Welcome to BIV Today the Daily Business podcast from the Newsroom of Business in Vancouver. I'm Kurt LaPointe, Editor in Chief. Our Podcast is brought to today by the Downtown Vancouver Business Improvement Association. The DVBIA supports and promotes and represents the shared interest of 7000 businesses and property owners in the central 90 block area of Vancouver's downtown core.
So we're in the thick of tax season which for many Canadians is the one time of year to reflect on our earnings and if we're fortunate our wealth. There are of course those who think about their earnings and wealth every day almost every waking moment of that day and they plan and execute extensive financial strategies. They have a discipline about their holdings they have techniques for prosperity.
My guest on the podcast today is Tom McCullough. He brings thirty five years of wealth management experience first with RBC Wealth Management and then establishing the highly regarded Northwood family office in 2003. He's an adjunct professor at the Rotman School of Management at University of Toronto and he's written. He's co-written a book with Keith Whitaker and has dozens of contributors for chapters that the rich and not so rich alike can value.
It's called Wealth of Wisdom. The top 50 questions wealthy families ask and it identifies what we need to ask of ourselves.
And for that matter others at times for protection and growth. Tom McCullough joins me now. Good to have you with us. Thank you very much.
Your book identifies not only of course these critical questions but the common traits of success. There are many of them but run us through a few of what you think are some of the more important traits of success.
Well just by content by way of context the book was written for families of wealth. But as you rightly say in your introduction the principles in the book are applicable really to most most families and it's divided into a number of different sections. And I think those sections end up
being that the core principles. But I if I had to say what they see couple of principles would be in terms of family thriving with regard to well I would say they are related to thinking about what your values are and what you want out of your life. And then people often take their ready fire aim approach as opposed to Ready aim fire and they jump right into doing something of personal thinking about well who are we. And what do we want and what do we want
things to look like. Another principle I would say is something related to planning and setting goals you know literally setting talking writing down your goals ordering them and others priority and then calculating what's it going to cost some goals cost something and some some goals don't. And then I think the third principle I'd say is maybe communication among family members. You know it's fine. You know it well well you're if you're the leader or driver or
entrepreneur patriarch matriarch it's fine the kids are young. But when you start to the family start to broaden and there's more than just one person a lot. There's a lot of angst that can be avoided or somewhat avoided by communication.
And I want to explore all three of these in our talk today but I'm intrigued right away by the question of values. And I wonder whether we do have to adapt our values and all of this. Or or largely do you have to then you have to define them and then work backwards and start essentially adapting your financial strategies to suit them.
Absolutely.
You start with values so you we do an exercise with a lot of our families where we we identify a large number of values say 25 we have cards and we ask family members to order those cards from most important to least.
It's kind of a tough job but if we do it in a fun exercise but really the point is you know one thing that really resonates with me. What what are the things that drive me. What are the things that. You know are I would I would do other things aside to do and they say that the happiest people are those who live according to their values. So it's most important that you adapt or that you adapt your life to your values and not the reverse.
Now in a family only you want to adapt to if you're more than one person you have to adapt to each other in some way. But ultimately the key is figuring out what each person's values are and maybe where some of the overlaps are and which things are going to drive your decision nice.
And before you can satisfy with the answers to these critical questions these 50 questions that to it. And what but in your own mind do you think someone has to be prepared to do it. In other words what. What is it.
What is it take wanted to take two to move the next step in the Internet. How do you values.
Yeah. Well not not just not just in defining your values but in determining that really you're going to be serious about generating wealth about this pursuit of a kind of a stable prosperity.
Yeah. I think that's a better a better term. You know it's not necessarily about making a large amount of money when sincerely I mean a lot of our clients already have a large amount of money because they sold a business or worked in a high paying job for a long time.
But I think the key is I think the key is you know eliminating intentionality.
And if some you know I mean maybe it's not hard to do so maybe you need a coach or you need somebody to help you do it.
Somebody with a bit of a framework but things that aren't urgent often don't get done even if they're important.
One of because the intentionality and desire and sometimes failure to seek out a way to do it either you can. You can look it up online there are ways to do. Just use values as an example. Start with that kind of kind of process you can figure out how to do it online but a lot of people they need somebody to help them be an independent person that will lead them through it and help them make a plan and help them ultimately quite frankly stick to the plan.
So I think that raises a whole other set of issues about how do you actually find somebody who is good with qualified experience is trustworthy. That's a tricky job in itself as well.
Now what is the. If you have to generalize what's the single most important question then that you have to start with.
Well it's the single most important question is one thing most commonly especially the mother herself.
I'll answer your question single most important question I think has got to be something to do with either values. What do I want.
