Common Mistakes During Family Business Estate Planning | The Family Biz Show Ep. 128

Transcript

Michael Palumbos (00:21.366)

Welcome everybody to the Family Biz show. I am your host Michael Palumbos with Family Wealth and Legacy in Rochester, New York. And today we've got a treat for you. Jim Grubman, who has been a long time mentor of mine. A lot of the work that we talk about today came from Jim and Jim's work with the Ultra High Net Worth Institute and the Wealthesaurus and 

 

Michael Palumbos (00:46.496)

If I looked at all the things that you've done in your career, and we would be here spending the whole hour going through that. And of my mentors, of the people that I've learned from through the years, you're probably one of the only ones that I haven't had on the show. So I'm so excited to have you on the show today. Welcome Jim Grubman. 

 

Jim Grubman (01:05.004)

Well, I'm excited to be here because yeah, we have been in the same circles and known each other and various sorts of things, but we haven't actually sat down to have this conversation. I'm looking forward to it. 

 

Michael Palumbos (01:16.142)

Good. So Jim is the author of the book Wealth 3.0 along with Dennis Jaffe and Kristen Keffler. And it was, you know, when it came out and when you started talking about this, it ruffled some feathers in the industry. And in a good way, in a really, really positive way, because you, the three of you made the shift. 

 

Michael Palumbos (01:46.562)

to thinking about things in a positive light and thinking about from a strengths-based, you you don't get out to three or four generations without doing some incredible things. And most family businesses were beating the, you know, the beating the S &P 500 businesses by five, 10, 15 years in terms of their longevity. So it was due, it was due. Thank you. 

 

Jim Grubman (02:16.376)

Well, thanks for pointing that out, because yes, we did ruffle a few feathers and a few people were a bit unhappy of how we were objecting to the status quo. But that's the nature of what happens in paradigm shifts and the need to grow beyond what has been to something a bit better. 

 

Michael Palumbos (02:38.018)

Yeah. And, you know, so for those of you who haven't heard it, let's just go through the old paradigm and what you might've heard when it comes to family businesses is that, you know, it's shirt sleeves to shirt sleeves in three generations. The third generation is going to lose the family wealth and the family business or the collapse of the family will happen. Rice patty to rice patty. it's, you know, here's what I, you know, I would say, and this might be a good time to, you know, just 

 

Michael Palumbos (03:07.254)

Debate it a little tiny bit. I don't know. That's not the right word, but discuss is You know physics and entropy it does kind of have this cycle that matches that shirt sleeves the shirt sleeves and three generations and the the the families that that don't think about it from a strength space that aren't open to emotional intelligence and growing 

 

Michael Palumbos (03:36.238)

these human beings, at the end of the day, this is all about people, right? And that's where I think, you know, we could probably, you know, stop to say, you know, I hate the carrot and stick, but I don't know how else to say it, but it's like, for some people, and then we, you know, when we started, we're going to talk about this a little bit, but for some people, that it's going to be, they're stuck in their ways. 

 

Jim Grubman (03:40.512)

Absolutely. 

 

Michael Palumbos (04:05.582)

And so it's, know, wealth 3.0 and I've got one that I'm thinking of in my head right this second. Man, I could open up his dialogue, his emotional ability to say, you're saying that the way I'm talking about the family, the way I'm talking about G3, the way I'm talking about our family wealth and what I'm doing with it is actually doing more harm than good. 

 

Michael Palumbos (04:34.872)

That's what you're saying is let's focus on how do we get them thinking in the right direction, right? 

 

Jim Grubman (04:41.55)

Absolutely. know, for some people it just sounds like, oh, positive psychology of rose colored glasses, but, know, things can happen. And I was dealing when, and maybe what we should do is pause for a second and just for those people, go back and review sort of what wealth 1.0, 2.0 and 3.0. 

 

Michael Palumbos (05:01.902)

Michael Palumbos (05:02.286)

No, no, I appreciate that. 

 

Jim Grubman (05:04.782)

Essentially, I was asked to do a retrospective on the field of wealth management back in 2019 at a certain conference. And I was racking my brain and having been in this business for back into the dot com era. What sort of settled out for me was most people do not realize that the modern wealth management industry is only about 45 years old. They think, well, it's always been this way. 

 

Jim Grubman (05:32.846)

But before the 1980s in the US, was wealth 1.0. It was all about the money. There was no mutual fund industry. It was very simplified, and there was very little written or very little attention to the family issues of wealth. It's hard to believe that everything that we've been, you're talking about discussions of family entropy and sure safe to sure safe. All of that. 

 

Jim Grubman (06:01.888)

starts from around the 1980s. And that's what I then called, well, Wealth 2.0 began around then. And we have been in and are still are in the Wealth 2.0 era in most places. And it was... 

 

Michael Palumbos (06:16.078)

Can I ask a question? think I want to go back to that. When we look at what was happening up to the 1980s and he may be even into wealth 2.0. 

 

Michael Palumbos (06:27.502)

One of the, you we said it's always been this way. Where did the feudal, if we look at feudal times and look at, you know, the Lord's passing their castle, the Lord's passing their kingdom to, you know, the next generation, that's really how old, if I'm thinking is about the family business. 

 

Jim Grubman (06:44.974)

Yeah. 

