True Wealth: Transferring Your Values With Your Valuables

True Wealth: Transferring Your Values With Your Valuables

Q&A with Family Meeting and Dynamics Specialist, Emily Bouchard

LR: What got you started working with wealthy families?

EB: Honestly, a prayer. It was a month after 9/11 and I was plaintively asking from my heart what could I possibly  do to bring more peace into this world?  In that moment I  had a thought to create “cells of peace” across the country.   Having no idea what that would look like, I started where I could – with families.  At that time, I worked at an adoption  agency finding permanent homes for children in the foster care system. I also facilitated a couples’ group and a group for stepmothers.

I began writing about the day-to-day issues stepfamilies  face and launched a blended family coaching practice in 2003.  A year later I was referred to a company specializing in preparing heirs for wealth transitions in their families.  I  honestly didn’t even know this kind of work existed.  I studied the unique challenges faced by affluent families, and was  shocked to learn from the research of Roy Williams and Vic Preisser that wealth transfers fail 70% of the time, with the  money gone and with familial relationships in shambles. I  started working with my first family in 2004, and have found  this work to be the most challenging and fulfilling career  I could ever hope for – my prayer was truly answered! By bringing peace and harmony into the complex families I am honored to work with, I not only make a difference in their lives, but I also see the ripple effect in the lives of their employees, their communities, and their grantees.

LR:  Will you explain the concept of “True Wealth”?

EB: At Wealth Legacy Group, we draw from the wisdom of our mentor, James (Jay) E. Hughes, and his premise that a family flourishes when you nurture their intellectual,  human, social, spiritual and financial capital.

LR: Why do you think people need to consider their other “assets” beyond the financial ones when transferring wealth?

EB: We believe that when you use your financial capital in service of your other resources, you then have a truly rich life, where you thrive, while supporting others to thrive as  well.  The majority of financial wealth is often transferred in conjunection with a significant loss. If you only focus on the intellectual and financial sides of the equation, and ignore the human, social and spiritual sides, you are likely to experience a great deal of strife and conflict within a family system.  Considering all the facets of true wealth creates a life raft for the surviving family members to be secure and safe as they navigate that particular bend in their river.

LR: How do you extract values in a way that is most meaningful? What is the process?

EB: As you know from Dr. Bruce Feiler’s research that you featured in last month’s issue, the most powerful way to tap into a family’s values is through the use of storytelling. By the time a family heirloom or family  property has transferred to a third generation, the stories that went along with that purchase are long gone.  And often the burdens and challenges associated with those belongings overshadow any meaning that may still be attached to them.

We employ a variety of techniques to engage family members in researching, sharing, and capturing family stories and the values they teach.  In some instances we facilitate family members in sharing their favorite memories associated with whatever is most meaningful to them, such as: family holidays, family trips, a first major purchase, etc.

Related: The Question We Should Ask All Young People

We also invite them to look at the money messages and values that have been passed along generationally  that have had an impact on them, both positively and  negatively.  We ask them to think about the first time  they remember an experience related to money and to think about what messages they heard and what decisions ensued.  We first have them write these out  for themselves, as this can be quite personal. After  building an experience together of safety and trust, we facilitate a conversation with their family members  about these memories in a way that opens up greater understanding and connection.

Along with families, we also facilitate this process for confidential groups of women inheritors and women philanthropists, so that they can learn from each other’s stories. A wonderful outcome of this experience is that they often build a trusted community where they can  begin to explore their personal values as well as their familial values.

LR: Do you have any examples or case studies of people your approach has worked well for? 

EB: Oh, there are so many. One that comes to mind was of a family with an entrepreneurial widower with a daughter from a first marriage, four children from a second marriage, and a new wife and new step-daughter who was the age of a number of his grandchildren.  We were asked to work with them to repair a major breakdown in trust amongst some of the siblings, and between the second generation and their new stepmother.

We chose to have an empty chair in each of our meetings to represent the mother who had passed away  6 months earlier after an extended fight with cancer.   We wanted to presence her as much as possible, and we asked everyone there to share stories about her in relationship to the family’s “true wealth” – college trips and educational goals she had for her children and grandchildren, family and social gatherings that she hosted and what were her favorite parts of those events, her belief in God and how each family member experienced her spiritual side in meaningful ways, her approaches to skinned knees, bruised egos, and other human experiences, and her favorite idioms, phrases, and family stories about money.

The stepmother was present for these conversations and  got to hear, along with everyone else, what family values were deeply ingrained and present in the family she was now a part of.  We then shifted to her and asked that she  share memories and stories from her life related to the five  facets of true wealth and the family got to know her and what shaped her approach to life, love, and money.