What is important to me. And related questions of accuracy both very tied together is is what are my goals. And it's very difficult if you could have done that verbally. Greg under some of these ideas and what are you goals. Often it's very difficult for us to say what those are. We might vaguely say well know more about here or
higher return or you know something new a kid. But but to actually sit down and say I'm going to write down what I want to happen and I'm going to decide which ones are highest priority and then I'm going to see if any of them cost any money and then figure out then what rate of return I need on my investments or how long I have to work or whatever it is to make sure those goals happen. The lowest probably the lowest possibility of rip that kind
of intentionality of who are. Who am I. What are my values are always at the family and what are our goals. I think that most of those are very very important first steps that are usually missed as people try and find the right investment or pick a stock or pick an ETF provider or tickets manager is going to perform the market and they may miss the most
important foundational issues about where they're going. You wouldn't get a car and just randomly drive randomly anyway usually know where you're going.
And I say most people invest in investing.
For example don't yeah you made the distinction in answering that. What's the most important versus what's the most common but what is the most common question that people tend to ask. How am I going to make a lot of money pursuing them.
No no. Well I guess it depends. I mean we're dealing with people who have money. OK.
So the most common question we get is I don't want this money to ruin my kids. What do I do.
Don't you ruin my kids because we have a lot of money.
And so we we're worried that this thing that we worked so hard to to build is actually going to maybe ruin the kids because it said they'll be entitled and more than a reason to get off the couch and we'll never fully develop. So it's not everybody's most company question but it's certainly the most common question that I feel I got in my practice without saying about it.
The title of your book is is of course very important and instructive in this one because it's about wealthy families not wealthy investors necessarily. Can you instill the values of wealth management in your children if you don't first start with yourself.
You can instill values. Now there's two things I'd say about instilling any values in children.
One is there are certainly opportunities to be intentional about teaching values.
So you know if you're thinking about wealth mentally as you could think about China and every family can do this having 20 jars for younger children and if you give them an allowance a third of those in the jar for spending those in the jar for saving and a third those in the jar for giving and those are great ways to help children think about money by generosity about delayed gratification all those kinds of things.
The other thing I know about values is and this is quoting one of the authors in the book the name is Ellen Perry and she wrote the chapter called what passing values to the next generation really look like.
And she she basically says that values are primarily caught not taught so you can teach all you want.
You can say you shouldn't do this you should do that. But mostly our kids are gonna be looking at us to see what we do not what we say. So think of yourself the last time you were in traffic with one of your kids or when you're in a.
Let me know things are getting too close to home. If you were in a light lineup or on the phone with Rogers or you were no talking to an employee or a service person.
So the question really is what are the values that we are are demonstrating. And there's a pretty good chance that the values that we demonstrate are the ones that will be picked up by our children. And so lots of us will step back and think about that and say you you know are these the values that I my demonstrating the values that I want my children to pick up that can be wealth values I'm saving or overspending or whatever. But it could be just general values and life as well.
And yet we want our children obviously to be happy and we probably want for them better things than what we even had. How do you how do you then avoid when you're dealing with things like managing your wealth not kind of overspending and lavishing things on them and doing that out of good intentions but perhaps bad results.
I think it's almost always had good intentions and love the parents do what they do. We live in a very busy society. Many of us have two working expenses in the family where we're short on time and so money like time money and time solve a lot of problems that money can solve too quickly. So we're busy and so we throw money at a problem. What happens with that is that we end up helping our children helping in that small age helping our children avoid natural consequence.
And so for instance think about the child who goes to university or teenager that goes to university and blows through their spending budget that is supposed to last a whole month by the 15th and they call up and we're really busy and they say you know Dad Mom I just blown through this money and then we top it up. So what does the child learn. They learn there's no such thing as a budget. I don't have to worry about delayed gratification. You know a whole series of lessons.
You know I don't budget a whole series of lessons that we don't want our kids to learn probably we probably want them to learn the impact of their own choices. We all want to want them to learn how to budget and save all those kinds of things. And and by and you know partly we're busy but partly we feel that you know although they didn't want know. And
we want to help our kids avoid difficulty. But the interesting thing I always think about it is when we when you talk to somebody about their character and how their character was formed mostly people coping with it were difficult.
Yeah it was forged in difficulty. And if we take those things away from our children small and large things we end up with kids who don't learn most significant lessons.
And if it gets more extreme than that we have trouble moving on in our life and they have trouble receiving rejection and correction at work or in school. And and then of course you can get into much more serious things too.
And so I don't think that is only an issue for the wealthy and that applies to to many many of us who are sending kids to university and you know I mean a lot of a lot of Canadians are relative to the rest of the world have lots of resources. And so I think these issues will be common.