 

Jim Grubman (06:48.754)

Absolutely, you probably know, but not many people know that although we can trace the concept of trusts back to Roman times, it was really during the Middle Ages that the concept of a trust and a trustee and what a trust is about happened exactly for what you said, which is people had to go off to the Crusades. What are you going to do with your castle and your family and whatever? They would go to a friend and say, 

 

Jim Grubman (07:17.91)

I am going to have you take care of my family, but I'm not giving you my family. And the idea of splitting the role of somebody who cares for is a steward of, which interesting also comes from that era as a word, but does not own the trustee, does not own the assets. That is from the same era. And so yes, there is this long history of family and wealth. 

 

Jim Grubman (07:47.214)

ownership, things like that. What I'm talking about for 1.0 though, particularly in the US, 17, 18, 1900s, was people who dealt with very rich people were pretty much supposed to just manage the money. There was very little education to the family. It was very paternalistic. And again, I mentioned something. There was very little writing or discussion of 

 

Jim Grubman (08:16.738)

very little teaching and training and passing on of to the wealth advisors, an understanding of the family issues. And so it was all, you know, apprenticeship of sort of, you know, be by my side here in this trust company and watch what I do. This is how you take care of really rich people. It was in the 1980s, the two things happened in the nineties. One is 

 

Jim Grubman (08:46.638)

the voices of inheritors started to come out. Often a lot of these people were from the 60s and you know, we know what that was like. But the idea of in 1988, for example, Joni Bronfman of the Seagrams Bronfman family did a dissertation for the first time talking about the title of the dissertation was the experience of inherited wealth. 

 

Jim Grubman (09:13.838)

There were other things. So voices of the family side, what it's like to live with wealth, the challenges of wealth, the fact that wealth is not all, you know, as we say now, unicorns and rainbows and whatever. And people say, you know, this is a lot harder than people think. That started to come out. And then with that, certain other voices, Jay Hughes, other people started to talk about it. But you got to remember Jay Hughes' book, 

 

Jim Grubman (09:42.808)

Keeping the Family was first published in 1997. People think it's been around like forever. That's not that long ago. And so 2.0 basically did wonderful things of bringing out the voices of families and wealth, the challenges of wealth, the fact that it's not just about the money, there needs to be financial education, attending to governance. 

 

Michael Palumbos (09:50.718)

Right. 

 

Michael Palumbos (09:53.464)

Yeah. 

 

Jim Grubman (10:13.28)

All of that has only been built in the last 45 years. The problem and why I wrote the manifesto that was 3.0 based on the original talk and then and Kristen were joining me in that was exactly what you said, which is a lot of it got codified as fear and catastrophe that 

 

Jim Grubman (10:43.404)

We only talked about the challenges of wealth. only talked about that wealth doesn't survive easily. And then unfortunately, terrible things happened in research. And if you're watching this on YouTube, you know I'm using air quotes. If you're only listening, I'm using air quotes. That in the early 1980s, there was actually some really 

 

Jim Grubman (11:12.768)

not bad research by John Ward and some other people saying, you know, there's some studies looking at a very limited way that says some family businesses don't seem to survive that well past about the end of the second generation. Unfortunately, that's all. And that that became gospel. Yeah. And it was been repeated. William's Impressor and their books and lot of bases and 

 

Jim Grubman (11:42.7)

I mean, how many websites have we seen and how many PowerPoints have you and I seen in presentation after presentation that says, you know, 70 % of well transfers failed by the end of the second generation. And I got fed up and I said, really? Like, and I went back and I tracked it all down to one small study that is not widely applicable. 

 

Jim Grubman (12:12.62)

and that everybody is just keep referring. All of this is background to your client. 

 

Jim Grubman (12:21.152)

your client and the patriarch of many enterprises have been hearing that and having it confirmed by saying, I worry that the wealth is going to ruin my children. And the advisor will say, well, actually you should be worried. Have I told you that 70 % of wealth transfer has failed? We have data on that. It's true. 

 

Jim Grubman (12:43.854)

And essentially what Wealth 3.0 has been about is saying, wait a minute, first of all, we actually have no data. There are no real data in the modern world other than anecdotal to know what happens to wealth over time. Number two, shirt sleeves to shirt sleeves is a really nice adage. And that's about it. And a lot of advisors will say, well, I've seen 

 

Jim Grubman (13:13.646)

sure sleeves to shirt sleeves. Right. I often have to say to them, okay, can you think of three families at least, where actually they were doing okay in the third generation or beyond. And they usually stop, look up, think about it and said, well, actually, yeah, I've known some families like that. There's a confirmation bias and a hindsight bias about what we think is the story. 

 

Jim Grubman (13:41.026)

Finally, what back to your client, a lot of it is this reciprocal conversation where somebody in G1 expresses worry, the advisor confirms it as true. And then what they do is they build it into the wealth plan. Okay, we got to protect the family from the money. Let's put it all in trust. 

 

Jim Grubman (14:09.774)

keep it away from them, tie them together so that they cannot destroy it, and that's it. And what I and Dennis and Kristen have been talking about is there's a better way that having a different conversation, pointing out the flaws in some of that thinking. We have research with the 100 Years Family Project that says many families actually do well. 

 

Jim Grubman (14:37.942)

And we move away from the very binary, do you succeed or fail to the idea in reality, there are actually many possible outcomes. For families of wealth. Pass or fail. So 

 

Michael Palumbos (14:55.326)

Evolving. We just evolve and it needs to be different and there is nothing wrong with, know, Tom Deans talks about, you know, every family's business that in his theory is that every generation should sell the business. And if you want to be in the next, you know, if you want to own it, that's fine, but buy the business and do it. And that's a form of evolving. That's not right for every family either. 

