Behavioral Finance
TAKING WEALTH ADVISING TO THE NEXT LEVEL: THE PSYCHOLOGY OF FAMILY WEALTH CONSULTATION
By Gary W. Buffone, Ph.D.
Who doesn’t dream of being wealthy or financially independent? And who among us doesn’t fall prey to the fantasy that more money would solve all our problems and bring ultimate contentment and happiness? It is these notions and fantasies that form the foundation of the American Dream.
We live in a society centered on the accumulation and management of wealth, yet often times the very people who have become wealthy, and even the professionals who advise them, may not fully appreciate how this affluence impacts their emotional health, happiness, and the very quality of their lives. Affluent Americans are confronted daily, frequently by surprise, with the many emotional and psychological challenges brought on by their own success and good fortune.
WELCOME TO MY WORLD: IN THE SHADOW OF WEALTH
I speak of this for this is where I live. In my own practice as a psychologist and family wealth counselor, I have encountered many individuals and families struggling with these often complicated psychological issues stemming directly from their financial success and prosperity. From motivating the underachieving adolescent, trying to tame their child's rampant materialism, helping their children to appropriately value and handle money, groom the successor for the family business throne, or to navigate the sometimes dangerous shoals of wealth transfers to kids, surveys of the wealthy tell us that it is just these challenges that are often the most important problems facing affluent families. And in this work I’ve often teamed up with financial professionals who were confounded, and their work and planning often stalled or completely disrupted, by the thorniest of emotional and family issues.
In a number of these cases, what we’ve discovered is that many of these children and families, no matter what their respective age or developmental stage, were not failing due to a lack of financial resources or advantages, but because of them. As it is often seen with families seeking help, the presenting problems seemed to be centered on the children. And these privileged offspring, many of whom were intellectually gifted, attractive, and healthy, were failing in surprising numbers, leaving their parents desperately trying to understand what went wrong.
These parents had reason to be worried. Despite their child’s considerable potential and parents significant financial resources, many of these kids were ending up anxious, depressed, flunking out of college or careers, unmotivated, financially irresponsible, and often abusing alcohol and drugs. Their values had often become twisted by a narcissistic sense of entitlement, believing they deserved what they wanted without earning it. Having lost any sense of the value of money, they didn’t appreciate the importance of work or industry.
Unable to create satisfying relationships and careers these individuals often suffered from low self-esteem, oftentimes masked by flashy spending or a front of grandiosity. Even when pushed into treatment programs or forced to get help, many participated half-heartedly or dropped out altogether. These very characteristics collectively make up what has been referred to as the Silver Spoon Syndrome, a condition that is frequently associated with “affluenza” and something I write about in my book, Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty.
Whatever the specific symptom or malady, children and parents can inadvertently find themselves standing in the shadow of wealth, struggling with their dysfunctional relationship with money, and watching helplessly as these problems destroy their children and family relationships. As a result, a new field or layer of practice has emerged within the wealth advisor community, a field which involves advisors further enhancing their present skill set by learning how to effectively help these families resolve these tricky psychological and family issues and conflicts constructively, thereby strengthening not only their client’s families, but their clients commitment and loyalty to the advisor as well.
This relationship and business enhancing practice is one of the best ways wealth advisors can add value to the services they already offer while at the same time more effectively distinguishing themselves and their practice in an already crowded and competitive financial marketplace. Nothing generates a more positive feeling in a client than their perception of their advisor as someone who actually cares about their problems and has the competencies to provide effective solutions that make a real difference in their lives.
Conservatively, tens of millions of affluent families will need help facing these complex and often gut wrenching challenges in the years ahead, with many turning to their financial professionals for answers. Yet, these same financial professionals are the first to admit that they feel ill-equipped to help their clients with these kinds of emotionally laden issues. So where will these individuals turn for help? If the advisor is not sensitive and responsive to these concerns of their clients, then the client will not be helped and a valuable opportunity for forge a stronger professional bond with that client and their family will be lost.