Money is energy as you know. And those are the conversations you have about money as a family as you're trying to generate wealth as as a group. They're trying not to fritter away on on things that are inconsequential and so on. How do you counsel families to have their conversations so that they can minimize the conflicts that they have.
That's a very good question. There is a really good chapter in the book by a fellow named Charles Collier who is the head of philanthropy I think at Harvard University for many many years but became a real advisor to family. He's got a great piece in there called How do you start a family conversation about financial inheritance rights inheritance. But many many of the questions that he
raises apply number one wealth in general. And number two to families of all all shapes and sizes and amounts of wealth.
But a lot of it is he talks about it this is the place where you could talk about your principles and the principles that you have learned as a parent. For example over time I think another principle is that he talks about is openness and creating an environment where people can ask where we're kids. For example can ask difficult questions. There are questions that are you know you're not allowed to ask.
And and I'm not going to be avoided you know money is an awkward topic and you have to. It doesn't mean you have to disclose everything to your children right away.
You can say well we decided not to talk about the details of the act but let's talk about everything else around that. And I think I'm giving you a Democrat I say again not just communication but give kids experience with small amounts of money early on give them experience with things that you're doing take them places. You know some of some of other issues related to wealth not just the actual creation of wealth or the actual management of money but also related to you know generosity
and how do you encourage generosity in your family. Because some of that is the idea of sharing wealth but is not a static thing as you say it's energy. So it's like the making of the managing of it and the sharing of it and filling the hole in the process having healthy healthy families.
But I can tell you there's loads and loads in the book on that topic and you I don't know what we'll talk about it later but there are also podcast and kids and podcast related to the book and kids younger people are like tend to like that medium as well.
Yeah definitely. Well here we are in a podcast talking about a podcast but just you you have one and I asked about. Because the times don't always go wonderfully. And mostly we run into some bumps as as families and and certainly as investors would say there is always uncertainty around the corner at times. How. How dangerous to the family fabric can be that uncertainty do you think.
Oh it can be very very dangerous. And so you know I mean there's no certainty in life. It's not like you know wealth or anything can guarantee certainty. I think one of the benefits of wealth and there are pros and cons of wealth interestingly enough one of the
benefits is it does. It has the potential to bring some level of certainty on some level of reduced anxiety in the sense that you're not worrying about you know a roof over your head or you're not worrying about where your next meal or not where you keep going to school. The more resources you have it takes away some of those worries but it still really doesn't change what can happen to kids you know and.
I just was reading an article today in fact from a dean of the university and just talking about the massive rise in anxiety and depression of young people at university in the last three or four years.
And so obviously people are going to university and U.S. colleges are our families have some kind of wealth to accomplish that. And these are these are wealthy families to some extent and kids are still going through that. So I think you know I don't think it's avoidable entirely. And again back to the idea of not helping kids
with all natural consequences. Some of that is driven by it by our society and parents who are pushing kids to achieve more and more and more and there's a great chapter in the book called How can you help children thrive and will focus on success.
And it's a great piece because it's you know everybody wants their children to do well but by pushing them to achieve in sports or in academic sorry and in so many other areas it can cause tension on family half or those things can continue well beyond children being young money tensions can can last or can occur all the way along the family continuum especially when kids get older as well.
So there's unfortunately there's no silver bullet at all.
But but communication and safe space to have conversations and some healthy routines are certainly some of the answers in examining this comprehensively as you have and spending the time that you have in the area of wealth management.
You must be able now to recognize some of the changes some of the shifts in family dynamics you've alluded to them earlier that the presence of two income families the busy ness of everybody. And I wonder whether you're noticing now that we have to in a sense reconsider the way in which we're where we're managing our wealth to accept the fact that in many cases our children don't necessarily share the same values as we do. As they grow yes.
And then if they don't what does that mean. We don't get the money. Does that mean. You know I think I know there's a very good piece about a couple of pieces in the book about how you find the balance between appealing to the title of your How can family support and both individuality and the shared dream.
And that really is the challenge you know. Somebody said you can do there's two legacy gifts you give your children.
One is roots and the other is when it reaches safety and knowing who they are and knowing who they can count on. But Wings is about differentiation. And what if my kids had quite different values from me.
Know there's certainly one that would be very jarring in the family but it's really important that parents realize that the people are individual people and they are going to choose their own path. And I did this values exercise testing them with my own family a number of years ago probably 10 years ago and these 25 values cards with words on them like integrity and family and power and pleasure and tradition and so on and so forth.
And my daughter didn't her serve and her cards and my wife serve the tours and my wife the number one values tradition and my daughter's number 25 value is tradition.
