How Generational Wealth is Built – Episode 339

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[00:01] Welcome to the Prosperity Podcast. On today’s episode of the Prosperity Podcast, we’re going to be talking about the gold rush and what happened in those days. We’ve probably heard the stories about people driving out West and finding gold. I think most of the wealth was created by the people selling the picks and shovels. We’re going to talk about that today. How about it, Kim? It’s so fun. I loved it when you just threw out the word gold or shovels. It’s, like all good titles, something that brings you up a little bit short. I have an interesting story. It’s silver, but same idea. I know there’s a gentleman that lives in the Reno area and his grandfather was one of the original silver miners and had unbelievable wealth because of it. However,

[00:57] it didn’t do any estate planning and died early. Whatever the laws were at the time caused this man’s… It might have been dad, not grandfather. Anyway, it caused this man’s family, I’ll just say that. I think it was mother and sisters, to really be destitute even though this guy literally had a silver mine for a while. How amazing that is. There are lots of celebrity examples that we can pull that show the destitute nature of no estate planning or lack of estate planning or sometimes even estate planning that has gone out of being current. In other words, it wasn’t updated. When we think about this, it is so interesting to really look at how wealth is built, especially sustainable wealth. That’s really where the shovels come in

[01:54] because like our story in Busting Financial Planning Lies book, one of our original ones about the pipeline, and this is a story that Robert Kiyosaki has told often, you need water in a town. Well, do you want to haul buckets or do you want to build a pipeline? It’s the same idea. The person that steps back and doesn’t get immediate results, yet builds a system or a method or something that’s repeatable, scalable as the new current term, is the person that’s going to have the long-term wealth. Our other book that’s brand new, so I’m kind of bookending this, I guess, with books, ha ha ha, is the Perpetual Wealth book. It’s been fun as we have done the audio recording of that, which, of course,

[02:42] puts it in my head so thoroughly, to see the amazing impact of a family that can think sustainably about building shovels, creating something that’s scalable and more permanent rather than just seeking a gold mine. When you get families together and you have two, three, four, maybe generations, and you can truly think perpetually the amazing good that comes out of it, and it’s not just about the money. It’s about the values. It’s about the traditions. It’s about the important stories of failure that that family can pass on from generation to generation. These are aspects of your legacy. When learning to build shovels, I’m sure there was a lot of trial and error about what metal worked and what was the best

[03:40] handle and the shape of the shovel. My husband is back to his eight implementer, Colby, that for some reason I’m overly stuck on today. He has like 14 shovels in the garage because for him, this type of shovel versus that type of shovel varies depending on the job that he’s doing. Well, I’m sure the people that made shovels had to figure that out. What works best in San Francisco in rocky soil doesn’t work as well as in Oregon where it’s sandy or whatever the case is. These are the kinds of things that get learned when you think long term, when you think about two, three, four generations and the perpetualness of that thought process. As we think about this, we’ve talked about the gold miners versus the

[04:29] shovels. As we have talked about thinking generationally, it makes me think about the family office situation. For listeners that aren’t familiar with that, if you can take a moment and explain what family offices are. Then I’m going to ask you a follow-up question that I think will be applied directly to this situation. Well, a family office could be as simple as just having a bookkeeper. It could be as next leveled as having your bookkeeper talk with your accountant, talk with your attorney as an example, maybe a corporate attorney or an estate planning attorney. It could be next leveled as where you’re hiring out a firm to help organize family retreats or handle investments for generations as opposed to just yourselves

[05:23] or implement trust work like an actual trust company that would be a trustee, a corporate trustee as opposed to having an individual or a personal trustee so that you knew absolutely positively for sure that your trust wishes were going to be followed. It could be also having that group of people. A family office is a service and it’s, again, as simple as a bookkeeper, as complicated as a whole group of people that handle your accounting and your legal needs along with other aspects almost in a concierge fashion for the family. All of these levels can be family office related and super, super wealthy families sometimes have their own family office. Sometimes they hire a firm that is a family

