How wealthy families respond to financial losses – and how advisors can help them
2008 was a bad year for money – even for people with lots of money.
Maybe cutting back on vacation homes or country clubs doesn’t seem like a real trauma, but many families who are still “wealthy” have indeed been going through an emotional crisis. They may have lost the feelings of safety and stability which came from their wealth – and they may have lost the trust which they invested in their financial stewards.
Some families end up getting “stuck” in this crisis. They remain angry and resentful, blaming everyone around them. Other families are somehow able to use the crisis as a catalyst for personal and family growth – as a time to reconsider what is important in life. These families become “sadder but wiser” as they come to see more clearly that happiness is not based on houses, cars and vacations.
Who are these resilient families? They’re the ones who take a “time out” to talk about what they value as a family, and what they want from their lives. They move from blaming to planning; from dependency to responsibility; from a focus on consumption to a focus on future generations.
Family wealth advisors are often the focus of the financial crisis – and of the blaming – and they can be in for a rough ride. With skill and patience, they can also help families to move through the grieving and recovery process. When the family is in the stage of “denial”, the advisor can gently but firmly point out the realities. During the “resistance” phase, the best help from the advisor is to offer a listening ear and not try to “fix” the pain or the problems. During the “exploration” phase, the advisor can help the family reevaluate their values and their approach to wealth. It is at this point, and not earlier, when family meetings can be of value.
This can be tricky stuff for advisors. Different members of the family may go through the stages of transition at different times, thus complicating the role of the advisor. And in the end the family may decide to move away from the advisor, and the advisor has to gracefully accept this decision.
It’s been a rough road, even for people with money. These are the times when the wealth advisor can help a family to bounce back and be resilient – and become even more than they were before the crash.
(An expanded version of this blog will be published in my book, Stewardship of Family Wealth: Developing Vital and Responsible Family Leadership Across Generations).