People need to be aware of the subtle stories they learned about money when they were children.
…Everyone today is familiar with the "American Political Myth," encompassing social, economic, and political truths. In this specific myth, all Americans have an equal opportunity to advance themselves economically through education and honest labor. And everyone ultimately has the power to change the conditions under which they live through freedom of speech and assembly, by petitioning and lobbying, and in the voting booth.
No individual or group will be disadvantaged, regardless of their race, religion, national origin, family background, or the neighborhood they live in, according to the myth. In America, my daughter or son could grow up to be president, just as yours could. And in America, anyone can become successful and wealthy beyond their wildest dreams by developing knowledge and skills, starting a business or entering a profession, and building on a good idea through hard work and stick-to-itiveness.
Readers may be asking at this point, "So what does any of this stuff have to do with financial planning?" Well, if personal myths can affect the outcome of a presidential election, then they certainly could play an important role in how people conduct their financial lives and in how they approach the relationship with their financial adviser.
What is the genesis of these personal myths about financial life? Think about the crucible of the family and the myths that your parents may have transmitted to you about money and wealth. Ironically, some advisers will remember growing up in families that were extremely ambivalent about money. Their parents and extended family may have voiced directly, or more likely, communicated subtly that, "We are not the kind of people who have money. We are very different from those people with money and we should be suspicious toward people with money."
Perhaps, it was suggested that those "other people" didn't earn their wealth honestly. These advisers' parents may have taken for granted that those "other people" were unable to understand or care about those who had to work to eat or put clothes on their backs. Despite a fascination with the lifestyles of the rich, they would heap ridicule on those they actually came across who were guilty of an ostentatious display of wealth.
These messages and attitudes were reinforced by historical anecdotes about how others with greater power, wealth, or social status cheated, took advantage or, or discriminated against the family. A personal lore of social and economic disenfranchisement emerges over time and takes on a life of its own - and it affects how advisers deal with money in their personal and professional lives.
Most advisers will find this type of family - with its mixture of jealousy and contempt for wealth - totally alien when contemplating their own development. For some of these advisers, simple irresponsibility with money may have been the discordant theme in their family of origin. In these families, money was as hard to hold onto as water in one's hand. Whether it was typified by a profligate spending or pie-in-the-sky investments that failed to deliver, the parental message was simply, "We are not any good with money."
Having money or not having money in these families seemed rather arbitrary, and parents interpreted the presence of money as a matter of luck rather than of skill. Promises that required the slightest monetary discipline were as durable as sand castles, the tide regularly washing each one away before the end of the day. Those people who could earn and hold onto money must have the stars, good karma, or some other kind of special magic working for them.
Still other advisers learned a personal story of respect for money. In these families, the role of money in the allocation of values was emphasized. The accumulation of wealth was seen as important not in and of itself, but in the good that could flow from the wealth.
In these families, money was used to increase self-development through education and travel; to refine tastes in food, clothing, and recreation; and to promote and support causes that aligned with the family's value system. Here the parental message was, "If we are mindful, money can be an important instrument for good, both within and outside of the family." These parents not only modeled but also explicitly taught lessons that through planning, purposeful action, and good financial habits, an individual could realize almost any important goal in life.
This short list of family myths about money is not meant to be exhaustive, of course. While each of the family myths described here is exaggerated for the sake of clarity, it's clear that our memories impart poignancy to the actions and characters that populate our own personal myths.
To achieve and maintain a high level of professional effectiveness, especially when working with the wealthiest clients, financial advisers must examine the personal money myths they themselves inherited and attempt to leave behind whatever excess psychological baggage they find. For many advisers, mere self- examination is adequate to become aware of the myths.
On the other hand, some advisers will need help in excavating these stories. On their own, they may be able to glimpse only fragments of their personal myths. These fragments usually appear during or immediately after an uncomfortable emotional response to a client. We spontaneously feel embarrassment, shame, anxiety, or anger when the discussion verges into a sensitive area. What stimulated the negative emotion and resulting story fragment could be a client disclosing a money problem or our own identification with the client's difficult financial situation. The client may evoke a psychic resemblance to a significant other in our life, such as a parent, in a process called "projection." In each case, we have negative feelings when we see aspects in others that we can't fully accept in ourselves.
Our professional objectivity depends on the ability to recognize and sort out our own personal money myths when working with clients. Uncovering and exploring our personal myths provides financial advisers with a laboratory to understand their clients better. Listening carefully for our client's underlying personal myths will help us to respond appropriately to their diverse strengths and vulnerabilities.
Michael B. Horwitz, PhD, CFP, is a financial planner and asset manager based in Austin, Texas. The following article is excerpted from the January 2005 issue of Financial Planning. Please note that it is written as a caution to financial advisers, but the material is equally applicable to all investors.