 

Jim Grubman (15:21.208)

Right. basically, we were very locked in the sort of simplistic thinking to the pass fail nature of wealth. And it just so much stuff around that. But that was 40, 50 years ago. Yeah. The demographics have changed. A lot of things have changed, including the rise of understanding new techniques to deal with it. The bottom line is we now are beginning to move into and need to move into 

 

Jim Grubman (15:51.512)

Wealth 3.0, which is leaving some of the bad stuff that grew up in Wealth 2.0 behind, keeping the good stuff and having better, newer techniques. And ironically for advisors, being able to say, we don't know. And somebody says, well, you know, I've heard wealth is going to ruin my family. And say, well, actually we don't know what those statistics are. 

 

Jim Grubman (16:18.292)

It's a much bigger question than that. Let's talk about what you can do and maybe what you already have done to make it come out well. 

 

Michael Palumbos (16:28.514)

Yeah, it's time to get curious. 

 

Jim Grubman (16:31.978)

Yes, to be curious rather than judgmental. And the other thing is to make room for stories and techniques that actually do work. You know, and in my career and yours too, we've worked with families who actually are, they want to be proactive. They're doing fine. They have strong things. But maybe now at this point we get back to... 

 

Jim Grubman (16:58.85)

when you were talking about, because I've seen many of those people too, usually the patriarch who says, nope, I've seen it, it's not gonna happen. I wouldn't say it's sort of like, how many movies and books have you seen and read and TV shows that show that rich people all basically go down the tubes? And so, nope, we gotta protect the money from the family and make sure the family, we may not even tell them that it's there. 

 

Michael Palumbos (17:17.411)

Right? 

 

Michael Palumbos (17:28.109)

Let me tee that up just a little bit. before the podcast started, before we start recording, we were talking about the families where it is typically the patriarch. 

 

Michael Palumbos (17:41.826)

who wants to control things, knows better than everybody else, is afraid of the wealth either ruining people or the fact that, you all have to work together. This is how I'm gonna keep the family together and I'm gonna advise beyond the grave. then the impact that that has, there's a ripple effect. That's bigger than a ripple effect. It's more like a tidal wave. 

 

Michael Palumbos (18:10.078)

of what happens, know, as Jay said, it's the meteorite, right? Yeah. It slams into the family because this is what you're going to do. So I think that that's really important. And I think a lot of people, when we set that stage, many people that are going to be listening to this are experiencing that exact thing right now. So. 

 

Michael Palumbos (18:36.344)

What are the questions? are the conversations that they should be thinking and talking about with the family to ease that, to have a different discussion, to open up a different door, especially when there's damage that's already been done. I already have a son who split off and started his own business or won't come to Thanksgiving giving dinner table any longer because... 

 

Michael Palumbos (19:02.956)

You know, he was told that from a young age, this one day this will all be yours and you'll be the president. And when there was multiple siblings and multiple cousins that came into the business, that wasn't, you we need to work together and it didn't happen the way he wanted. How do we open that door to those families? That's, I think would be really powerful. 

 

Jim Grubman (19:25.294)

But it's funny because I've encountered that very often, you know, and that either pushback or somebody saying, don't know. I mean, I've seen surest of this, surest of this. And, know, I don't know a lot of wealthy families that are doing well. you know, but again, the confirmation bias and, know, as Daniel Kahneman said, people don't believe facts. They believe stories. Yes. the success. 

 

Michael Palumbos (19:51.63)

Michael Palumbos (19:52.371)

Yellowstone, know, just dynasty. It goes on and on forever. 

 

Jim Grubman (19:58.958)

And a story like succession has had so much more impact than people saying, actually, you know, sure, there is no evidence one way or the other on shirts, sleeves, the modern world. But it's like, yeah, but have you seen succession? And it's funny, because I once read an article about a psychotherapist in New York City. And I had to like smack my head and shake my head a few times because he said, 

 

Jim Grubman (20:28.084)

all my clients are billionaire children. And yes, succession is true. They all are like that. Succession is a true thing. And I thought, that's funny. You haven't met my clients and who actually they're doing fine. But to your point. 

 

Michael Palumbos (20:43.446)

Yeah. 

 

Jim Grubman (20:47.842)

When I talk with somebody who expresses concern about their children and grandchildren, and that they're not quite sure what to do and that they think they need to lock it down or do something, I don't take a frontal approach and say, well, actually, you're thinking is really old and it's a lot better than you think. What I say is, I agree. 

 

Jim Grubman (21:16.322)

that actually it sounds like you see risk in what's going on with the family and you see risk in some of the ideas of having, for example, family meetings, more communication, teaching them about the wealth. That actually it sounds like you see a lot of risk in that. And what happens next is the most important thing because 

 

Jim Grubman (21:44.136)

Usually they'll say, absolutely. 

 

Jim Grubman (21:48.814)

So notice it's like, I don't contest the risk, because actually there is risk, it's legitimate. And so they say, yeah, I mean, there's a lot of risk to this and I just don't think it's a good idea. I will then say, I agree there is risk. I have some ways of handling that risk that may be a little different than what you're doing. Would you like to hear about? 

 

Jim Grubman (22:20.266)

And what I then do is watch and listen, because it's an assessment of the degree to which somebody is open or closed. If they say, okay, yeah, like what is it? What do you do about it that I haven't heard about or whatever? If they say, no, I'm good. Like, yeah, I'm pretty comfortable with what we're doing. And I think we'll just keep doing it. 

