:

whether or not they're well founded.

Jim Grubman:

And so, um, putting numbers to it somehow has always enhanced its validity.

Jim Grubman:

And I think that's, Wealth 3.0 and what I and some colleagues are trying to

Jim Grubman:

do, which is to unwind this idea that we know we actually have data on it.

Jim Grubman:

The data are solid, uh, and um, that we can tell this to clients and other

Jim Grubman:

advisors, um, as truths when an actuality, there's a lot of um, uh, um, you know,

Jim Grubman:

I'm not sure how I wanna say it, but sort of, um, uh, there's not a lot of

Jim Grubman:

solid grounding in the numbers that are bandied about, and it's time that we

Jim Grubman:

actually let those go because we're doing damage to families when we tell them

Jim Grubman:

a story that actually may not be true.

Russ Haworth:

And again, um, Josh and Rob have been on the

Russ Haworth:

show and, and we very briefly mentioned that the third generation.

Russ Haworth:

Quote rule.

Russ Haworth:

Um, and the number of, um, so Josh was telling us a story about the number of

Russ Haworth:

people who come to him in the class.

Russ Haworth:

He runs at a business school to say, I'm the dreaded third generation.

Russ Haworth:

I'm the one that's gonna mess this up.

Russ Haworth:

And so we can see that, that those statistics and sayings are making

Russ Haworth:

their way to families because in the absence of anything else, and, and

Russ Haworth:

we've spoken about this, and this is just as a general comment, not not

Russ Haworth:

specific to, uh, any particular study.

Russ Haworth:

But those types of statistics and rules and that they are effectively

Russ Haworth:

fear marketing to prompt action.

Russ Haworth:

And if there's positive outcomes from that action, then some

Russ Haworth:

might argue that's a good thing.

Russ Haworth:

But what we're saying in terms of World 3.0 is we don't need to use the negative.

Russ Haworth:

We don't need to use fear in order to promote this.

Russ Haworth:

We can do it via a lens of positivity and do it through a lens of, as we

Russ Haworth:

said earlier, what's your definition of success and how do we help you?

Russ Haworth:

To that, and again, I think that's what we're saying in terms of what

Russ Haworth:

we can be doing going forward is let's look at creating research.

Russ Haworth:

Let's look at ways in which we can identify these challenges based on

Russ Haworth:

actual real time statistics for now.

Russ Haworth:

Is that right?

Jim Grubman:

That is right, that, you know, it's time that we actually begin to

Jim Grubman:

create, uh, an idea of what does happen to families, but in a much more nuanced, uh,

Jim Grubman:

rigorous sort of way that, uh, looks at modern research protocol, modern methods,

Jim Grubman:

solid procedure and research design.

Jim Grubman:

Um, we actually do need to know what happens.

Jim Grubman:

But, uh, we need to know in a way that is much more well grounded than

Jim Grubman:

these, uh, studies from the past.

Russ Haworth:

And I'm reminded as well of your, um, when in your introduction, your,

Russ Haworth:

uh, history in, in the medical field.

Russ Haworth:

And I just wonder how often research is, um, sort of relooked at, uh, in terms of

Russ Haworth:

sort of the worlds of medicine, because I think we can see in terms of our

Russ Haworth:

advances from say, early teenth century.

Russ Haworth:

Compared to where we are now, that there's much more of an attitude

Russ Haworth:

towards let's constantly strive to test and test and test these new, um,

Russ Haworth:

research boundaries rather than relying on, you know, if we were all relying

Russ Haworth:

on, um, medicine from the 15 hundreds as an example, then um, there'd be

Russ Haworth:

a, it'd be a pretty sorry, state.

Jim Grubman:

And that's why I see this very much as embedded in a Wealth 3.0

Jim Grubman:

approach, which, uh, again, is founded on rigor, um, and solid action and practice.

Jim Grubman:

Uh, you're, you're right, that.

Jim Grubman:

Um, even if a study in the 1990s shows, um, in some ways, for example, that

Jim Grubman:

trust and communication are important factors, um, it's not the be all and end

Jim Grubman:

all that we need to, first of all, the study's never been replicated like that.

Jim Grubman:

Um, and so the question is, if anybody else did the research,

Jim Grubman:

would they find the same thing?

Jim Grubman:

We have no, uh, evidence of that.

