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So, You’re Financially Secure. Now What?

Dr. James Grubman, Financially Secure

With Dr. James Grubman, Wealth Counselor, Author of Strangers in Paradise: How Families Adapt to Wealth Across Generations

Dr. James Grubman is an internationally-recognized consultant, speaker, and educator in the field of family wealth psychology. His book, Strangers in Paradise: How Families Adapt to Wealth Across Generations, is a look inside the singular interplay of culture and wealth.

The book helps financially secure individuals share their wealth with loved ones.

Defining “Wealthy”

Being wealthy in the U.S. means a few different things.  For one, there are self-made high-earning professionals or very successful business people with assets of $10 million or more.  This puts them in the Top 1% of all Americans.  Others marry into wealth, inherit it, or have a windfall through a lottery.

Immigrant Journeys From Scarcity To Wealth

In his book, Jim lays special emphasis on immigrants’ journeys from scarcity in their native countries, to building up wealth and becoming financially secure in the U.S.  An estimated 75% of wealthy Americans were born and raised in scarce circumstances and built up wealth in their lifetimes.  These journeys involve socio-economic and cultural shifts.

For example, immigrants raised in poor communist or socialist countries faced very different socio-economic environments relative to America.  Immigrant transitions often reflect a change from doing what’s necessary to survive to having the opportunity to thrive.

Reactions To Change

When faced with socio-economic change, people react in different ways.

Many immigrants want to hang on to their old worlds and recreate them in the U.S.  For instance, an immigrant from Greece might continue to eat Greek food, speak the language at home, and surround himself with fellow Greek immigrants.  They avoid openly embracing the cultures and traditions of the U.S.

Immigrants also worry about their children losing core values from the old country.  These values include hard work, an emphasis on savings, respect for the elderly, social modesty, etc.  They recognize that their children are growing up in a very different environment and aren’t always sure on how best to raise them.

Rushing To Assimilate

Jim Grubman points to the other type of immigrant who quickly wants to put the old country behind him.  These quick adapters lose themselves in the new world.  They often become very materialistic and rapidly leave behind their middle-class grounding and good values.

Jim Grubman believes these early adapters are as short-sighted as those taking an avoidance approach.

Middle Of The Road Works Best

He advocates a middle-of-the-road approach with acceptance of the new society and a retention of old-world values.  These values include risk tolerance and the ability to persevere under difficult circumstances.

Affluent Parenting Is Not Easy

In his book, Strangers in Paradise: How Families Adapt to Wealth Across Generations, Jim Grubman notes that parenting gets more difficult as you become rich.

To succeed and raise well-behaved children, affluent parents must inculcate strong values in future generations.

The path to good parenting starts with understanding oneself and being a role model.  Parents can use everyday decisions to guide their children on how to value things and do what’s necessary to grow wealth.

Marrying Into Wealth

Similarly, when someone marries into wealth from a lower economic background, they need guidance on how to adapt to wealth.  Such marriages are sometimes viewed with a jaundiced eye because the incoming member hasn’t really worked for that wealth.  This can cause problems.

Instead, Jim recommends welcoming the in-law with appropriate safeguards, educating them on the family’s journey from lesser means to wealth, and emphasizing their core values.  The goal is to create respect for wealth and recognition of its value.  This way, newcomers do not waste wealth but safeguard it and look for ways to grow it.

Having wealth comes with a responsibility to future generations, whose lifestyle will be vastly different from the one before. Families who are educated in this regard will be more successful in holding on to the legacy and to the true riches that having money can make possible.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz:  Sometimes an idea comes along that takes the things you already know, organizes them in a brilliant way, which then gives you a new perspective and wisdom about the world around you.  For me, one such book is, Strangers in Paradise: How Families Adapt to Wealth Across Generations and was written by my next guest Dr. James Grubman.  Hey, Jim.  Welcome to the show.

Dr. James Grubman: Glad to be here.

Steve Pomeranz: Before we get started we’re going to talk about people who have accumulated some wealth.  I’d like to get an idea of what that means.  What does it mean to be a wealthy person?  Or in the vernacular a rich person?

Dr. James Grubman: I think it means a couple of different things.  One is there are those people who become very successful and, either as high earning professionals or very successful business people, develop a level of assets that put them in the 1% which is, in America, having about $10 million or above.  Certainly, there are people that have quite a bit more than that.  For some people, even coming from a difficult background, being able to get to $1 million or $5 million is quite affluent.

Steve Pomeranz: Yeah. That’s quite an accomplishment.

Dr. James Grubman: Others marry into wealth or have a windfall through the lottery.  Basically, somebody who significantly rises above the economic level of how they were raised.

Steve Pomeranz: One thing that I really like about your book is that you describe this in terms of an immigrant’s journey.  This journey, let’s say, from scarcity to wealth—however you define it.  Take us through this idea that it is an immigrant’s journey.