[06:10] office and does the work for them. Then there are other people like in our situation, we have a bookkeeper that we’ve had for close to 30 years and she knows absolutely everything including who our other professionals are like accountants and attorneys when necessary to pull them in and help coordinate things. It’s the coordination that I think is so valuable inside a family office and you can have it at all different kind of levels. What’s interesting, recently I was at a meeting with a bunch of people in the family office industry. There was a group of us together and the conversations that they had were very high level, high net worth individuals and they were thinking in terms of decades and

[06:59] centuries really. They’re going through and explaining how they set up their family office and they did have it some more complex than others. It was someone that was looking over their finances and someone that was shaping the way that it’s going to pass from parents to children to grandchildren and so forth. As we think about this gold rush per se, the shovels and the gold, these most wealthy families are the ones that are thinking perpetually as you’ve mentioned. It would be nice to maybe just take a few minutes and talk about from your conversation of working with very high net worth individuals, what are some of the things that they do differently than others so that listeners can prepare themselves to be in that shovel industry and ready for that gold rush?

[07:53] Absolutely. I think the automation, which is something that technology is going to help with finances so much in the coming years, is one aspect. The coordination is the second aspect. The bookkeeper to the accountant, to the estate planning attorney, to the financial advisor, to the insurance agent, et cetera, et cetera, et cetera. The coordination of professionals is so important and it’s a very sorely missed aspect of people with even modest wealth and having lack of coordination can really create some problems. And then furthermore, the holistic and long-term point of view. Holistic, just really looking at everything together, literal families like Generation A, B and C, looking at all of them together and getting some benefits from scale because there’s

[08:54] more members to that type of family than just a typical family unit. Additionally, then of course, if your family office capability ends up including other families so you get married into relationships and that type of thing, then that can, I think, be even more valuable. For most of our clients, just starting with automation and coordination is a fabulous place to start and also sometimes even before that, having a really good set of books. Just a quick recommendation to take a look at something like QuickBooks as opposed to Quicken. Quicken is a checkbook register. QuickBooks is a proper accounting program. When you can put your own personal finances on a proper accounting program, that’s more valuable.

[09:53] Now, the sad thing about them is neither of them really know how to look at whole life insurance as an asset. That’s something that we’re working on in the technological space is to create a program that will automatically update and look at life insurance in its proper point of view. You know, the coordination and the automation are absolutely critical. What’s funny is that you talk about you’re creating this technology tool that will help out with the QuickBooks. A lot of these innovations that we’re hearing just as that technology tool that will just play in the sandbox for a moment that may turn into a software. That software may be something that you are able to distribute out and charge for. Now you have another shovel in the goldmine.

[10:46] I think for listeners out there, easy to get overwhelmed thinking that you have to learn every single thing, meaning become the best real estate investing expert and take years to do that. Or you have to learn everything about how life insurance works. Whereas you can find someone that has mastered that shovel and be a part of it and have them as a part of your family office team. That’s the way that I’m approaching it because I find that my Colby score, I’m not going to go the deepest and be hands on like Todd, who has an eight implementer, but I’m going to find the people that can do that work and that love it. Well, that just brings us full circle back to Dan Sullivan, who is a huge promoter of the concept called who, not how. This is exactly what you said. It’s getting a who,

[11:41] a WHO to come and help you get a job done because they’re better at it than you are, rather than help you understand how to do it, but leaving you to do it yourself. For those that have the ability, the old saying there’s not a problem if you can write a check. If you feel like this is an area of problem for you, but you can bring in a who and write a check, then you have your problem solved. Yes. Well, listeners, if you are looking for that who to help you out, my suggestion is to send an email case study of what’s going on and see if you can get your questions answered. You can do that at hello at partnersforprosperity.com. Thanks for taking time with us today. Kim, it was a great conversation.

[12:27] Spencer, it’s always a joy. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.