Jim Grubman:

In addition, there may be new information, there may be, uh, factors

Jim Grubman:

which were not considered in the study.

Jim Grubman:

Somebody does it looking in, uh, a better way perhaps.

Jim Grubman:

Um, for example, in the past couple of decades, one of the things that's come

Jim Grubman:

forward is that even more than things like communication and building trust

Jim Grubman:

in families for family businesses, the role of doing good strategic planning.

Jim Grubman:

In the business actually maybe more important for the business longevity.

Jim Grubman:

Um, and that really good solid strategic planning may be,

Jim Grubman:

uh, much more top of mind.

Jim Grubman:

I would also hear, take us back to what I said, which is Williams pressor made

Jim Grubman:

a leap that we have to be very careful about what happens to family businesses.

Jim Grubman:

Is not necessarily the same as what happens to family wealth.

Jim Grubman:

And those, I think, uh, often have been confused.

Jim Grubman:

And even in the research protocol of the Williams and Pressor original study,

Jim Grubman:

um, there was, I believe a quarter or a third of um, The people in the study

Jim Grubman:

who did not have a family business, they were just managing family wealth.

Jim Grubman:

And so confounding what happens to family business versus what

Jim Grubman:

happens to wealth in families across generation, um, is another research

Jim Grubman:

confound that we need to tease apart.

Russ Haworth:

And so if we were to imagine we had a blank piece of paper.

Russ Haworth:

And we could go about designing something moving forward that, that

Russ Haworth:

allows us to tick the boxes that we want to tick in, in terms of the rigor

Russ Haworth:

and the, the type of research that will help move the, um, family wealth and

Russ Haworth:

family business advisory world forward.

Russ Haworth:

And I, I say that in essence, that helps.

Russ Haworth:

Family wealth and family businesses.

Russ Haworth:

So it's not just about us who, who act in the, the kind of practitioner space.

Russ Haworth:

It's, it is helping a much broader, uh, market of people as well.

Russ Haworth:

But if, if we wanted to design that from scratch, how do we go about doing that?

Jim Grubman:

Well, uh, in a commentary article in the FFI practitioner that

Jim Grubman:

I wrote as a companion article to the long, detailed, very comprehensive

Jim Grubman:

article in the, uh, international Family Offices Journal for um, June of 2022.

Jim Grubman:

Uh, I specifically discuss, uh, about five or six major points of what

Jim Grubman:

better research might look like.

Jim Grubman:

So maybe we can go through that.

Jim Grubman:

Um, one of the points is exactly what we talked about, which is, um, we

Jim Grubman:

needed to understand, uh, although family business, um, Is probably

Jim Grubman:

the major driver of the creation of family wealth at a significant level.

Jim Grubman:

There are many other drivers of family wealth.

Jim Grubman:

There are high earning professionals.

Jim Grubman:

Um, there are people who have start off with significant settlements and

Jim Grubman:

grow the wealth investment success.

Jim Grubman:

Um, and so number one, when we're doing research in this field,

Jim Grubman:

we need to really identify the.

Jim Grubman:

Of the cohort, what is the source of their wealth?

Jim Grubman:

Because it very well may be that different sources of wealth

Jim Grubman:

lead to different outcomes.

Jim Grubman:

We don't know that we've been throwing 'em all in the same bucket.

Jim Grubman:

Um, I think we need to keep them, uh, separate and understood because longevity

Jim Grubman:

with one type of wealth creation may be different than some other types.

Jim Grubman:

So not throwing it all together.

Jim Grubman:

Family wealth equals family enterprise would be a good place for us to start.

Russ Haworth:

Mm-hmm.

Russ Haworth:

. Yeah, I completely agree on that.

Jim Grubman:

The second point I make is something that has never been done.

Jim Grubman:

All the studies about what happens with family wealth or family

Jim Grubman:

business are always retrospective.

Jim Grubman:

Um, you take a point in time and then look back.

Jim Grubman:

The reality is to do longevity studies, you need to have longitudinal research.

Jim Grubman:

You need to start.

Jim Grubman:

With a particular cohort and follow them across time, uh, in order to

Jim Grubman:

track what happens in real time taking measures at different points.

Jim Grubman:

Probably one of the most, uh, famous longitudinal studies

Jim Grubman:

that many people are aware of is the Framingham study in the us.