THE SOFTER SIDE OF WEALTH ADVISING: IT AIN’T ABOUT THE MONEY
It is these very problems that provide the enlightened advisor with an opportunity to become the client and families “hero,” if they are willing to develop the knowledge and skill set to effectively address these concerns. But this involves you being willing to step out of the numbers game and learn more about the softer or human side of advising, a side that involves developing a deeper understanding of yourself as well as your client. This is not a journey every advisor can take, but for those who do, the personal and financial rewards are great.
Many professional wealth advisors cringe at the thought of having to get into the “sticky” business of counseling their clients on the “softer” or more human side of advising. They are most comfortable dealing with the hard numbers and facts involved in financial and legal matters and would prefer their clients talk about their feelings and worries with some ‘shrink’ or a person who is more suitably trained to handle such issues.
But many times the client does not want to seek an outside consultant and prefers the trusted advisor help them with these personal issues as well, that their advisor offer the convenience of a “one-stop shop” where they can go and have all their needs addressed by one person or office. Some advisors don’t feel comfortable in this role but feel stuck knowing that their client is asking them to offer a specialized service for which they unqualified or incapable of providing, and rightfully so.
But at the same time the advisor recognizes the need to help their client. And they can do this without having to become what I’ve heard some advisors refer to as “junior psychologists.” With the proper training, most wealth advisors can learn how to respond to their clients’ emotional needs directly and when necessary, call in an outside professional who is more specialized in addressing these complex family and psychological issues. In both cases, this provides that golden opportunity for advisors to service their clients by providing the information and support specifically focused on solving just these problems.
So just how does this family wealth counseling work in the daily practice of wealth advising? Time and space do not permit more than just a glimpse of this next level of advising but allow me to dabble a bit and paint a picture of the process of how wealth counseling works. In a future article, we will talk about the critical core competencies of the “next level” wealth advisor.
HOW IT WORKS: THE PROCESS OF FAMILY WEALTH COUNSELING
The actual process of next-level wealth advising and counseling involves the advisor learning certain knowledge and skills, something we will refer to as core competencies, and to be able to apply these tools in their daily practice. The simplified process of wealth counseling involves three steps, each stage requiring the application of these core competencies, and looks something like this.
Stage One: Assessment and Engagement
Stage One tasks and core competencies involve:
Active and reflective listening skills
2. Appropriately creating an emotionally “safe” holding environment for the client or family to be able to disclose and discuss their concerns
3. Administering a semi-structured interview to elicit the deeper engagement of the client and to provide an atmosphere necessary for optimal data collection and processing
4. A basic understanding of family psychology/dynamics and the family life-cycle
5. Developing a formulation of the client’s or families problem or problems for targeted interventions.
Quite naturally, this process is sequential and the first order of business is effective listening which is essential to enhancing the client’s comfort in sharing their deepest feelings and concerns. There are ways to facilitate this engagement and discovery process, for example by asking certain open-ended questions, using reflective and active listening skills that can make a real difference in the level of the client’s disclosure and sharing. As this discovery process develops, the advisor is at the same time mining the shared concerns for data needed to first understand the client’s true needs but also to be able to see what will help them to normalize the problem, and then to find the best solution. A basic understanding of families, their dynamics and stages, comes in handy here.
As might be expected, often the identified issues are predictable and stage dependent in the context of the family life-cycle. In the early years a couple may find themselves struggling over how to manage escalating conflicts over their finances, trying to negotiate a pre-nuptial agreement, or concerned about setting an appropriate allowance for their young child. In their middle years they may request help trying to deal with an underachieving or overachieving adolescent or in launching the boomerang kid. A bit later, parents may seek assistance in figuring out how to pass on the family business, refereeing sibling squabbles over inheritances, working out a good retirement, or making the difficult decisions on the distribution of their estates .
In some cases the assessment process has to involve outside experts to evaluate very specific problems. For example, a psychologist may need to evaluate the struggling, underachieving adolescent to be sure their problems are not resulting from an undiagnosed case of ADHD or depression. Or perhaps a corporate or industrial psychologist would assess different candidates, including the largely inept but “chosen” son who is the natural heir apparent, to provide feedback to the family or board on who would be best qualified to take over the family business. The wise and ethical advisor will recognize when an outside referral is needed and attempt to facilitate this referral process. They must also become familiar with the available resources and professionals involved in the field of family wealth counseling.