Dr. James Grubman: Steve, multiple surveys over many decades in the US actually indicate that 75-80% of those with wealth were born and raised in more scarce adverse circumstances.  The ranks of the wealthy really consist of people streaming in in various ways.  Only a few are really born in those circumstances.  About a decade ago my colleague, Dr. Dennis Jaffey and I realized that wealth is, in a sense, a land of immigrants.  In terms of being raised in one economic culture, but now they’re living in another, much better economic culture.

Steve Pomeranz: So you can then continue this analogy to say you have the pioneers, you have the people who marry into the pioneer families, and we’ll get into some of the other aspects of the people who have made this change.  But instead of it being a change in geographic location—which is how we normally think of an immigrant—it’s a change in social movement and also in an ability to do the things you want to do versus doing the things you have to do just to survive.  You use an example of the Greek immigrant or any immigrant from a country who comes over, and many immigrants have certain patterns in the way they act.  Tell us about that.

Dr. James Grubman: Sure.  The core issue is culture.  We often think of money related to class, but the underlying element that I address is, think of economic status as a culture.  If you’re born and raised in middle-class culture or even working-class culture, living with affluence is a very different culture.  Not unlike somebody who is born and raised in Greece with all the cultural elements of that.  What they experience when they move to America and have to adapt to living in a very different culture.

Steve Pomeranz: How do some of them actually react to that?  Give us the range of the ways people deal with these changes.

Dr. James Grubman: Well, what’s interesting is cross-cultural psychology guides the way for us on this.  We know that there are people who try to handle the blend of their heritage culture compared to the new circumstances by pretty much avoiding making any adjustment.  Continuing our example here, it would be like the Greeks who come to America, but they continue to maintain the home with all the trappings of what it looks like back in the old country: eat Greek food, speak the language.  They really don’t make much adjustment to the new circumstances.  Those are the avoiders.  There are people who become wealthy who actually take much of the same approach.

They consider themselves to be middle class, now and forever.  Their identity is middle class.  They actually see acting like the rich as very toxic.

Steve Pomeranz: Yeah. What about the other concern of an immigrant worrying about their children now in a new country; let’s say it’s America, adapting all of the different aspects of the culture, both positive and negative.  They see perhaps these children are losing these core values that were developed in the old country.  Do those who immigrate to wealth look at their children and have the same concerns?

Dr. James Grubman: Absolutely.  That was one of the core insights that Dennis and I had.  Those people who become wealthy have, in a sense, the same dilemma of the immigrant parent, which is how do I raise my child and then our grandchildren in a culture that I did not grow up in?  That’s what I, as a wealth psychologist, have heard over and over again with the families that I have dealt with.  They recognize their children are growing up in an environment very different from what they grew up in, and they are bewildered on how best to do it so their kids turn out well.

Steve Pomeranz: So you have the immigrant, as you mentioned, that holds back, that avoids the new culture.  Then you have the immigrant that jumps in with both feet and wants to put the old country behind them.  What would be an analogy with regards to that type of immigrant to the immigrant who has obtained wealth?

Dr. James Grubman: Interestingly, that’s what general society, movies, and TV tend to portray about what happens when people become rich.  They provide the stereotype we all know of.  Kind of like from Wall Street, the movie, or something like that, The Great Gatsby.  People lose themselves and become very materialistic, and rapidly leave behind their grounding and the good values, which actually are part of middle-class life.  In a sense, those are people who are so quick to assimilate into the new culture that they leave behind all vestiges of where they came from.  That’s as short-sighted as taking an avoidance approach.

Steve Pomeranz: So kind of a middle of the road approach where there’s acceptance to the new society plus a foot back in the old society to keep those old values is important.  What kind of characteristics …  Here’s what I’ve often thought this idea that you have of an immigrant with just the clothes on his or her back and poor as church mice.  Let’s say this is in the early 20th century, and they get on a boat and they come to America.  We all know that picture of them coming in and seeing the Statue of Liberty.  All they really have is the hope of a better life.  I think sometimes what kind of people were these to take these kinds of risks?  Discuss that a little bit.

Dr. James Grubman: You put your finger on something that, again, is really intriguing from the research of cross-cultural psychology and the research on what we know about entrepreneurs.  In a sense, those people who set out to become much more successful from often some pretty adverse circumstances.  I can think of one client I knew, in particular, a patriarch and a very successful family business, who grew up in poverty.  He actually has many of the characteristics that we identify, like with those people who make it to Ellis Island, and came to America and did well—a capacity to understand and tolerate risk, the ability to persevere under difficult circumstances.  Often they’re very strong-minded and strong-willed, which unfortunately later can sometimes backfire in trying to run the family.  There actually are many similarities between immigrants who set out, who come to a new land more successfully, and entrepreneurs.