Jim Grubman:

Where Harvard looked at, um, some Harvard, uh, students and alumni, and

Jim Grubman:

they followed them over 40, 50 years to find out, uh, what were cardiovascular

Jim Grubman:

risk factors, health factors.

Jim Grubman:

And over time, because they kept following the same cohort, they

Jim Grubman:

were able to broaden and study these people, uh, in great depth.

Jim Grubman:

In order to answer long-term questions, you need long-term research and

Jim Grubman:

we've never done that as a field.

Jim Grubman:

So, uh, we need to secure the funding and have really good robust research

Jim Grubman:

design, um, to be able to track, uh, the, the various cohorts that

Jim Grubman:

are part of the study over decades.

Jim Grubman:

And with that, we may be able to actually get some answers on what

Jim Grubman:

happens with family wealth over decades.

Russ Haworth:

Absolutely.

Russ Haworth:

And that, that's quite, uh, a tricky thing to secure.

Russ Haworth:

I know, um, about talking from personal experience, you know, the work that me

Russ Haworth:

and and Jamie Wener have done in, in terms of the research project that, that we've

Russ Haworth:

done, and we were fortunate enough to speak to the people we spoke with over the

Russ Haworth:

course of five years and on a couple of occasions, our dream is for that to become

Russ Haworth:

something that is more longitudinal.

Russ Haworth:

But the challenges that you come up against are things like funding and

Russ Haworth:

finding the research team to design the research in the appropriate way.

Russ Haworth:

So although we're saying this is how we would design things going

Russ Haworth:

forward, there are still barriers in terms of, of doing this.

Russ Haworth:

But, but I guess what we're saying is, let's, let's work together in terms of,

Russ Haworth:

um, the, the benefit I had from, from being in a practitioner and research.

Russ Haworth:

Team was huge because I'm sure the researchers won't mind me

Russ Haworth:

saying they operate in a different language almost in terms of the

Russ Haworth:

technical aspect of what they do.

Russ Haworth:

So we were able to translate that into, um, kind of everyday talk, if you

Russ Haworth:

like it in the work that we've done.

Russ Haworth:

But, but that kind of practitioner research, um, LED model is hugely

Russ Haworth:

beneficial because it allows that interaction between the two.

Russ Haworth:

As well.

Russ Haworth:

And, uh, I guess in terms of what we're looking here, um, at moving

Russ Haworth:

forward, um, as practitioners, we would benefit hugely from this.

Russ Haworth:

So let, let's get involved.

Jim Grubman:

Well, Russ, what I can tell you the good news is, is that since

Jim Grubman:

these articles have been published, um, some, several major institutions

Jim Grubman:

and firms have approached me and said, okay, so actually what would it take

Jim Grubman:

to do this longitudinal research?

Jim Grubman:

Um, and, uh, I'm.

Jim Grubman:

Including, I had conversations at the PPI Rondevu last week and whatever, and

Jim Grubman:

that it very well may be that, um, uh, we're gonna be able to put together a

Jim Grubman:

consortium with several funders that, uh, begins to create research that's

Jim Grubman:

going to have a significant impact on this field for decades to come.

Jim Grubman:

That's probably the most exciting thing that has come of this.

Russ Haworth:

Yeah, that, that sounds fantastic.

Russ Haworth:

And, and look forward to hearing more on that.

Russ Haworth:

Um, so we've covered two of the elements.

Russ Haworth:

So we've got, uh, the research objectives must be clearly.

Russ Haworth:

Define and, and separate the between family, business and, and family wealth.

Russ Haworth:

And that in order to get valid, um, longevity studies, we

Russ Haworth:

need longitudinal research.

Russ Haworth:

Um, what else do we think is needed in order to help, uh, improve,

Russ Haworth:

um, research in family wealth and

Jim Grubman:

Several things.

Jim Grubman:

Sure.

Jim Grubman:

Um, one is something that you touched on, which is what are the outcome measures?

Jim Grubman:

In 1987.

Jim Grubman:

In 1997, um, simplistic ideas of well, who succeeds and who fails we're part of the

Jim Grubman:

understanding of a newly developing field.

Jim Grubman:

We are much farther along than that, and what I describe in the FFI article and.

Jim Grubman:

The, um, other one too is we may actually need to move away from a binary

Jim Grubman:

up or down, um, measure to something that looks much more at patterns.

Jim Grubman:

What are the patterns that occur across generations?