From this place, we were able to explore past promises and expectations and how the estate plan and transition plan honored the original values of the deceased mother and living father.  And then we opened up new possibilities  for what this next stage in their father’s life could look like with his new wife, so that his children did not need to feel threatened, and he didn’t need to feel defended or offended by their concerns.

As this process unfolded, the older grandchildren who were present became curious about how their grandfather had made his money and how he came to own so many different businesses in three states.  The more they  learned, the more interested they became, and they requested the opportunity to go on a family road-trip to see the properties and film him telling his stories on site.   He loved the idea and the family worked together to plan out the trip and to determine the best methods of filming  and archiving his memories at each stop.

A few years later he was tragically killed in a plane crash and his family was so grateful that they chose to invest the time and energy and resources to not only capture all of his memories in that way, but more importantly, to create a trip of a lifetime that is by far their most cherished memory of all – having that quality time with him and everyone being together as they captured his values and his legacy for future generations he will never meet.

LR: What are the most common mistakes people make when transferring wealth? 

EB: With regards to this particular topic, the most  unfortunate mistakes occur when someone reads an article like this one and thinks that they can implement these ideas on their own, without professional facilitation.  This can often backfire and have disastrous results.

I’ll give you an example.  A father read a recommendation  in a book that he should ask his children what they wanted of his at the time of his passing.  He thought this was a  great idea and the next time his daughter was visiting he  put it into action.  He asked her to tell him, of all the things  he and her mother had, what did she really like and want.  She was very hesitant to say anything as she didn’t want to appear greedy, and, because she was afraid of possible repercussions. He encouraged her and let her know that he really wanted to know.  She chose in that moment to trust him and said that she always loved a hand carved nativity  scene her parents had brought back from South America when she was a little girl.  Her father immediately reacted,  yelling: “That’s impossible! You can’t want that! You aren’t religious! You never go to church!” and then told her to pick something else.

You can imagine how that went. She simply said he was right and that she didn’t want anything and that she was just kidding.

This happens all the time with the most well-intentioned  parents. They can see how important it is to be inclusive and to ask for the thoughts and stories and opinions of their loved ones, but they can often be less skillful in  how to cultivate authentic sharing. Most families operate  largely from what Patrick Lencioni, the author of The Five Dysfunctions of a Team, calls “artificial harmony”.  Over time we are trained to know where the electric fences are and, as a result, we do not feel safe opening up beyond those boundaries. Families benefit greatly from having a skilled facilitator to guide them through the process and to help them build skills to communicate openly and entrust each other with what matters most – their human capital.

For your readers who feel inspired to apply some of these ideas on their own, I caution them to start very slowly and to follow a few simple guidelines:

1. Start by sharing a positive memory first. 
2. Ask others to share a positive memory in the same vein. 
3. Stay curious and interested. 
4. Stay out of certainty, agreeing or disagreeing. 
5. Listen. Listen. Listen…and avoid interruptions. 
6. When they pause, simply ask them to tell you more. 
7. Thank them for being willing to share with you. 
8. If someone declines, don’t press them.

As a professional who facilitates conversations like these,  I still find it risky and challenging to apply these principles in my own family.  Luckily they are used to me continually  trying, and this past year we had a breakthrough success. After our Thanksgiving meal, there was a lull in the  conversation. I took a risk and shared how when I’d  recently been on a date, the gentleman asked me to share a story about something that I was most proud of in my life.  I told my family how I was taken aback at first, and  then shared the story of how my experience as an eighteen year old counselor at a summer camp for children with cancer had inspired me to major in child development. Looking back, I was proud of myself for creating my own  major and excelling at it.  I then asked my family if they’d be interested in sharing their memories of proud moments. To my delight, and to my father’s great satisfaction (and pride)  everyone did, including my two sisters-in-law from England and Germany.  We left that experience with everyone feeling closer and knowing something about each other that we wouldn’t have known otherwise.

For more articles on legacy planning, click here to subscribe to Legacy Arts Magazine.

Laura A. Roser
Life Transitions
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Laura A. Roser is the #1 expert in meaning legacy planning. She is the Founder and CEO of Paragon Road, a company that assists individuals in passing on their non-financial as ... Click for full bio

Multi-Factor or Not Multi-Factor? That Is the Question

Multi-Factor or Not Multi-Factor? That Is the Question

Written by: Chris Shuba, Helios Quantitative Research, LLC

Let’s pretend you are a US investor that wants to deploy some of your money overseas.  You think international developed market stocks are attractive relative to US stocks, and you also think the US dollar will decline over the period you intend to hold your investment.  Your investment decision is logical to you. But you have choices:  You could a) simply invest in a traditional index like the MSCI EAFE, b) invest in a fund that systematically emphasizes a single factor (like a value fund) that only buys specific stocks related to that factor, or c) invest in a developed fund that blends several factors together, like the JPMorgan Diversified Return International Equity ETF (JPIN).  What is the best choice? 