 

Jim Grubman (22:50.006)

I don't go any further because that tells me they have no interest in hearing it anymore. They are completely closed and I'm wasting my breath and potentially damaging the relationship if I just go in head to head with them and say, no, you really got to hear this and you're wrong and whatever. And so think of these things. I agree there is risk because that's what they're focused on. 

 

Michael Palumbos (23:16.6)

Right. 

 

Jim Grubman (23:18.452)

I ask if they're interested in hearing how to handle the risk other than what they're doing, the method. If they express interest, we then start talking and I tell them about the bogus research and many other sort of things. And I watched to see, you know, is the light bulb going on, but to go head to head with somebody who is pretty convinced they know the story and that what they're doing is good. 

 

Jim Grubman (23:48.91)

Don't even waste your breath. 

 

Michael Palumbos (23:51.2)

1. That well that makes all the sense in the world. I 

 

Michael Palumbos (23:56.398)

To my detriment. want to help everybody. And that's that becomes you know that becomes the the problem and the way I got the way I got involved and met Jay who then introduced me to John a and all of this stuff when you know and I was at the very first rendezvous in the. 

 

Jim Grubman (24:01.486)

Yeah, no, that's not gonna work. 

 

Michael Palumbos (24:21.762)

reason why that happened is I had a family where we technically did all the right things for the family cottage. We set up the trust. We put the pieces together, except Michael never in involved the next generation to say, what do you want? Yes. And there was the mom and dad remembered and all the grandkids remembered every single wonderful memory that was created at this cottage through the years. 

 

Michael Palumbos (24:51.32)

but the evolution of the family had changed. And it's now for them to monitor and keep that cottage would have been a lot of work on one of the family members and it wouldn't have been shared. And that's the difference. And had I asked those questions, when that happened and the trust got dissolved three months after mom and dad both passed, I questioned everything. And that's when I read Jay's book. And then I reached out to Ann to say, 

 

Michael Palumbos (25:20.366)

Ann was his assistant and I'm like, what did I do wrong? And he's like, you didn't do anything wrong. It's just time to evolve how you do things. 

 

Jim Grubman (25:31.443)

It's funny, you just used one of the most important words. You said evolve. 

 

Jim Grubman (25:39.412)

And you evolved your approach. And from my perspective, that's the most important element, evolution and adaptation for families. You mentioned Word and, know, Jay often talks about entropy and families and stuff. I have a different view that to me, there's a natural history and a developmental arc of families across generations. 

 

Jim Grubman (26:08.556)

that is actually of evolution and change, which is normal and natural. And depending upon what the family does, different outcomes occur. You have a book on your shelf behind you there, Wealth of Wisdom. And I contributed chapters to both the first one and then the second one. And many people have heard me talk about the three questions of adaptation that 

 

Jim Grubman (26:36.736)

are relevant to our conversation now. Because the idea like that cottage. 

 

Jim Grubman (26:44.726)

You can do damage in two different ways. It's almost like a U-shaped curve. You can cling to it, codify it, lock it down, force the family to maintain it as you said, the way the family will stay together long after its utility and it's a problem. And actually that will cause damage to the family. You can also not do anything about it and let it go and the family will lose some of the good things. 

 

Jim Grubman (27:13.834)

that having a shared family residence or place could do and that they don't replace it with anything. That can cause damage. The three questions of adaptation I find really help families think through this. The three questions are number one, what from your heritage should you keep or might you keep? 

 

Jim Grubman (27:41.954)

but still serves you well, all right? Number two, what from your heritage no longer serves you or the family that you might let go of. And the third one is actually incredibly important, which is what from your current circumstances might you learn that will help you going forward? What to keep? 

 

Jim Grubman (28:11.266)

what to let go of and what to take on. 

 

Michael Palumbos (28:15.694)

It's so funny. So a lot of my growth in this industry, and I would say my clients were not typically ultra high net worth originally. that's it. That it's just grown into that probably over the last five, six years. But in the beginning, it was mom and pop, you know, the millionaire next door kind of practice and what we doing. 

 

Michael Palumbos (28:41.486)

But I still wanted to bring this data and these ideas to them. In 2011 or 12, I started this interest in business coaching. And in 2016, a family said, what served in Fed and took care of the lifestyle for three households is not gonna be able to do the same thing for six or eight households. 

 

Jim Grubman (29:10.862)

right? 

 

Michael Palumbos (29:11.502)

What 

 

Michael Palumbos (29:11.802)

are we going to do? And so I got very interested in growth strategy work at that time. I'll share you where I'm going. That business today, they're 8X where they were in 2016. Here we are, 2026. They went from $10 million to almost $80 million right now of revenue. And it's doing exactly what we wanted to. 

 

Michael Palumbos (29:40.724)

in when you're doing business work, if people took the work of great business, know, good to great and all of the things of building culture and building leadership teams and those things. it's, start, you know, every year when I do strategy work, it's like, what do we need to stop doing that we, you know, that we need to be doing? What do we need to keep doing? And what do we need to start doing? You know, 

 

Jim Grubman (30:06.03)

Here 

 

Jim Grubman (30:06.292)

you go. The same two questions. Yeah. 

 

Michael Palumbos (30:09.37)

And it's really interesting the great businesses that survive and thrive, regardless of whether they're public or private. It's those same families that are doing the same things that were, they did them for the business. It was easy to do for the business. It's not as easy because nobody else is doing it. And I'm air quoting right now. 