Jim Grubman:

Because it may very well be that there are different patterns, for

Jim Grubman:

example, at different levels of.

Jim Grubman:

If you have 12 million, your pattern of what happens over time should

Jim Grubman:

not be lumped in with what happens to wealth in the a hundred million

Jim Grubman:

range or in the 2 billion range.

Jim Grubman:

Um, and so we have a much more sophisticated idea that market

Jim Grubman:

segments, levels, types of wealth, origin of wealth may all influence the.

Jim Grubman:

And so on.

Jim Grubman:

The third emphasis is we need to move away from a very simple idea of, you

Jim Grubman:

know, success or failure, which of course, uh, you know, debunks the shirt

Jim Grubman:

sleeves, the shirt sleeves because it basically says there's only one outcome.

Jim Grubman:

Uh, you go from shirt sleeves to shirt sleeves.

Jim Grubman:

Um, and I think that we need, uh, a much finer grained understanding of the long

Jim Grubman:

term patterns of wealth over generat.

Russ Haworth:

Completely agree.

Russ Haworth:

And, and I think that's possibly another podcast that we could, um, have just on

Russ Haworth:

that topic alone in terms of, um, defining

Jim Grubman:

Yes.

Jim Grubman:

And

Jim Grubman:

I, I think the, um, the field itself, if you look back over the last

Jim Grubman:

30, 40 years has really come to an understanding that, uh, basically.

Jim Grubman:

Wealthy, you know, rich people cannot all be lumped into one cohort

Jim Grubman:

as some homogeneous population.

Jim Grubman:

Often that has some usually really bad stereotype characteristics.

Jim Grubman:

So I think, um, uh, we've come a long way in understanding, uh, subgroups

Jim Grubman:

among the wealthy, and I think that's where the research really needs to go

Jim Grubman:

for outcome and longevity research as.

Jim Grubman:

Uh, a couple other things.

Jim Grubman:

Um, we need really good research design, and I think that we're much farther

Jim Grubman:

along now than we were back in the early days of the development of the field.

Jim Grubman:

Um, keeping out bias in, uh, design, making sure that

Jim Grubman:

measures are well standardized.

Jim Grubman:

Just basically good research protocol has come a long way.

Jim Grubman:

And so the procedures for the research, uh, need to be enhanced.

Jim Grubman:

And then finally, Um, we need to look at, uh, the wealthy themselves.

Jim Grubman:

Uh, I've already touched on one aspect, which is, you know, we need

Jim Grubman:

to look at segments of the wealthy.

Jim Grubman:

What happens at the high net worth level may not be the same as at

Jim Grubman:

the ultra high net worth level.

Jim Grubman:

And so, um, having a more finely grained approach, uh, is something that

Jim Grubman:

needs to be part of the new research.

Jim Grubman:

Uh, but the last point I think we have to take a moment on,

Jim Grubman:

which is the demographic.

Jim Grubman:

Um, uh, when in, in the 1970s to 1990s when the original research was

Jim Grubman:

being done, according to Williams and Pressor, and then later with

Jim Grubman:

Ward, um, they were looking at what happened by g2, perhaps G three.

Jim Grubman:

And if you think for a moment, that means that generation one, Dates back

Jim Grubman:

to the late 1880s to early 19 hundreds.

Jim Grubman:

We're talking about a demographic for the statistics that are bandied about now.

Jim Grubman:

A demographic back then that was predominantly white

Jim Grubman:

male led uh, Christian, heterosexual, traditional family.

Jim Grubman:

I mean, um, who became wealthy was a very particular, uh, type of.

Jim Grubman:

That is very different than today's diverse global, less traditional

Jim Grubman:

blended family, female led, um, people of color growing more and more.

Jim Grubman:

Um, we need to have the demographics much more represented of who is wealthy

Jim Grubman:

now, uh, rather than rely on statistics and studies that relate to a demographic

Jim Grubman:

that actually in many ways has, uh, gone.

Russ Haworth:

Yeah.

Russ Haworth:

Uh, again, completely agree, uh, on that.

Russ Haworth:

And it, again, it reminds me of the comment I made earlier around the sort

Russ Haworth:

of medical research being, uh, very limited, very restricted over time and as.

Russ Haworth:

Medicine advances and the science advances, they're able to, to introduce

Russ Haworth:

a much broader, diverse range to those types of research studies and take the

Russ Haworth:

understanding from one study and place it into part of the context for their next

Russ Haworth:

study to almost test that side of it.

