Many wealth managers care about money personalities because they can flag early signs of behaviour that may help or hinder an investment plan for an individual or a family.
A wealth manager, for example, may use a behavioural assessment to see where specific interests and impulses lie. To be clear, different money personalities exist at every income level, but when millions, or billions, of dollars are involved, the impact can be magnified.
“When it comes to high-net-worth individuals, they have a hundred times the money and they sometimes can have a hundred times the dysfunction,” says Jen Lawrence, president of Process Design Consultants and an instructor at the University of Toronto, where she teaches the Art and Science of Success.
In an average family, someone buying a Gucci belt instead of groceries might cause tension, Lawrence says. In a high-net-worth family, the stakes are usually higher, especially when someone buys a yacht or invests in a flashy business. And when more money is at stake, people tend to get a lot more emotional.
In 1999, Russ Alan Prince and Karen Maru File published the book High-Net-Worth Psychology, which examined HNW investors through a framework of nine money personalities: Family Stewards, Phobics, Independents, Anonymous, Moguls, VIPs, Accumulators, Gamblers and Innovators.
In the family office space, an awareness of these personality types can help family members and advisors alike have more constructive conversations to get everyone on the same page, Lawrence says.
The key is to accept them as loose archetypes, she says. You don’t want to weaponize the terminology and stereotype others.
According to Lawrence, here are the nine types:
The Family Steward is often an ideal family office client because they want to make decisions that help grow or at least maintain wealth for future generations. They’re thinking, what values does the family want to unhold? And, if the family has a powerful last name, what kind of legacy do we want to create?
Money personalities aren’t always fixed, however. Some people grow into the role as they age instead of specifically seeking it out, Lawrence says. A pitfall is they may become resentful if they must always work on behalf of the family while their own needs are sidelined.
Phobics, meanwhile, don’t like to think about money. Lawrence says they can be second- or third-generation family members who simply want to receive a regular cheque from a trust. Sometimes there can also be trauma around money. If money was weaponized within the family to control children or grandchildren, for instance, some people may end up wanting nothing to do with it. Individuals might also drop into a phobia type if there was an unexpected death in the family.
Family-office professionals may need to spend more time with these individuals bringing them up to speed on everything from estates to equity markets.
Independents can also be a little checked out, and not want to dive into financial details.
“Money is a means so they can eventually go sailing around the world,” Lawrence says. An Independent might tell a family office they don’t want to participate in collective decision-making and would rather put their money somewhere safe that generates enough income to go live on a beach. Sometimes, Lawrence says, these individuals just need a financial carve-out.
Think Connor Roy in the HBO TV show Succession. While his siblings battle over the family’s media business, Connor is largely interested in doing his own thing.
The Anonymous wants to keep mum about the family fortune, and is fearful that others will immediately dislike them because of their wealth. Some young family members may not disclose their wealth at post-secondary school, for example. Others may prefer to donate anonymously. This works easily enough if the whole family agrees, but for those wanting to leave a legacy through philanthropy, some conflicts can ensue.
Moguls, on the other hand, prefer to use their money to achieve personal power — they often build large corporations and use their success to influence politics. Think Logan Roy, the patriarch in Succession, Lawrence says. A mogul will likely see the world differently than a phobic. Neither is wrong, she says, they just “see the world completely differently.”
A VIP is someone who may have spent their summer on a mega yacht in the Mediterranean. They use money for status, prestige and fun. These are likely younger family members and the behaviour is often just a stage. Still, grandparents may think they’re wasting their hard-earned money and decide to put up guard-rails.
For Accumulators, there is never enough money. An accumulator could have billions, be told by financial professionals that the next 10 generations will be taken care of and still want to build more wealth.
Lawrence says that can sometimes come from growing up with scarcity and suddenly having a lot of money, perhaps from growing and selling a business. Conflict can arise when an accumulator wants to keep reinvesting in a family business while other family members feel they have enough and want to start giving money away or prepare to exit.
Gamblers, simply put, like to gamble. They may be more likely to invest in cryptocurrency, open restaurant after restaurant that fails or hit up Las Vegas.
“They often believe that they have some sort of competence that other people don’t have,” Lawrence says.
That can be alarming to other family members and leave family-office advisors thinking about what kinds of safeguards to put in place. Lawrence notes there is also a fine line between a personality that enjoys risk and an actual addiction issue.
Finally, Innovators are typically smart, analytical people who have built businesses. They may not like listening to wealth managers because they think they know all the answers. And while they may generally be more intelligent than other family members or their advisors, they need to understand an outside perspective is always helpful.
An Innovator who is also a Family Steward, for example, can sometimes roll over everybody else. Advisors may need to remind them when they’re running afoul of the family’s collective values.
Ultimately, Lawrence says, these personalities are designed to give people some common language to discuss issues that drive conflict within families.
Personality typing can help family members realize that their relatives “aren’t necessarily jerks,” she adds.
“They just see money maybe differently than you do.”
Leah Golob is a Toronto-based freelance journalist covering business, personal finance and consumer issues. Her work has appeared in The Globe and Mail, The Toronto Star, the Canadian Press, The Logic and Yahoo Finance Canada. She has been recognized with awards from the Portfolio Management Association of Canada (PMAC) and the Society for Advancing Business Editing and Writing (SABEW Canada).
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