Once the client is comfortable and engaged in the counseling mode and the problems or issue is clarified and fully understood by the advisor, only then can the professional progress to the next stage of the process. Jumping the gun and attempting to try to solve the client’s problem before they feel that the advisor both cares about and understands their concerns only inhibits, if not disrupts, the helping process.
Stage 2: Developing and Implementing the Solutions
Tasks and core competencies at Stage Two involve:
1. Knowledge of and decision-making in the selection of the most appropriate intervention in a range of available options
2. Applying and carefully monitoring the single or multi-level intervention strategies to determine whether the family has achieved their established goals
3. Distinguishing those cases when outside consultation with professional family wealth counselors or psychologist may be beneficial
After the Stage One assessment and engagement process are accomplished, the focus shifts to agreeing on specific goals and then designing and pursuing targeted interventions to address the identified concerns.
Once the target issues are identified and goals clarified and specifically defined, there are several ways that interventions can be applied. In some cases, the advisor may offer relevant educational materials (ex. books, CD’s or DVD’s, brochures, Websites) to help the clients better understand their issues and learn more about things that they can do to help themselves. In other cases the advisor may recommend and actually deliver in-house psycho-educational programs or seminars tailored to the specific needs of the prosperous family (ex. resolving family conflict, improving communication, keys to successful business succession, managing asset distributions).
In more involved cases, the advisor may decide to set up a series of individual and family meetings to address the problems. In cases where there are extremely complicated problems that seem well beyond their skill level or expertise, the advisor may request outside consultation with other professionals, which can involve highly specialized family wealth psychologists or counselors who then join the helping team.
Specialized family wealth psychologists and counselors can be made part of the wealth management advisory team to help work through the complicated emotional issues or family dynamics that can block the constructive resolution of problems. In this capacity the family wealth counselor works closely with the family and financial team members to help clarify and resolve the impasse. I have found this team approach of working with a group of professionals to be most rewarding and productive when trying to address the most difficult of family wealth issues.
Stage 3: Follow-up and Aftercare
In Stage Three, tasks and core competencies involve:
1. Development and implementation of timely and appropriate follow-up interviews to assure the client’s satisfaction with the outcome of the counseling process.
2. As needed, applying further attention and services to resolve any continuing concerns of the client.
This stage involves the advisor checking in formally with the client and making sure that the process has worked and that their concerns have been addressed fully. Formal interviews or contacts directly and in person are most preferred and yield the best and most accurate findings. Again the process of the advisor making the phone calls and sitting down and meeting with the client to be sure they are satisfied with the helping process is an ideal practice standard, and one that demonstrate caring and quality service.
SO KEEP IN MIND
So keep in mind, the affluent will increasingly seek out such specialized wealth consultation in the years to come. Advisors who are aware of their client’s emotional concerns and issues and are properly trained and experienced in this emerging area of practice can provide valuable assistance for the prosperous family, and by doing so, develop the kind of relationship with their clients that make them a client for life.
To learn more about family wealth counseling and the money-psychology connection or to contact Dr. Buffone, visit his website at www.thefamilywealthresource.com.
GARY W. BUFFONE, PH.D., ABPP
Dr. Buffone is a leading advisor to the affluent and has been cited on psychology-money issues in Money Magazine, Worth, CNN Money, CBS MarketWatch, Wall Street Journal, LA Times, MSN Money, to name a few. As a consulting psychologist, he regularly consults with prosperous families, their advisors and family-owned businesses on a range of relevant issues.
He is a recognized speaker who has delivered keynotes, seminars, and workshops to hundreds of lay and professional groups on a variety of psychological topics. Dr. Buffone has authored over thirty articles, book chapters and books in his field including The Myth of Tomorrow, Transcending Trauma, and Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty.
Dr. Buffone is married and makes his home in Jacksonville, Florida.