Money is in some respects life’s fire: it is a very excellent servant, but a terrible master. – P.T. Barnum
During a Friday morning breakout session titled “Family Wealth Conversations: A new way to serve clients and differentiate your firm,” at NAILBA 33 in Hollywood, Florida, Jay Cherney, Ph.D. shared with attendees the power of money stories.
“Money is a very powerful force in our lives – for better or worse,” he said. “It all depends on how we manage it.”
When Cherney was 8 years old, his grandfather died. At the time, Cherney lived in Manhattan with his parents, sisters and grandfather. His aunt, uncle and cousins lived just up the street and the close-knit family spent much of their time together.
After his grandfather’s death, the family disintegrated in a dispute over the relatively small amount of inheritance left in the will. Cherney’s mother and her two siblings split apart and never spoke again.
Unfortunately, Cherney said, stories like this are far too common.
Talking about money and meaning
Why is it so hard to talk about money? People become uncomfortable when the topic of money arises because it is very personal and makes us feel vulnerable, Cherney said.
The solution? According to Cherney, open and effective money conversations will help prevent personal and family disasters.
But when families have these conversations, it often stirs up emotions because money is so closely linked with our feelings of identity, power, purpose and legacy, Cherney explained. We lash out when we think people are blocking the way to what we want. When this happens, we suffer, because we’re social beings.
Why is wealth transfer so challenging?
The process of transferring wealth is rife with emotions and vulnerabilities, according to Kerney.
Many are left feeling uncomfortable about letting go of things they worked hard for. But while avoiding it gives short-term comfort, Cherney explained that it often ends up like a drunk driving accident: tragic and avoidable.
Why does wealth transfer fail?
90 percent of wealth doesn’t transfer to the third generation, according to Cherney. Why?
- 60 percent of the time, it’s due to lack of family communication and trust
- 25 percent of the time, it’s due to unprepared heirs
- Just 3 percent of the time, the cause is financial planning, taxes and investments
Yet despite the huge discrepancies, Kerney believes the majority of advisors tend to focus on the three percent and ignore the central reasons for failure.
It’s all about stories
Cherney says that advisors must shift the way they approach their clients. He recommends moving beyond a narrow focus on products as commodities and instead focusing on getting to know clients as people. What are their dreams and needs? What makes them tick? What drives them?
Because money conversations are so deeply personal, advisors must tread carefully, he warned. The goal is to help uncover clients’ life purpose while maintaining a sense of safety, he said. Although we weren’t taught how to enter this sensitive area, it can be learned.
Cherney said the core question is, “What does money mean to you?” The answer is often the “headlines of our money story.”
What’s your story?
People tend to jump to conclusions and then stick to them, even when new information becomes available that changes the story, Cherney explained. Instead, we need to focus on considering everything and seeing the whole picture.
“We tell ourselves stories and we do the same with our clients,” he said. “You think you understand them, but there’s always more info.”
How can advisors uncover the whole story? By asking questions. By realizing you don’t know the whole story and likely never will. Admit it and work at it, he said.
What’s a money story?
Our money stories are often formed at an early age by watching those around us. They reveal our core values, emotions and needs, Cherney explained
Money stories drive most of our decisions, even though we’re usually not conscious of them.
Cherney shared that when he was young, he lost five dollars. He said that at the time, it was a “life catastrophe.” His mother chewed him out, leading him to believe that money was precious and had to be guarded.
To begin to uncover clients’ money stories, he suggests the following two questions:
- What stands out about when you first became aware of money? Tell a story about what money meant in your family.
- What’s been your most positive experience with money – when did it give you the most satisfaction?
When advisors hear these stories, it helps them experience the clients’ emotions and put themselves in their clients’ shoes. The process creates a quick intimacy because sharing these important and intimate details forms a bond.
“Money stories operates day to day, moment to moment and affect how we live and how satisfied we are,” he explained.
The benefits for advisors?
- Quickly create trust, intimacy
- Becomes easier to understand your clients’ seemingly irrational choices.
- Helps you overcome objections because you better understand them.
- Can get to the core of why they are resisting your advice.
“Our money story can be edited and changed over time if we’re open to new experiences,” Cherney said.
And there’s one more bonus for advisors, Cherney added. Clients who have formed a bond through shared storytelling will be more likely to stick with their advisor because they feel that they know them. This makes it more likely that they will then introduce the advisor to their children, opening up huge opportunites to connect with the next generation.