Wealth in Families (2nd Edition)
by Charles Collier
Harvard University Press, 2006
110 pp., $15
It usually surprises people to hear this, but most wealth in this country is relatively “new money.” Around 80 percent of affluent families acquired their financial resources within the lifetimes of the wealth-holders and by their own efforts. Only around 20 percent of affluent families inherited their wealth from others.
This is not the way that media or even the wealthy tend to portray wealth in America. “Old money” is to many more titillating — think “bad girl” Paris Hilton — than new. It is also, paradoxically, in some eyes more respectable: no one wants to be known as nouveau riche. And yet the testimony of sociologists indicates that this 80/20 distinction has stayed pretty much the same since the early 19th century, through all the various revolutions of technology and society of the last 200 years.
In other words, to use a metaphor publicized by wealth counselors James Grubman and Dennis Jaffe, the “land of wealth” is a land of immigrants.
This condition of the “land of wealth” hasn’t changed since Charles Collier published the first edition of his now-classic book Wealth in Families in 2001. But the fields of philanthropy and wealth advising have changed greatly in those six years.
Most wealthy families no longer find it novel to think of their human capital and social capital as valuable as or even more valuable than their financial capital. Many have gathered to write family mission statements and to develop philanthropic strategies. Wealth management firms and family offices have added officers like myself, who serve as wealth counselors and facilitate family meetings. And a burgeoning market of consultants offers families and firms similar services.
The new edition of Wealth in Families reflects those changes. Collier includes a new chapter on family meetings and an appendix on the application of family systems theory to family wealth governance. He also includes an introductory chapter on how to open a conversation of these topics with your family.
But in large part the original edition of this book has prompted the changes mentioned above. Its appearance gives us an opportunity to reflect upon them — on what’s new and what’s stayed the same in the land of wealth, what’s better, and what’s still missing.
As noted, what hasn’t changed is the condition of wealth as an “immigrant” experience, which contributes to the anxiety that often accompanies wealth in America. If the land of wealth is largely a land of immigrants, that means the natives don’t tend to flourish and stick around. “Shirtsleeves to shirtsleeves in three generations,” as Collier and many others note, is the norm. This precarious condition often leads to denial or avoidance, but it can also feed a hunger in wealthy families to learn more, to prepare their children, to forestall or ward off the dissolution of their “outpost” in this new land.
Dissolute or impoverished grandchildren are not the only source of emotional anguish for wealth-holders. Collier also points to the need to connect wealth with purpose, thus laying bare a paradox in the American soul: For many Americans, securing material resources is their purpose, the “American dream.” The land of wealth looks like the promised land, the land of milk and honey. But if getting there is your purpose, what do you do after you’ve arrived? Not thinking through this question has led many wealth-acquirers and inheritors to feel lost, depressed, even worthless amid their great wealth. A premonition of this problem causes many Americans, not just the wealthy, to consider wealth both a blessing and a curse.
Collier is a senior philanthropic advisor at Harvard University and has spent most of his career in development, so it is not surprising that he points to philanthropy as a method for addressing the need to prepare future generations of wealth-holders and to help the present generation find purpose.
But this new edition does even more than the first to suggest that philanthropy is only one of many ways to achieve these ends. A process of family meetings, for example, may focus on philanthropy, or may deal with philanthropy among other topics, or may touch upon philanthropy just barely. A focus on philanthropy may not suit the character of every family. Collier acknowledges this reality by emphasizing the process of family communication and decision-making and not just the product (e.g., more or better giving) of that process.
The inclusion of the family meeting chapter, with its interview with wealth counselor Kathy Wiseman, and Collier’s appendix on family systems theory provides a natural progression beyond the interviews Collier prepared for the first edition, where he marshaled mainly the voices of wealth-holders themselves and a few students of wealth and philanthropy. These voices provide great inspiration but not as much guidance on implementation. By themselves, they may have left some readers wondering if there are proven or generally accepted ways to implement a process of family reflection, communication and governance.
This new edition keeps all these inspiring words, but also shows that the field has continued to develop and that there are ways to turn inspiration into reality — and people who help guide families on those methods.
These developments also expose this book’s natural limitation. A book can show you how to fix a faucet, set up your computer or balance your budget. These are matters of some precision, with largely right and wrong ways of proceeding. They also do not directly involve other human beings, with all their emotion and unpredictable ways of responding to your words and deeds.
No amount of reading can provide a sure-fire way to talk with your kids about money, to explain to them your choices and decisions, or to hold a productive family meeting. These matters demand personal introspection and a clarification of your own values. They also require the ability to listen, to give others a chance to respond, and to manage or at least be attentive to group process. In short, they involve not just knowledge but also skill. One can learn about skills from a book, but one cannot learn the skills by reading. That takes interest, aptitude, guidance and lots of practice.
In this respect, I think Collier’s new edition also points beyond itself to the road ahead. That road has several branches.
One branch concerns the activities of wealthy families. Philanthropy will continue to play a large role in wealthy families’ lives. It will be an expression and source of purpose. It will serve as a means to educate family members and an opportunity for them to foster connection with each other.
But other activities will move to the fore alongside philanthropy in the “economy” of a wealthy family’s life. I am thinking of such activities as being knowledgeable stewards of the family’s financial resources and of collaborating around family businesses and private investments. I am also thinking of such projects as developing all family members’ financial literacy and taking purposive steps to diversify the family’s human resources through education and leadership development. Finally, I see a growing interest in family governance and structural capital — the development of family councils and family meetings — that can include but also transcend philanthropic expressions.
Another branch of the road ahead concerns the work of wealth advisory firms. The success of Collier’s book points to a growing distinction in the industry between firms that remain focused on the management of finances and firms that attend to client families’ super-financial assets. For years financial firms have marketed to human beings but have worked on money. Now increasing numbers of firms not only talk about personal and family dynamics around wealth, they also make those dynamics their focus. Not all wealth-holders will want that type of attention. Room will always remain for firms focused primarily on the money. But I see an increasing distinction between companies that talk and those that do in this arena.
Finally, a third branch concerns the self-understanding of wealth-holders. Collier’s work reflects and responds to the need wealthy families have to find meaning and purpose once they have solved the economic problem. I see families increasingly making sense of their experience through metaphors such as the “immigrant” analogy I have touched upon above. Families and their helpers will come to a clearer sense that “rich people” are not all the same, that “immigrants” and “natives” have different experiences and different challenges, though for both the fundamental challenge concerns the relation between wealth and identity or meaning. I see Collier’s work as prompting a strong desire not only to pose questions for the wealthy but to propose frames of understanding that help wealthy families discuss these questions and understand themselves.
Charles Collier’s book stands as the opening statement in a new and exciting field, one so new it still doesn’t have an established name. With this second, expanded edition, he continues the work he has pioneered and continues to help and to inspire.
Albert Keith Whitaker is director of family dynamics at Calibre, a division of Wachovia Wealth Management, and a research fellow at Boston College’s Center on Wealth and Philanthropy.