Investing in a traditional international market capitalization index like the MSCI EAFE is not a bad choice. It has delivered nice returns for a US investor, especially uncorrelated outperformance in the 1970s and 1980s, and helped to diversify a US-only portfolio.

Your second choice is to invest in one particular factor because it makes sense to you.  Sticking with the example of a value strategy, you might believe a fund or index that chooses the cheapest or most attractively valued stocks based on metrics like Price to Earnings (PE) is best.  

You could go find a discretionary portfolio manager who only buys stocks he deems to be cheap.  Typically the concept of “cheap” is based on some absolute metric that the manager has in mind, such as never buying a stock with a PE greater than 15.  If there are not enough stocks that are attractive, he will hold his money in cash until he finds the prudent bargains he seeks.  This prudence also obviously risks possible underperformance from being absent from the market.

The alternative is to buy a value index or fund that systematically only buys the cheapest stocks in a particular investment universe.  So if there are 1000 investable stocks available, the index ONLY buys the cheapest decile of 100 stocks and is always fully invested in the 100 securities that are relatively cheapest.  This is an investment approach that a discretionary manger may disdain.  The discretionary value manager may look at those same 100 stocks and think they are pricey.  But nevertheless, academic research has shown that always being fully invested in the relatively cheapest percentiles of stocks in the US has produced superior returns over many decades. 

Such a portfolio is called a “factor” portfolio.  Why the name?   In the early 1960s, academics introduced the concept of beta and demonstrated that individual US stocks had sensitivities to, and were driven by, movements in the broad market.  In the early 1990s, academic research began to show that other “factors” such as value and size also drove US stock returns.  Since then, several factors have been identified as driving individual stock outperformance: value, size, volatility, momentum and quality.  Stocks that are cheaper, smaller, less volatile, have more positive annual returns and higher profitability have historically outperformed their peers.  It turns out these factors also work internationally.

Related: Who Gets Sick When the U.S. Sneezes?

Of all the factors, value is the factor that has been the best known the longest (even before it was academically identified as a “factor”), thanks to the books of Warren Buffet’s teacher Ben Graham.   And if you look abroad at an array of developed global markets and create a value index and compare it to its simple market capitalization weighted brother, the historic outperformance of value has been stunning.  Until recently.  

While there was some variability by country, on average from the mid-1970s up until 2005 a value factor portfolio in a developed market outperformed its market cap weighted index by about 2% a year.  That’s a lot. By contrast, since 2005, the average developed country value portfolio has underperformed a market cap indexes by about -40 basis points.  Which is the danger of investing in one factor.  It may not always work at every point in time.

So if investing in one factor like value runs the risk of underperforming, how about a multi-factor international developed equity portfolio?

Below is a breakdown of individual factor portfolios’ performance in international developed equity markets since 2005, an equal weighted factor portfolio as well the performance of the MSCI EAFE as our performance reference.  Note that, for the last 13 years, value has been the poorest factor by far, while the others have handily beaten the EAFE.  An equal weighted portfolio of all 5 factors, while not as optimal as some of the individual factor results, beats the EAFE by 1.6% and has an information ratio, or risk adjusted returns that are superior by 37%.  The equal weighted factor portfolio also has the advantage of not having to predict which factor will work when, so even when a factor like value does not beat the market, the other factors can pick up the slack.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

The equal weighted factor portfolio has one other advantage over the market cap weighted alternative. Note in the chart below how well the portfolio outperformed in the 2008 crisis, so it tends to do relatively well in highly volatile sell offs.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

While it’s not inconceivable that one or two of these factors could erode, or underperform for a stretch, the fact that you have exposure to multiple factors in a portfolio that seems to do especially well in crises suggest the multi-factor blended portfolio remains the most attractive way to invest in developed markets.

So, when asked the question: Multi-factor or not multi-factor?  The data speaks for itself.

Learn more about alternative beta and our ETF capabilities here.

DEFINITIONS: Price to earnings (P/E) ratio:  The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings.

DISCLOSURES: MSCI EAFE Investable Market Index (IMI): The MSCI EAFE Investable Market Index (IMI), is an equity index which captures large, mid and small cap representation across Developed Markets countries* around the world, excluding the US and Canada. The index is based on the MSCI Global Investable Market Indexes (GIMI) Methodology—a comprehensive and consistent approach to index construction that allows for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations. This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investability and replicability. The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large, mid and small capitalization cutoff points are recalculated.

Investors should carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full  prospectuses contain this and other information about the ETF. Read the prospectus carefully before investing. Call 1-844-4JPM-ETF or visit to obtain a prospectus.
J.P. Morgan Asset Management
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio