We should all have this problem. Then again, most of us do. A whopping sixty-seven percent of Americans have anxiety over money according to the findings of a recent poll issued by the American Psychiatric Association. Because the poll was taken between March 23rd – 25th, the findings appear paradoxical. 1 Although the economy is doing well, people report more anxiety over their finances than they did a year ago.
But you’re dealing with HNW and UHNW clients. They don’t have money anxiety since they have a lot of it. True? Unfortunately, this doesn’t seem to be the case. A recent article in the New York Times: “I’m Rich and That Makes Me Anxious,” revealed many wealthy people don’t believe they have enough money. Seems the more you have, the more you need to feel tranquil about your finances. Since this is a never-ending cycle, you can see why it might drive people to distraction. 2
In that same article, a recently retired Vice-Chairman of a successful bank said, “Emotionally, I don’t come from money; I got very lucky on Wall Street. I’ve been dealing with a myriad of psychological issues since I retired. I have more money than I had ever imagined, but I still worry — do I have enough, if I live longer than I thought?”
According to research done by Charles Schwab & Company in 2017, Americans believe you need $2.4 million to be considered wealthy. 3 But I am certain if you asked your clients who were worth $2.4 million if they were wealthy, almost all of them would say, “no.” Further, those of us with long experience in the industry wouldn’t think of a person with $2.4 million as being wealthy, either. (When J.P. Morgan died in 1913, he left an estate of $80 million. Upon hearing this, John D. Rockefeller said, "and to think; he wasn't even a rich man”). 4
“Am I wealthy?” appears to be a question of perception and not reality. Your wealthy clients perceive their level of wealth compared with the wealthy with whom they associate. When working as a trust officer in Palm Beach, many of our clients had three homes. As long as you had a minimum of three homes, you could hold up your head at the club.
But those clients would meet other wealthy people who had three homes, a yacht, and a private jet. Our wealthy clients who only had three homes but not a yacht or jet would begin to perceive themselves as less wealthy than previously thought even if their net worth had not changed.
According to studies done by Brookings, Roper, and the Pew Charitable Trusts as cited in Business Insider, wealth is a relative measure. People do not compare themselves to those who have the same amount of money as they do. Instead, people compare their level of wealth to those a few rungs above them. This makes them feel less than wealthy. Thus, no one feels like they have enough money. This leads to the paradox that a majority of people think the wealthy should pay more in taxes yet very few people consider themselves wealthy, so they shouldn’t pay more in taxes. 5
We have all worked with clients who had a great deal of money but were filled with anxiety about their assets. Even if they lost a small unrealized loss, they perceived that loss as a disaster. They felt real, gut-punching anxiety and this fear often drove investment decisions since the client went bananas if their stocks sold off a few points even if they owned the bluest of the blue chips.
For your “wealth anxiety” clients (and perhaps many others) you might consider having a dialog to help them answer the classic question: “how much is enough?”
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Contributing Writer: Subject Matter Expert Charles McCain