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By Stacy Allred, MST, CFP®, Joan DiFuria, MFT, and Stephen Goldbart, PhD

In 1994, American investor Charlie Munger, vice chairman of Berkshire Hathaway, delivered a speech about attaining “worldly wisdom” with a powerful message that still reverberates today. Worldly wisdom requires building a set of mental models and stacking the models in a latticework to solve problems. In 1996, he expanded on this concept and underscored the importance of using a multidisciplinary approach, i.e., no one discipline has all the answers, and problem-solving requires taking the “best big ideas” across disciplines.

Using a multi-model, multi-disciplinary approach may seem overwhelming at first. But as Munger said, it’s not really that tough because “80 or 90 important models will carry about 90 percent of the freight,” and “a mere handful” will do most of that work. No one “master list” exists; rather, you need to gather the most relevant models with the greatest positive impact on the problems you are trying to solve.

As advisors to families with significant financial capital, what are the problems you and your clients are trying to solve? What opportunities are you and your clients trying to optimize? Which models are most relevant for tackling these issues? Which models belong in your cognitive toolkit?

Meet the Romeros

Let’s consider a hypothetical case study of Joe and Mary Romero and their three children, who are ages 16, 20, and 27.  What problems and opportunities do they face? If the Romeros were sitting in your office, which models would be most relevant to help them build worldly wisdom and thrive?

Joe and Mary are a couple in their mid-50s who recently sold a successful business they founded and built over the past 30 years. Joe is excited about the sale, but he’s not sure how he wants to spend his time in the future. He really doesn’t like the idea of retirement. “Everyone I know who has fully retired seems unsettled and not very happy,” he says.

Mary is less worried. She’s already plenty busy, between parenting, friends, making pottery, and working on philanthropic activities. She is looking forward to using some of the business proceeds to build a family foundation.

Joe and Mary have three children:

  • Sally, 16, is undecided about her future and focused on her friends. She is concerned that her family’s wealth may lead her friends to see her as a “rich kid who doesn’t have to do anything in order to succeed.”
  • Zack, 20, is focused, independent, and loves animals. He has always known he wants to become a veterinarian. Zack knows vet school is costly, and he’s counting on his family to help him realize his goal.
  • Bob, 27, works as a software developer. He is financially self-sufficient and has never leaned on his parents for money. But now that he’s thinking about starting his own business, he wonders if he should ask his family for some help.

Every family is unique and, like the Romeros, has specific details and needs. But in more than three decades of helping families navigate wealth, we have found that, time and again, wealth-holders share a “conceptual skeleton.” They have similar questions about many of the same issues, such as the following:

  • Purpose: How might we build and maintain a sense of purpose and well-being for each generation?
  • Stewardship: How might we best steward wealth and find the balance between personal enjoyment and sharing?
  • Effective giving: How might we make gifts that enhance family members’ growth and development but don’t undermine self-esteem, motivation, or autonomy?
  • Future thinking: How might we plan for continuity, succession, and being a role model for the rising generation?
  • Harmony: How might we employ practices that minimize the risk and divisiveness that money can bring to a family?

Imagine your client has attained significant financial capital and now faces new problems. “I don’t want the money to mess up my kids or my relationships with them,” says your client. This client is now in your office asking about financial education programs for the kids and advice about the dos and don’ts of gifts and inheritances.

As an advisor, this is where things get interesting. Financial education, well-structured estate plans, and investment portfolios are important. But these alone aren’t enough to combat the risks and challenges associated with significant economic capital. So, what do you and your client need to do?

Promote Flourishing, Combat Languishing

The number-one goal of successful wealthy families is to foster thriving individuals and build connections among family members. In other words, the objective is to promote flourishing and combat languishing using financial capital to help family members build bountiful lives. Creating a bountiful life—being the best you can be, living a life of passion and productivity, empowerment, equanimity, and empathy—is real wealth.

The Holistic Learning Family Research shows that families who succeed over time—at growing and preserving family assets and family connections—embrace a holistic definition of wealth For these families, financial capital interfaces with social, intellectual, human, spiritual, and legacy capital—the “five capitals,” as defined by family wealth and governance expert James Hughes. With its broad definition of wealth, Hughes’ model of the five capitals is a foundational model for your cognitive toolkit.

The successful multi-generational family works for rising generations to thrive, live fully engaged lives, have tools that enable them to reach their potential, and build a sense of well-being. Armed with a broad integrative mindset and shared purpose, families that flourish are on the lifelong journey of creating a holistic learning family.

Families that go from “good to great” are aware of the opportunities and risks of wealth and seek to get in front of these challenges. They want to empower each family member, encourage social responsibility, and make positive contributions to their communities.

In designing a holistic learning family model, our purpose was to create a tool to support family members according to their capacities, passions, and stages of life. As one of our clients said, “Wealth is like rocket fuel, but where will it take you?” 

Indeed, at any age or stage of life, financial capital can help build well-being and self-esteem or magnify ill-being and the potential for feeling lost.

We’ve observed that families that over-identify with the money itself are most likely to fall into a black hole over it.

Too much focus on money can undermine personal well-being and development. It can amplify anxiety, depression, entitlement, lack of motivation, and, in extreme cases, even narcissism. These behaviors can result in languishing rather than flourishing—of family members and the family itself.

In multi-generational families, the ingredients contributing to the learning journey vary with individual life stages and choices. The table above outlines these ingredients for the Romero family.

Next week, we’ll cover how to build a learning journey that contributes to a connected family of wealth. 

For more in this series:

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