07 March 2012

Wealth managers seek psychology skills

When it comes to family squabbles over money – particularly contentious ones involving inheritances you may find a new face at the mediation table with the lawyers: a psychologist.


When it comes to family squabbles over money – particularly contentious ones involving inheritances  you may find a new face at the mediation table with the lawyers, stock brokers and accountants: a psychologist.

The involvement of a mental health professional isn't about providing traditional therapy. It is more about helping those involved to communicate. Because wealth, particularly sudden wealth, can create anxiety and confusion.

Financial advisers say the trend is growing because of the historic wealth transfer that is under way as the baby boom generation ages. Baby boomers are projected to pass along an estimated $41 trillion through 2052.

As traditional wealth managers work out inheritances, they find they have to keep families from imploding as holdings are divided after a parent or other wealthy relative die. And to do that, they say they need more than just spreadsheets and stock charts.

Psychology to the rescue

"It's definitely a burgeoning field. It's a field that needed to be around for a long time. But there weren't people doing it," said psychologist Jamie Traeger-Muney, founder of The Wealth Legacy Group. "Talking about the emotional impact of wealth on people's lives is really new."

Traeger-Muney works alongside financial advisers, estate attorneys and accountants who bring her in to try to ensure that those who are about to receive large sums of money, or have recently come into it, are able to wrap their brains around a plan to help them hang onto to it. "It's not about what's wrong with you - why are you irresponsible. It's about what are your goals and how do you get to them," she said.

Business can be emotional

If there is unsettled emotional business when a parent or grandparent dies, the battles among family members can reach epic proportion - leading to siblings never speaking to each other again, among other difficulties.

At Aequus Wealth Management in Chicago, the financial planners embraced the idea that the psychological well-being of the clients is intertwined with their financial success. So, founder Cicily Carson Maton partnered with a psychologist who is integrated into the business at Aequus.

"Who gets grandma's teapot? We emotionally attach great value to something we can't have. It's totally out of proportion," Maton said. "Just having money isn't going to make people happy," Maton added. "Sometimes it makes them very unhappy."

Between 65 % and 75% of families fail in the transition of money from one generation to the next - either by losing much of the inheritance because of poor planning or by losing family harmony, according to a frequently cited study by The Williams Group that was based on interviews

Ways to avoid conflict

Involving a psychologist in the financial planning can help avoid the sorts of conflicts that occur in many families, even when the amount of wealth involved isn't huge, added William "Marty" Martin, a psychologist who works with Aequus. But when significant wealth is involved, the intensity can rise along with it when issues aren't worked out in advance. Since conflicts and bad feelings that can date back to childhood, it helps to have someone to coach the family through this process.

He said that one client recently sent an email to her sibling that she portrayed as friendly, but that he was able to point out to her that the friendly intent of the message probably didn't come through the loaded comments that were embedded. He counselled her that it's best to hash these issues out in person before it gets to the point of the dreaded email or letter.

He also recounted a successful intervention involving a woman who had become estranged from her wealthy father, who had married a woman she didn't get along with. The daughter had worked at a high level in the family business and was fired after her father remarried and was to be cut out of his will. Rather than sit back and wait to see what happened, Martin said he counselled his client to keep a dialogue going with her father, who ended up giving her a share of his wealth. "By anticipating," Martin said, "they got to work it out."

The key to using psychology to help smooth out the transition of wealth, he said, is to make it part of the process rather than as a last-resort when things blow up. "I'm part of the process. It's normalised. It's not as if they say something and it triggers (an intervention)."

(Reuters Health, Mitch Lipka, March 2012) 

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Health and your money

Healthy finances


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