 

Michael Palumbos (30:35.35)

Well, they don't know, they only know the people that aren't they only know the 70 % failure rate and that's the that is the the curve you're trying to change. That's that trajectory you're trying to change. 

 

Jim Grubman (30:49.108)

And you make actually a great point there, which is the patriarch who actually may understand adaptation in a business, but does not have as much emotional intelligence and understanding of family dynamics, parenting, other things like that, does not understand, they think more statically about the family and dynamically about the business. 

 

Jim Grubman (31:15.948)

But a business that doesn't go through those three questions and changes also can get into trouble. All we're saying is, you you need to realize the same issues apply to the family. to, again, a lot of pay tracks will focus on what we've been doing, we're going to keep. I can't think of a single thing that we need to let go because it really has been successful and it's what got us here. And what do we need to learn or take on? not much. 

 

Michael Palumbos (31:41.037)

Yep. 

 

Jim Grubman (31:45.486)

You know, I think we're good. And so lo and behold, then bad things happen within the family. And it's the families getting together and to kind of take this to the next step. You know, this is where having skills that that G1 patriarch and, know, and matriarch may not have had around. Well, how do you talk about wealth in the family? A lot of them will say 

 

Michael Palumbos (31:53.293)

Yeah. 

 

Jim Grubman (32:15.182)

I don't know, or you don't. How do you prepare people and educate them? Well, I've never seen that happen. And again, that ship sailed a long time ago. I hear that a lot. My kids are 33. Somebody will say, you know, they are what they are. They think of financial acumen as personality. And I've had patriarchs say, hey, nobody taught me this or that. learned, you know, my kids have been around me. 

 

Jim Grubman (32:43.648)

all their lives, they should know what to do. And it's like, so there's a lot of sort of wrongheaded ideas about the family side. And lo and behold, those are the operative things that lead to struggle. 

 

Michael Palumbos (33:00.05)

Yeah, you're, know, in looking at Wealth 3.0, it's the filter to change, the filter for, you know, that growth comes from what would you, know, what does the family have to, you know, drill in on and focus on first? 

 

Michael Palumbos (33:21.162)

in order to make that shift, to make that growth pattern. I think you talk about it. I'd love for you to talk about that a little bit is where should my focus be? I'm getting ready for transition. We're going from G2 to G3. We've been really successful, but the family is cracking and things are happening that I'm not comfortable with and I'm a little nervous. 

 

Michael Palumbos (33:47.266)

Where should my focus be if I'm the person that's leading in generation two right now? Dad's gone, mom and dad are gone, they built the business, we're here and I'm feeling the cracks but we're hopeful for the future. What's my focus? 

 

Jim Grubman (34:03.2)

The focus is on learning and learning and the concept of preparation. A lot of people don't understand that being prepared for wealth and generational transition is an active process. It's not a passive process. And let's take a tangent for a second here. Sure. You know, 

 

Jim Grubman (34:29.742)

You know my first book, Strangers in Paradise, the work that Dennis Jaffe and I did on developing this metaphor about actually how most people in G1 who come to wealth are immigrants to the proverbial land of wealth. They started off in middle class or working class or poverty levels, socioeconomic culture, and now they find themselves in a very different culture of socioeconomic status. 

 

Jim Grubman (34:59.47)

In G2 and G3, they are more natives of the land of wealth. This is the land of their birth. This immigrants and natives metaphor is a very sticky idea and eliminates, but the relevance of it is a funny perspective, which is something I've often said, which is most people really don't know how to be wealthy. That they may have been successful. 

 

Jim Grubman (35:28.642)

and they may have a lot of money, but nobody ever sat them down and said, you you're about to migrate to this new culture. Let me explain the language and the things that you need to, again, the things you need to take on and learn that you do not yet know. Everybody thinks that, you know, they're gonna make the journey and they have everything that they need from how they grew up. 

 

Jim Grubman (35:53.686)

So the idea that by the time you get to G2, the family, if they have not had communication, preparation, education, other sorts of things, they're unprepared and have not done a lot of the things that are necessary for the G2, G3 transition. I once worked with a family, you'll love this one. I once worked with a family. 

 

Jim Grubman (36:22.606)

And the conversation with grown-up G2s and their elderly G1s thinking at the up-and-coming G3s was basically the lines of, well, we need to be setting up talking about things in the family more and whatever. And the G1s said, why? Like, you you grew up with us. You saw the wealth in the family. 

 

Jim Grubman (36:52.608)

We made the transition from us to you pretty well. Like what else is there? And one really sharp woman in G2, one of the daughters said, look, if you're riding in a car on a long trip as a passenger, you may see the countryside going by, but if you're not the driver, you're not making the decisions. I was a passive observer. You were in the driver's seat. 

 

Michael Palumbos (37:22.222)

Yeah. 

 

Jim Grubman (37:23.05)

Now I'm in the driver's seat, but nobody ever taught me how to drive the car. So just because I was along for the ride doesn't mean I know how to do this. Right. And it was a great image for the family that just because you're present for a transition doesn't mean you know how to do it or to basically drive on a whole new road that has different characteristics for G2 to G3. 

 

Michael Palumbos (37:49.73)

Yeah. And the other piece, you I always go back to the people is that, you know, if there was three siblings or five siblings that grew up under mom and dad's roof, they grew up under the same values. They grew up watching exactly the same thing. And even those five had different perspectives of what they saw. 

 

Michael Palumbos (38:11.338)

So when by the time you go to G3 and you're bringing spouses in and all this stuff, we have so many different people and players and value systems and purposes in life that if we don't start thinking about, of course it's going to be different and we have to take each one as it is. 