Russ Haworth:

And they, they kind of build on, um, each other.

Russ Haworth:

And we've seen the, the work that things like.

Russ Haworth:

Vaccine for, um, COVID can do the impact that that can have as a result

Russ Haworth:

of many, many years worth of accumulated research, rather than basing everything

Russ Haworth:

on, say, research from the 15 hundreds.

Russ Haworth:

So, so that's a real time example of that kind of progression through research.

Russ Haworth:

And I, I guess it sort of, um, in conclusion, bringing the research.

Russ Haworth:

Standard, the, the kind of, um, collaborative approach that we've

Russ Haworth:

discussed, the kind of broader, um, and yet more specific kind of demographic

Russ Haworth:

side of things and, and that that's all gonna lead to a progression for

Russ Haworth:

the field, but also the aim ideally, I guess, is better outcomes for families.

Russ Haworth:

And just on that, back to the success point is, in my view, that should

Russ Haworth:

be defined by the families, not defined by people going, let let

Russ Haworth:

us stop you becoming a statistic.

Russ Haworth:

And for example, this business has to continue through to the next generation

Russ Haworth:

or for it to be successful, even if that makes you entirely miserable.

Jim Grubman:

Well, what you're talking about is in some ways the outcome

Jim Grubman:

measures that might be done in a research study should include self.

Jim Grubman:

Assessment, the families should be asked.

Jim Grubman:

Um, and, and again, not binary, you know, did you succeed or did you fail?

Jim Grubman:

But, um, possibly what's called a Likert scale, like from zero or one to six,

Jim Grubman:

uh, the degree to which, um, the wealth still continues to support the family.

Jim Grubman:

They might look at, you know, what are the areas in which, uh, this has

Jim Grubman:

benefited you, what are the areas in which you now are struggling?

Jim Grubman:

Um, and the families.

Jim Grubman:

Self assessment should be a very important part of, um, the protocol.

Russ Haworth:

Yeah, completely agree.

Russ Haworth:

Um, Jim, as always, it has been a fantastic conversation.

Russ Haworth:

Um, please tell our audience how they can find out more about, uh, the

Russ Haworth:

articles and, uh, yourself as well.

Jim Grubman:

Sure.

Jim Grubman:

Um, the, uh, comprehensive article going into depth about the Williams and Pressor

Jim Grubman:

material was in the June, 2022 issue of the International Family Offices Journal.

Jim Grubman:

A great journal, um, uh, that you can obtain through Global Law and Business.

Jim Grubman:

Um, a copy of that article is also posted on the homepage of

Jim Grubman:

my website, James Grubman dot.

Jim Grubman:

Uh, the FFI practitioner article talking specifically about, uh,

Jim Grubman:

recommendations for good research now going forward, can be obtained

Jim Grubman:

on the FFI practitioner website.

Jim Grubman:

Um, and actually I may be posting a copy of that on my homepage as well.

Jim Grubman:

Um, with the other companion article, it may already be there.

Jim Grubman:

Um, and feel free again at any time to email me, um, through my website.

Jim Grubman:

There's a contact form or jim james gruman.com and I would love to hear.

Jim Grubman:

Comments, thoughts?

Jim Grubman:

Um, you know, we might end on, on a note.

Jim Grubman:

Uh, I posted on LinkedIn when these two articles came out and it

Jim Grubman:

basically blew up our little corner of the internet, um, in a, a big way.

Jim Grubman:

I think it's had 8,000 views and a hundred and something reactions and comments.

Jim Grubman:

It's, it's really gone viral and so, um, you can also go to LinkedIn and

Jim Grubman:

see the conversation about this there.

Jim Grubman:

Which was overwhelmingly supportive, uh, for the new information.

Russ Haworth:

Fantastic, and what we will do is provide links to all of

Russ Haworth:

the resources you mentioned there.

Russ Haworth:

In the show notes.

Russ Haworth:

Um, but for now, Jim, uh, until your next, uh, appearance on the show,

Russ Haworth:

um, thank you very much for your, uh, expertise and insights and, uh,

Russ Haworth:

I look forward to catching up soon.

Jim Grubman:

I look forward to our next one as well.

Jim Grubman:

It's always great talking with you, Russ, and, uh, great that

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