Those of you who’ve read my past articles might have noticed that this article is on a different web site.
That’s because as of July, Abundance Wealth Planning is now a Financial Life Focus company. I’m very excited to be combining with an established financial life planning firm. Strength comes in numbers and with the support and resources that comes with a larger company, I look forward to serving my clients even better.
For those of you who are reading one of my articles for the first time, welcome! My name is Joseph. Although I’m new to Financial Life Focus, I’m not new to financial life planning. After a long career in the tech finance industry, I started my own practice in 2018, providing fee-only financial services to entrepreneurs, tech executives, and other high worth individuals.
One of my biggest reasons for becoming a financial life planner was that I wanted to help as many individuals as possible to achieve their hopes and dreams. Whether we’re novices or experts when it comes to personal finances, ideally we’re always trying to improve our understanding. By writing regular articles I’m hoping that both my clients and prospective clients can benefit from my approach and my knowledge.
Having experienced lots of ups and downs in my own experiences with money and wealth, I have a particular interest and passion in serving clients who are just starting on their money journey. The ages and family situations of my clients are diverse, but generally it includes folks who have come into wealth through family inheritance/trust fund activation or an IPO/equity redemption. For this article, I’ll be focusing more on the former category, but many of the principles can apply to anyone who has come into sudden wealth.
The Complications of Family Wealth
Many family wealth clients I work with are those who have been given a trust fund or have just received a large inheritance. While coming into a large sum of money sounds like a wonderful blessing, many of my clients actually come to me with mixed emotions and concerns.
Since the client didn’t have a hand in creating the wealth, there might be a sense of disconnection. Is this money actually mine? Am I actually able to use it without strings attached?
Guilt can come from a variety of angles. First off, the client didn’t earn this money themselves. So they might wonder, does this money really belong to them? If my parents are giving me this money, what are they thinking of me? Do they think I need help or are not capable of earning my own wealth?
When family wealth comes as an inheritance, the person giving the wealth isn’t around anymore. So the person receiving the money often has little or no guidance on what the intentions are behind the money. Was it meant for a specific purpose? Are they just supposed to safeguard the wealth as a family asset to be passed on to the next generation? How would the person giving the money judge its usage if they were still alive?
The expectations are even more complicated with living family members and friends. Will this money change me? What will my friends think of me now? Will they think better of me or view me as a “trust fund baby”? Will my spouse expect a heightened lifestyle? Will I be expected to spend this money in a certain way?
My Financial Life Planning Approach For Clients With Family Wealth
Whenever I start working with a new client, my first questions are actually not about the client’s financial goals.
This is one of the primary differences between a financial life planner and a regular financial advisor. A key aspect of financial life planning is actually the continuous and collaborative exploration of what brings joy to the client, and then creating a financial plan to attain that goal in a way that aligns with the client’s personal values. Contrast this with regular financial planning, where the emphasis is on setting a target amount of net worth and then creating the plan that gets to that number as soon as practicable..
Together we explore every major aspect of the client’s life- anything which finances would potentially affect. The goal is to see how important each aspect currently is and how the client would want to change that particular aspect.
The Wheel of Life is a concept used in general life coaching. Each “spoke” of the wheel represents a different part of the client’s life. We’ll go through each “spoke” and determine what the client’s priorities are, and what they want to accomplish.
We’ll also explore how they might have been affected by money in the past, and their general attitudes towards wealth and money in general. With this information as a baseline, we can then explore other topics as needed. If the client has just received new family wealth, these may include:
- What is the price tag of this money I am receiving?
- What am I doing or not doing with this money so that I can feel more at ease?
- What is the expectation of the person who gifted this money to me (or what do I believe is the expectation)?
- What do they want for me and what do they not want? Is there any evidence that backs up this belief?
- What are the consequences (both positive and negative) of me using this money and of me not using it?
- What needs to happen for me to be proud/happy of myself?
It’s not just about asking these questions; it’s about how we work through these questions together. By asking these questions, I’m not just building a rapport with the client that will lead to trust and more open communication, I’m building a foundation for the client’s future financial success. With the information we’ve gathered we’ll be able to collaborate towards a plan tailored to the client’s goals and values, which means they are more likely to follow it through. And as the client’s life situation changes, we’ll be able to adapt the plan more expeditiously.