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"You don't know where you're going until you know where you've been"
Erica comes from money. She's 30 years old, lives in New York City, and works in her family's business. When talking about her family wealth, Erica says her "family fortune," as she ironically calls it, goes back four generations. She adds, with a mix of pride and anxiety, that as long as she can remember, she's always been told it's her responsibility to be the "steward" of the family wealth. She needs to preserve and actively steer the family's wealth, to be used as the family intends, and to increase its value. Erica sees this role as steward as a part of her identity.
But after pride and seriousness, comes paralysis. Erica is stuck, and so is her financial advisor, Anne. Anne and Erica meet and make financial plans together. Anne makes recommendations and Erica enthusiastically and genuinely agrees to them, honestly feeling they make sense. But then she doesn't act on them, or does so only partially.
Few new investments, few steps forward. Erica is passive — almost phobic — about managing her money. She also doesn't feel she can spend money. While she knows she has money and needs to invest it, she is scared and avoidant to touch it. Both she and Anne are frustrated and puzzled. They wonder what is going on. But make-sense strategies, like asking what is getting in Erica's way or coming up with alternative investment ideas, get nowhere.
What Erica and Anne haven't yet figured out (and they will — keep reading) is that what's going on inside Erica is out of sync with her external experiences. This divide in a client can stop forward movement. One's internal experience consists of feelings, thoughts, values — and their past. One's external experience includes their decisions and actions. When internal and external are out of sync, we don't move forward effectively.
The money genogram is a tool that motivates change — a willingness to make a new decision or take a new action.
In fact, the internal experiences are what shape the external ones, and that is key to moving ahead in effective financial planning, particularly when hitting an impasse, aka a stuck place.
In our example, Erica does want to move forward with decisions and actions around money, yet her internal money life, her feelings and her family's money past are stopping her. How do advisors help clients move past an impasse, a stuck place? The key is to look into what is internally blocking clients. Once this is understood, then often it's much easier to move forward.
Let me share two tools with you (one in this article and the other in the next) that advisors can use with their clients to collaboratively move past impasses and move forward on financial planning. The two tools are money genograms (this article) and learning conversations (next article).
What is a money genogram?
Essentially, a money genogram is a family tree focused on the theme of money. It gives the advisor and client literally a new view, a visual map, and a new understanding of the client's personal and family money patterns. It helps the client and advisor see how her money attitudes and behaviors grew out of her family's money patterns. The genogram highlights each family member's attitudes and behaviors around money and the relationships in the family around money. In this way, it helps connect the client's present and past.
Often, there comes an "a-ha moment," like "so, that's what holds me back. I get it!" With this understanding of the past, the client is often freed up to make new decisions about the present and future.
Ultimately, the money genogram is a tool that motivates change, which in some ways is what financial advising and investing is all about: a willingness to make a new decision or take a new action.
What do advisors and clients gain from using a money genogram?
The money genogram connects a client's internal money life with her external money life. When advisors help clients focus time and attention on money feelings, beliefs and past, together advisors and clients make better decisions in the present and for the future. Additionally, advisors and clients also benefit because together they develop a better and deeper understanding of the client's own relationship to money. A genogram opens the possibility for a stronger relationship between advisor and client, new investing, and new motivation to act in healthier ways around money.
Creating a Money Genogram with Your Client
Making a money genogram has two steps:
Step 1: Draw the genogram, going back at least 3 generations, and include the client, her parents and grandparents. You can add other family members or generations, as suits your particular client. You can also include any caregiver or other people your client feels strongly shaped her relationship with money.
Step 2: Ask questions related to the meaning of money and the ways money was handled in the family (see list of questions at the end of this article). This step brings in family themes that have shaped your client. You don't have to ask them all the questions. Choose ones that are best tailored to your client. Other interesting questions may spontaneously arise in conversation and lead to valuable insights.
Lessons from Erica's Money Genogram Process
When Anne and Erica made the genogram, they learned about Erica's avoidance around money. Going back to her great-grandparents, money was a terrible source of tension in the family. Women were given the message they can't manage money, and were not given money, whereas sons and brothers were given most of the "family fortune."
Ironically the men often mishandled it, spending lavishly or using it in controlling and unfair ways. Erica's grandmother was given a fraction of the family holdings, compared to what was given to her two brothers. The grandmother then gave Erica's uncle, not her mother, control over the family money. And in keeping with family patterns, the uncle spent extravagantly. While Erica's mom received some money, she then worked very hard to make more. And she, like previous family members, was also very controlling of it. Erica's mother is very successful financially, both by working non-stop (at the expense of family time) and by investing. She has given Erica the message that she also needs to make money her highest priority and be so "good at money" that the "family fortune" increases and isn't "stolen" from them, as it was by men in previous generations.
Using the money genogram, Anne and Erica had very useful conversations and uncovered valuable insights. First, Erica realized that she feared dealing with money altogether. She avoided it, worrying others would take advantage of her and steal or lose her money, as had happened in previous generations. Erica also realized she felt pressure to be perfect at managing money and losing none, since her mother had worked so hard to prove women could do this well. Because of this intense pressure to be perfect, Erica didn't want to take any action. Better not to act than to make a mistake.
What happened next? Anne and Erica developed an action plan based on what they had learned about Erica's internal experience. They took small steps in investing, so Erica could gain confidence in herself and trust that Anne would not take advantage of, or take control over, Erica's money. Anne educated Erica about investing, including that you don't win all the time, so you have to take the long-term view. This helped Erica fight her fear of ever making a mistake.
Finally, a crucial insight was Erica realizing that by not acting at all, she was unwittingly repeating the historical family view of women being "incompetent" with money — and this was the last thing Erica wanted to feel. This insight motivated Erica to work more actively with Anne, make more decisions and take more action. She realized she needed to act to be a successful family steward, an important goal of hers.
Using Money Genograms with Your Clients
It's useful for advisors to practice first with colleagues, making money genograms with each other. This gives insight into one's own relationship with money, which enhances work with clients by allowing advisors to know their own issues, strengths and history. It also gives advisors the experience that clients will have, allowing advisors to be sensitive to the client's experience.
Money Genogram Questions
Talking About Money
Messages About Money
Money Events and Their Impact
Behavior Change Around Money
The views and opinions expressed herein are those of the author, who is not affiliated with Hartford Funds. The information contained herein should not be construed as investment advice or a recommendation of any product or service nor should it be relied upon to, replace the advice of an investor's own professional legal, tax and financial advisors. Hartford Funds Distributors, LLC.