Steve Pomeranz: My guest is Dr. James Grubman.  The book is, Strangers in Paradise: How Families Adapt to Wealth Across Generations.  Jim, when a person arrives at this place of wealth, there’s no welcome wagon.  There’s no literature or way for them to figure out what to do now, how to act, and how to rethink their status in this new country.  Is that right?

Dr. James Grubman: That’s very true.  Yes.

Steve Pomeranz: Tell us how this manifests itself with the person who’s got some newly attained wealth.

Dr. James Grubman: This is where we often hear, and the real reasoning behind the proverb, “Shirt sleeves to shirt sleeves in three generations”.

Steve Pomeranz: Yeah.

Dr. James Grubman: Which is that people are so focused on making the money and getting the demand of wealth that they are not really prepared necessarily, once they get there.  In particular, the issue of adapting parenting.  There are very real differences that need to occur because of the complexity of having wealth.  Being affluent, actually, people often think it makes parenting easier, but as Malcolm Gladwell quoted me in his recent book, David and Goliath, one of the things that parents often discover is that there are many complicated questions that arise in raising what you might think of as the natives in the land of wealth, the second and third generation.

Steve Pomeranz: Let’s talk about that for a minute.  As I was growing up and I would see affluent families, a child graduates from high school and gets a BMW, not anything that was particularly earned, but here’s a gift.  Around me in my own cultural neighborhood, so to speak, nobody got that type of thing.  It really felt like that type of person was being spoiled, but give us some context on that.

Dr. James Grubman: That’s a great example.  What I have found and sometimes what I do in counseling families is it’s not just about the BMW at age 18.  For many of the kids, it’s the fact that they have no responsibility for it, no skills for it, and no preparation for managing that asset.  I have actually seen it work out very well, including where kids sometimes get a good car, but the ones who are prepared by their parents during the teenage years to understand how to work towards contributing, what the insurance costs,  how to pay for upkeep, how to manage the loan.  Ironically, those 18-year olds who have a BMW do perfectly fine with it, but it’s because they have been prepared with skills, not just given it as an entitlement.

Steve Pomeranz: Really, the issue, as I see it is, first the parents really have to understand their own immigrant journey in order for them to get the perspective on their own lives.  Once you have that then you can turn around, and you can share that perspective with your children and make sure that you make the right decisions to guide them properly. But if you don’t understand your own situation and the challenges you face and their context,  how are you ever going to figure out the healthiest way to relay this to your children?

Dr. James Grubman: That’s exactly it.  You have to understand yourself and have some self-knowledge in order to know what to do for the subsequent generations.  We have to remember, every in-law who marries into a wealthy family from middle-class life, they are immigrants, too.  They need to be shown the ropes.  They need to learn what to do because it affects parenting as well.

Steve Pomeranz: Isn’t there some type of resistance at times from the pioneer immigrant family bringing in an in-law or someone from the outside thinking that somehow, “They haven’t really earned this money like we have.” What do you find in reality to be the case?

Dr. James Grubman: Ironically, I sometimes say, “In a land of wealth, there’s border patrol as well.” The original family is weary of new immigrants coming in, sometimes forgetting their own immigrant status originally forming a family.  Those families that are able to be welcoming and help educate the in-laws that come in, and to do it in an educated way, in a welcoming way, with appropriate safeguards, actually find that the relationships go much better in married life and the kids then benefit from that.

Steve Pomeranz: You’ve said it before, that these in-laws are also risk takers which is one of the characteristics of the so-called pioneers.  They have the ability to take risks, and they’ve developed skills, including the emotional skills in order to cope with their new life, and you’re saying that the in-law in some ways also shares these characteristics.

Dr. James Grubman: Some of them do.  Some of them legitimately don’t.  They’re marrying in and they haven’t developed those skills, but the stresses between, in a sense, a native of wealth marrying an in-law immigrant out of middle-class life.  Those are very significant stresses.  I can think of one recent set of clients I have where at age 28, a young man was asking me to help him and his soon-to-be bride who comes out of middle-class life to work with them around doing what you mentioned in the beginning, on becoming bi-cultural, being able to blend the two cultures, work out the differences, and then create consistent parenting, so that the marriage works out, and the kids turn out well.

Steve Pomeranz: This is important stuff.  The book is Strangers in Paradise: How Families Adapt to Wealth Across Generations.  The book is available, I suppose at Amazon and other outlets alike.  Is that correct?

Dr. James Grubman: Yes.  On Amazon in paperback and in Kindle version.

Steve Pomeranz: Okay.  More information can be found at the website JamesGrubman.com.  Jim thank you so much for sharing your time.  Great book.  Appreciate it.

Dr. James Grubman: Thank you.  Thank you for having me.