So that spawned a really really interesting conversation. Yeah. Now interesting enough over time we realized that I thought actually not totally true. Well we are going to get rid of the little Christmas tree and replace it bake with my daughter was very negative on that. Interesting I know. So I said where does tradition fit obviously tradition isn't
your least values. That was very important. So you see this in the conversations I mean to me the issue with the conversation you're having these conversations as a family and talking with the it leads to other people even more significant conversations about who are we in what is what is life for and what is money for and how is the money going to help each of us be the best people we can then I should ask you a bit of a personal question.
What was the biggest lesson you learned in writing this book.
Oh good question. What was the biggest lesson I learned.
Well I had a funny little lesson I'd say in. Well maybe the first one I said what's really interesting I'm in a business that is usually thought of as related to dollars and attacks. You know we manage your affairs including investments like tax issues and structure issues of wealthy families. Interesting in a book 50 chapters about wealthy families. How many are not about money. They are about how these are about family and business. How do you think
about giving. How do you think about choosing advisers some of them are money advisers and some are other advisers. How do you how do you set goals. How do you think about the next generation. No. So. So yes there is a technical you know core to wealth management that Rather is technical advice but a lot of the work that we do is help them to figure out the basics you know.
Are we who do want to be. What are our goals what will they cost. How will we incorporate the kids into this. How do we not ruin the kids. How do we choose a good adviser. All those questions. And at some point yes you get to how will
we invest the money. What should the tax plan. But interestingly enough though I think those issues come later in the process with families not in the very beginning and we come back to the most asked question you know for the average family probably it's you know what kind. What can I invest in. You know what. What do you like. And my answer is always I have no idea.
We've got to wait until we've done this preliminary work to figure out what it is that you need me before we can get to what do what do you have to invest.
And it sounds as if you have to bring to the fray. Yes and IQ but an IQ as well in emotional intelligence.
Absolutely absolutely and honestly you know my business is called a family off. So we say we look after these wealthy families and it's very difficult for us to find advisors to who have this set of skills you know investments and you know planning but also have this you can deal with families in their rough form.
And so what we actually do is we hire people the professions of origin you know SCA or a CFA or CFP financial type designation and then we train them ourselves in the other. And the other areas that they don't have guilt about and also train them and people to process of how do you deal with the family. How do you listen.
How do you not feel the timer sounds almost like a family therapy office at times.
There is certainly some about no question.
Tell me give me a 30 second commercial here for your podcast where do you find it.
So so the Web site is a wealth of wisdom. Book dot com. And on that website there is a link to purchase the book from Amazon or whatever your favorite bookseller is.
And there is also a list of all of the podcasts and podcasts are essentially interviews with each of the contributors lockers in the book and they are about 20 to 30 of them available and they are conversations about you know who the person is what their background is how they got to where they are but mostly about the chapter in the book and we say you know you you said this in the book but what did you mean by that.
And didn't you say this over here and how does it all connect and tell a few stories about families and how they you know after this or haven't and there's lessons to be learned so I can say personal it's just been a really really wonderful experience for me to get to know these people even better than I did and to hopefully produce something that's a value to the families who are listening to it.
Last question on this because I do want to find out in the end is there something like a formula of how much time you need to allocate to stay on top of things.
I unfortunately I would get into no formula. I would say that you know if there's one kind of lesson to leave is sorting out it's important to sort out your goals. My favorite cocktail party question when people often really know what I do they often ask me about investment related issues and my my favorite cocktail party question is what rate of return you need on your investment to meet all your objectives.
And I can guarantee you there is no one ever that I've known the answer to that question which in some ways is kind of shocking because if you're if you're getting in a car to head somebody you usually know where you're going to help.
But mostly people have not sat down itemized their goals prioritize them and calculated how much they will cost.
This is a three hundred three percent not the right answer for that.
They got exactly exactly right. And and then are those goals achievable in real life.
You know we've got people who've got lots of great goals but then you've got to get the 300 percent rate of return to actually make them happen.
And so I think that I think that's the lesson really for folks is you know instead of trying to find the hot manager or the best in t after ever start with it's almost on the balance sheet you know on the left hand side of the balance sheet is your assets the right hand side is your liability. You've got to figure out your liability might be dead. But they also might be planning to spending how much you want to spend you want to buy a lake house. Do you want to leave money to your kid. How
much is that going to cost. Or they're going to come from your income or do you have to you know grow your assets. Don't say that side of the planning is the important step. How long does that take. That's your question. It depends how complicated your stuff is. You can find somebody who is a very good that can help you do that.
Rapper big time sit come it's been a great conversation we could go on for a long long time but I want to thank you for your time today. It's been a real pleasure to talk to you.
Thanks very much. I really enjoyed it. Tom McCullough is the co-author of wealth of wisdom the top 50 questions wealthy families ask and this has been VIP today critical point.
Thanks a lot for listening we'll see you next.