 

Jim Grubman (38:29.294)

Right. And if we spin out the metaphor and the world changes, you know, a different road, the conditions, the environment that you're trying to do with. And then there's the aspect of genetics and nature and personality. I know you have children. I do, too. Ironically, there's a lot of very well-founded research that says actually more of how people turn out 

 

Jim Grubman (38:58.974)

is what they're born with for personality and actually less about parenting, which has parents, you know, I cringe just as you did. You know, we think we have great influence, but, you know, this goes back to the idea that people, the families need to understand there has to be adaptation. You have a different set of people in a different set of circumstances. The world is different. 

 

Jim Grubman (39:26.03)

The mix is different. As you said, a major factor is you have different people in the family from spouses and partners. People have different life experiences. They are parenting the G3s who are, again, new different people. And the idea that somehow you just replicate it and it'll go fine is not founded in fact. 

 

Michael Palumbos (39:50.434)

Yeah. So let me just kind of not wrap things up, but I would just want to where we are right now, because I want to go someplace that I think is really meaningful. We talked about before. So we talked about wealth 1.0 to 2.0 to 3.0. We talked about being curious. We talked about the evolutions of families and the we talked about the three, the three questions of adaptation and all of these things. 

 

Jim Grubman (40:01.262)

record it. 

 

Michael Palumbos (40:20.118)

I think that the road is different today than it was. And then a lot of the research and a lot of the work was debunked. And even though we have these stories, because the story is in every culture. Shirt sleeves to shirt sleeves, rice paddy to rice paddy, from stalls to stars to stalls. But it's a story. It's a parable. It is not fact. 

 

Jim Grubman (40:49.786)

Can I interrupt you on here? There's another aspect and it was funny. This happened while we were writing the book on Well 3.0. I was working on the chapter about shirt sleeves to shirt sleeves. And I looked at it and I had an insight. I never realized about it when I saw it on paper. And it led to talking about this in the book. So what is the adage? 

 

Jim Grubman (41:19.746)

Repeat it again. 

 

Michael Palumbos (41:21.696)

shirt sleeves to shirt sleeves in three generations. 

 

Jim Grubman (41:24.78)

That's great. Okay. What is missing in what you just said? 

 

Michael Palumbos (41:36.59)

Tell me, I'm dying. 

 

Jim Grubman (41:37.902)

There is no verb. It's a clause. It's a sentence fragment. 

 

Jim Grubman (41:46.708)

everything about it that is its power is actually unspoken. Because let me tell you different variations on that. If I said to you, and again, we write about this in the book, if I said to you, know, sure sleeves to shirt sleeves in three generations has occasionally happened to some families. All right, that I make it a full sentence and I finished that. 

 

Michael Palumbos (42:13.314)

so much more powerful. 

 

Jim Grubman (42:14.85)

That if I say to you, but you know, sure seems to sure sleeves in three generations always happens and it's going to happen to your family. That's a different sentence. 

 

Michael Palumbos (42:24.514)

Yes. 

 

Jim Grubman (42:26.51)

that a lot of the, what does that mean? Actually is never spoken. And I realized it's in it being incomplete. It leaves the room to fill in the blank and imply it's a given, it's inevitable. And maybe as we say, maybe you can avoid the curse of it, but actually it's incomplete. 

 

Michael Palumbos (42:51.928)

Yes. One day some archaeologist is going to find a book someplace that says from shirt sleeves to shirt sleeves in three generations could happen to your family too if you don't evolve. 

 

Jim Grubman (43:03.414)

Yes, 

 

Jim Grubman (43:03.975)

actually, you know, humorously, I think we're going to find the hieroglyphics that said the real sentences from Church sleeves, the Church sleeves in three generations is something that is totally bogus. 

 

Michael Palumbos (43:15.214)

Hahaha 

 

Jim Grubman (43:18.318)

That may be the reality of it. 

 

Jim Grubman (43:22.85)

Anyway, your point that the idea of there's a lot of things that we need to move beyond and realize that have told a story that is very powerful, but that story is getting old. And if I were working, say, with you and your family stuff, I would say, what is the story in your family? What is the real story of you and your family, whatever? 

 

Jim Grubman (43:51.342)

And in terms of technique, this is where working with advisors and also with families, I will actually get curious and say, so tell me about each of your four children and what you already have tried to do, what you have done for each one of them. Think of one thing that they did, a phrase, something that they said, 

 

Jim Grubman (44:21.24)

something that you admire where you were impressed that they handled money well. Just one thing. And it's funny how often people will stop and think and come up with something. This goes back to, you you can be worried about wealth impact in the family, but actually what is the evidence for it? And are there sort of, as we say, green shoots of 

 

Michael Palumbos (44:35.16)

Yeah. 

 

Jim Grubman (44:50.296)

financial skills where with a little bit of prompting, you'll remember that actually in some ways they're still doing okay. In fact, maybe doing well. 

 

Michael Palumbos (45:00.078)

Yeah. Let's talk about parenting around this arena. And I have a segue into, I wrote this in 2011 in my book, 2012, whatever it was. And it was, I called it the parent transition. And, and it was just the, that came from conversations and listening to all of you as I was soaking in all of these different things. like, oh, from a parent. 

 

Michael Palumbos (45:29.952)

transition piece. When the child is of a certain age and the ages are irrelevant, it's different for every kid, they need a parent. They need somebody that's going to grab them and keep them from going into the road when there's cars coming down the street. They need somebody to yell at them at the right times, at the right moments. They need somebody to encourage them and love them and hug them when they're crying. They need a parent. Somewhere along the lines, the transition 

 

Michael Palumbos (45:56.302)

has to, for the parent more so than the child, has to go from parenting to mentoring or coaching. And that is different for every single child. It's not an age-bound thing, it's a skills-bound thing, and it's awareness-bound thing. And then here's the part that I think that so many parents, many of them can make that shift, but then they never make the shift to colleague. 

 

Jim Grubman (46:04.492)

very much 

 

Michael Palumbos (46:24.364)

And I think that it's so important that you will always be their parent biologically. But once they become adults, you better learn how to make that transition to colleagues because they are their own person. And if you don't get curious about who they are and what they want and how they feel about things, you will get stuck. And I laugh, my favorite line of my mother-in-law is when she called up to tell my wife who she should vote for. 

 

Jim Grubman (46:53.454)

Ugh. 

 

Michael Palumbos (46:54.254)

And I use that because it's just so simple. Of course, you're going to vote for this person. Your daughter's 45 when you're still saying these things, it's like, oh my goodness, you know, there's zero curiosity and 100 % myopic, that's not the word I wanted to use, egocentric. 

 

Jim Grubman (47:01.42)

Yeah, really. 

 

Jim Grubman (47:18.872)

Yeah, yeah, yeah. You and I have a good relationship and I think I can be direct with you on something because I'm going to take you back about five minutes to the examples of what you said of parenting. And what I'm going to gently point out is that most of them, in a sense, were preventive and negative. 

 

Michael Palumbos (47:42.114)

Sure. 

 

Jim Grubman (47:48.472)

Move. Somebody going into traffic. Stopping them from doing something like that. know, that most of those examples that you gave were of you keeping them out of trouble or that they were going to make a mistake and do something and you save them from that and gave them advice and that that is what we identify as parenting. And believe me, you are not the only one who does that. I have been more than enough guilty because what I would say is 

 

Michael Palumbos (47:51.886)

Sure. 

 

Jim Grubman (48:17.398)

those who are able to make the transition to mentor and then to what you call colleague, know, also are with their kids and nudge them and say, you know, I got to tell you, I'm always really impressed at what a good head you have on your shoulders about making money decisions. you know, I just, watch you raising your own kids and I got to tell you, I think you're doing a great job. 

 

Jim Grubman (48:47.02)

The role of parent as person who praises and confirms and notices when somebody does something well and points it out. If you notice your kid does something well and you never say it, it's like buying them a gift and never giving it to them. And so in some ways that's sort of a wealth 3.0 thing, which is 

 

Jim Grubman (49:16.46)

Are you going to focus on the challenges, the difficulties, writing the mistakes, things like that? Or do you have a broad view that sometimes you need to do that? But a lot of your job is to notice when it goes well and to notice it and comment on it. Parents who are able to shift to, you know, I'm really proud of you. And that. 

 

Jim Grubman (49:46.976)

are able to cement the relationship and lay the groundwork for what you described accurately as the transition to mentor and the transition to friend and colleague. 

 

Michael Palumbos (50:01.038)

Yeah. So let's build on that. 

 

Michael Palumbos (50:06.306)

During that developmental time period and going through into the teen years and even early adulthood, and as you just said, for the rest of their life, your job is to find, that's a really, that one is a take to the bank kind of thing. Go and find all the good things that your kids are doing and make sure you tell them it doesn't matter. They still wanna hear it if they're 60. They still wanna hear it at 60. 

 

Jim Grubman (50:34.83)

Exactly. 

 

Jim Grubman (50:35.471)

And you have so much more credibility and so much more power. How often do we hear of people who say, you know, all I hear from my mother or my father or somebody is criticism. They never notice when I do something well. 

 

Jim Grubman (50:52.142)

And it's funny, you may know the literature on couples about the ratio of positive to negative interactions. Do know that literature that we 

 

Michael Palumbos (51:02.971)

Yes, yes. Share it. 

 

Jim Grubman (51:05.706)

Most people don't realize, you know, the Gottman people and the research that showed when they looked at couples that did well, to use Jay Hughes' term, flourished, had a ratio of positive to negative interactions during the course of a single day or whatever you want to do, that when that ratio dropped to a certain level, they knew the couple was in trouble. 

 

Jim Grubman (51:35.614)

You may know what that ratio or that bottom line threshold was. Do you remember what that is? Most, if I ask most people, they'll say, you mean when it drops down to, I don't know, like two to one, one to one or whatever, it's actually when it gets as low as five positive to one negative. That's the bottom line. Successful couples have 10 to one, 20 to one, 30 to one positive interactions. 

 

Michael Palumbos (51:40.013)

I don't. 

 

Michael Palumbos (51:57.495)

Wow. 

 

Jim Grubman (52:04.824)

to negative ones. They build a reserve in the relationship that they can draw from in the hard times. But just think of that. It's like, imagine if your interactions with your children had way more than five positive to one negative to those interactions, like what that would be like. Yeah. 

 

Michael Palumbos (52:29.73)

So when you think of the parents that you're talking to, especially, know, so when we don't have wealth, the only thing that we have is each other. Right. And so we build these positive, wonderful relationships and they're strengthened by the cousins and all the things that we do together. And, you know, and we remember all of those good times. Yes. When we have wealth, we get distracted. 

 

Jim Grubman (53:00.27)

If I may help you, yeah, no kind of way. 

 

Michael Palumbos (53:04.95)

Yes! 

 

Jim Grubman (53:07.104)

I would change slightly the language you're using, is you were speaking sort of 

 

Michael Palumbos (53:12.206)

It 

 

Michael Palumbos (53:13.15)

was absolute and then it is not. 

 

Jim Grubman (53:15.598)

Again, sure Steve, it's sure Steve. It's like we can get distracted. We may not be paying attention to that. would stop and leave room for possibility. 

 

Michael Palumbos (53:19.809)

else. 

 

Michael Palumbos (53:26.478)

I'm laughing at myself folks because you know, I know this, but it's nice to have, you know what, I'm just gonna have, I'm gonna hire you for the next five years. Just follow me to make sure. No, I will just continue reading this. Dealing with helping the kids, know, Carol Dweck did the research on growth mindset versus a. 

 

Jim Grubman (53:31.266)

You know this. 

 

Jim Grubman (53:52.6)

Well, not. 

 

Michael Palumbos (53:54.358)

Not, not growth mindset. Yes. Fixed fixed mindset. And I, in, as we're talking and you're talking about the, the 10 positives to one negative, if you're developing your child, I, I feel that it's like, 

 

Michael Palumbos (54:11.928)

how do we help the children, like you said, they're born with their personality at some levels. There's research that proves that. But how do we, I think the biggest job that we could help do as a parent then is to help our child build a growth mindset so that when the family needs to evolve in the future, they have the ability to do that. If they come into this with a fixed mindset, it's gonna be really hard. It's hard to. 

 

Jim Grubman (54:40.236)

Well, it's very true. And this is often why actually what happens with families, sort of the hidden dirty little secret about wealth is it's mostly about parenting. And, you know, people struggle with parenting. Parenting is hard under the best of circumstances. But there's nothing really different of this going back to the immigrants and natives analogy. 

 

Jim Grubman (55:04.61)

Parenting is hard no matter what. And if you grow up with under parenting in middle-class life, you're going to carry that forward. Can parenting change and be adapted when people become wealthy, to the culture and world of wealth? It's the fact that people don't know how to adapt parenting to wealth. They may think it doesn't need to be adapted. 

 

Jim Grubman (55:31.416)

We're going to raise him as middle-class kids and that because that's how I turned out. And that's the only way that people turn out well, even though we have ample evidence that not that's not the case. It's again, those three questions of adaptation very strongly apply to parenting. What are we going to keep that is the core of good parenting, like positive noticing, praise, discipline, know, gratitude? What do we let go of? 

 

Jim Grubman (56:01.72)

that was from a time and a place that no longer exists in this family's life, that was parenting in a whole other economic culture. And what do we learn and take on for how you parent when you have $120 million that we do not know? It's the same thing, that parenting and its adaptations in a mindful way. I'm thinking here of... 

 

Jim Grubman (56:31.424)

one family I worked with, and they were now in G3. They were doing pretty well. They're having some struggles with the G4s. And one of the things that I asked the parents, because actually I was dealing with groups of parents, many several branches. I said, like, when your child comes to you, because they also had a famous name, your child comes to you from school and says, 

 

Jim Grubman (57:00.642)

Are we rich? What do you say? And to a person, even though they were already in G3, they said, I have no idea. I never know how to answer that. It has happened. And I hemmed and hawed and stammered and said, well, you know, we're okay. You know, the lie about we are comfortable. Air quotes again. 

 

Jim Grubman (57:28.842)

They had no idea to handle one of the most basic questions of parenting with wealth. And we worked on that. And it actually became a nugget around which they started to feel more empowered to deal with wealth directly. They were parented by people who said, you do not talk about wealth. Don't act wealthy. Don't think of yourselves as better because you're wealthy. Just shut it down. 

 

Jim Grubman (57:56.024)

you know, and all the terrible things we say, like kids says, are we rich? And somebody says, you know, I am, you're not. And they think that's a clever thing. And it's actually incredibly punishing. They just, they did not know how to handle one of the most fundamental questions. So anyway, we've, we've talked about a lot of different things. It's the idea of, you know, families do well when they're open to adaptation. 

 

Jim Grubman (58:25.966)

constantly, continually. In particular, parenting with wealth is an area that you need constant adaptation for. And so you need to seek out people who can help you do that. 

 

Michael Palumbos (58:28.504)

Yeah. 

 

Michael Palumbos (58:42.026)

And then hopefully somewhere before you fully retire, that'll be one of your next books to work on. 

 

Jim Grubman (58:49.23)

Actually, 

 

Jim Grubman (58:49.81)

I am already thinking ahead and my next book actually, I have to do a second edition update of Strangers in Paradise. That was in 2013 and it actually has a couple of little, well, 2.0 sections in it I gotta extract. But yes, my next book, hopefully, God willing, is on parenting in paradise and the things that we are talking about here. 

 

Michael Palumbos (59:17.614)

I it. I love it. if you want more information, make sure you grab Wealth 3.0. Jim Grubman joined us today, and it's just been a fabulous, very rich conversation. So glad we got to have this. Thank you. Thank you, everybody, for listening. Again, I'm Michael Palumbos, Family Wealth and Legacy in Rochester, New York, and you've been listening to the Family Biz Show. 

 

Jim Grubman (59:33.198)

Finally, me and my god, yeah. 

 

Michael Palumbos (59:45.62)

hit that button so that you can subscribe and listen in on other episodes in the future. Thanks everybody. Have a great day.