One of the best books I read this past year is “Complete Family Wealth: Wealth as Well-Being” by James E. Hughes, Keith Whitaker, and Susan E. Massenzio.
The book contains lessons for wealthy families, aspirational families, and their advisors alike. Reading this book will not make you rich. But the concepts will make you richer.
Like materially richer, Morgan?
Maybe.
But remember the subtitle of the book - wealth as well-being.
This was, in fact, the proposal of my book, Money with Purpose: Receive the Dividends of an Undivided Financial Life. Our financial life is one aspect of our overall well-being. We ignore or compartmentalize it at our peril.
From Money with Purpose:
“This book does not presume that being a millionaire is a goal of yours. In fact, this book would argue that becoming a millionaire is not a goal at all. Rather, it may be a byproduct of purposeful living or a means to a more meaningful end.”
Similarly, being or becoming wealthy isn’t a goal. It also doesn’t offer any sense of meaningful purpose.
However, stewarding financial capital for the benefit and well-being of the next generation is a goal.
Do you see the difference?
Our financial lives are in service to well-being, not the other way around.
Let’s dig in. But first…
You can buy Complete Family Wealth here:
Also, please consider subscribing and sharing this newsletter with someone you think would benefit:
Qualitative Capital Versus Quantitative Capital
“Compete Family Wealth” is a big book full of BIG IDEAS. I’ll likely return to it in later posts, but today, I want to focus on an important distinction: Qualitative Wealth versus Quantitative Wealth.
Understanding the difference is the theme of this book.
In the late 20th century, when Family Wealth was published, its subtitle was Keeping It in the Family.
Many readers assumed that the "it" referred to money. After all, doesn't the proverb - "shirtsleeves to shirtsleeves in three generations" - refer to a family's economic condition?...
...But this conclusion is wrong.
The "it" is not money. It is the family's well-being. That is its true wealth. We encompass this well-being by speaking about "qualitative wealth" - the family's human, legacy, family relationship, structural, and social capital. This wealth as well-being is the goal, which the family's quantitative wealth, its financial capital rightly serves. ~ Page 9
And thus begins "Complete Family Wealth," the next iteration of the famous "Family Wealth: Keeping it in the Family."
This series of books is primarily written for wealthy families interested in conversations about legacy, giving, wealth transitions, inheritances, and other wealth dynamics.
If that includes you, and you know it includes you, then fantastic. That said, my extreme bias as a CERTIFIED FINANCIAL PLANNER™ professional is that more families at all different wealth levels must have conversations about legacy, giving, wealth transitions, inheritances, and other wealth dynamics.
In my view, these conversations are also a part of financial well-being. Talking about money with your loved ones is good. It is financially healthy.
As a result, in their specificity, the authors have fallen on timeless concepts that anyone with a financial life - all of us - can relate to and learn from.
Qualitative Capital
In the first chapter, the authors highlight the importance of seeing beyond money - financial wealth or quantitative capital- to a broader definition of qualitative wealth.
According to the authors, there are five types of Qualitative Wealth (See pages 11-13):
Human Capital
Human capital is people. It’s our skills, experience, work, personal well-being, and resilience. Martin Seligman would call this 'flourishing.'
Legacy Capital
"The family's core values and sense of shared purpose." The authors write that this can be considered the 'family brand' or 'sense of shared identity.'
Family Relational Capital
Families must be able to communicate and relate with one another. The authors cite the "ability to build strong interpersonal connections within the family" as a component of family relational capital. They don’t use the word, but I will insert the word ‘love’ here. Even if family members don’t always like each other in every moment, there must be shared bonds of love and healthy togetherness.
Structural Capital
For wealthy families, structural capital can mean navigating trusts, business entities, and other financial, legal, and tax elements. For all families, this can mean navigating the economic complexities of modern life with grace and confidence.
Social Capital
Families operate within broader communities, and “[c]ommitment to these communities gives families a strength that comes from serving something greater than themselves,” the authors write.
The family’s positive interactions with its community are its social capital.
Case Study
Let me use a generic example that shows the interaction of qualitative and quantitative capital.
Imagine Tim and Lisa inherit $100,000 after the death of a relative. Tim and Lisa own their own home and look forward to retirement in 10 years. At that time, they will have paid off their mortgage and have a pension and two social security checks to ably pay for their cash flow needs.
Tim and Lisa's only daughter, Lucy, will attend college next year.
Originally, Lucy was planning to attend a local community college for the first two years, but Tim and Lisa feel that the $100,000 could be put toward her education, allowing her to enroll in Lucy’s dream program, a top-notch engineering program at a public university, without incurring student loan debt.
They have a series of long, healthy, and engaging conversations with Lucy about her schooling. Lucy is particularly engaged and creates spreadsheets with itemized budgets of tuition, room and board, and other school costs.
She understands the gravity of what her parents are considering and welcomes both the responsibility and opportunity inherent in the gift.
Four years later, engineering degree in hand and a series of incredible opportunities under her belt, Lucy embarks on the first stages of her new career.
Where did Tim and Lucy's $100,000 go? Is the family less wealthy?
No. They have built capital in other ways:
Human Capital: Lucy has built human capital.
Relational Capital: The family has built relational capital after learning how to communicate effectively. This has strengthened the bond between Lucy and her parents and offered a template for future conversation.
Legacy Capital: Acknowledging that education is a core value of the family, the family's decisions have affirmed and grown their legacy capital.
Structural Capital: Going through this process together has grown the family's structural capital. They have a better framework for making significant decisions.
Financial Capital: Tim and Lisa have invested their financial capital, perhaps lessening that amount - though they purposefully did not harm their retirement prospects. Moreover, Lucy's schooling has allowed her to start building her own financial capital immediately, and with the proceeds her family offered and zero student loan payments, Lucy is investing in a Roth IRA and 401k by age 22. She hopes to buy a condo near her job in a few years. The family's financial capital starts growing again.
Not only is there a fullness to this picture, there is a sense of coordination. One area impacts another area.
Money is Fungible
Remember: Money is fungible.
It can become college educations, retirement paychecks, food, and a Starbucks coffee.
Growing financial capital is important, especially for families working to accumulate assets for retirement or other goals.
But financial capital alone doesn't offer the whole picture.
A complete picture showcases qualitative capital, as well.
Where can you find the book?
You can buy Complete Family Wealth here:
Also, please consider subscribing and sharing this newsletter with someone you think would benefit:
And, if you’re interested in reading more of my writings on building a fruitful and purposeful financial life, you’ll enjoy my book, Money with Purpose: Receive the Dividends of an Undivided Financial Life.
Love this, Morgan, and have added "Complete Family Wealth" to my ever-growing reading list. Need to read your book as well...
Think there needs to be a more "qualitative" approach across all areas of personal finance