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?