By Thomas Twombly, President

How do you define “wealth”?

For over twenty-five years I have been asking this same question to better understand how to communicate the value of a firm like Lucien, Stirling & Gray. I’ve asked clients, colleagues, friends and business associates in various settings. I’m curious to hear people’s answers, because how they define “wealth,” individually and collectively, is one of the keys to helping them plan, save, spend, and invest effectively. It’s directly tied to how we differentiate ourselves from other firms in delivering wealth management services in a meaningful, valuable way.

Pause and think about how you define wealth.  What comes to mind? What’s interesting about most of the responses I hear is that rarely does someone’s primary answer center on money.  Did you find yourself thinking about your family or your relationships with your children? Those are common responses I hear. “My health” or “the special friends I have in my life” are others. “My faith” or “the sense of deep satisfaction I get in building my business and serving others” are yet others I’ve heard.  Was your answer to this question similar to any of these statements?

Curiously, the subject of material wealth often doesn’t arise until I ask, “How does money factor into your definition?” We live in a capitalist society, where our notions of success and personal accomplishment are frequently tied to our balance sheets, so money is clearly an important component of how we define wealth.  But, it’s interesting and telling that when the conversation does turn towards material success as a primary measure of wealth, it’s often accompanied by a sense of discomfort. I often hear statements like “but there’s so much more to it than that.”

This raises some interesting ideas, and points to some of the subtleties we encounter in helping clients to build and manage wealth on their terms. Here are some other questions to ponder:

What is the difference between having material riches and being truly wealthy?
Are lottery winners instantly “wealthy”, or is there something more to wealth than a big pile of cash?

Some people see no difference, and would answer “yes” – a big pile of instant cash does make one wealthy. But our experience indicates that the people who value our advice most attribute deeper, more subjective, more personal qualities to the notion of true wealth. It is in addressing these personal qualities where we differentiate ourselves as advisors, and where we help clients align their material wealth-management activities with their personal, social, and even spiritual wealth-building activities.

Throughout history, and across cultures, elements of well-being, stewardship, and philanthropy are important to the concept of building true wealth. There is a shared belief that material success is an important component, but it requires careful shepherding. Miguel de Cervantes, the author of Don Quixote, said: “The gratification of wealth is not found in mere possession or in lavish expenditures, but in its wise application.” Ebenezer Scrooge, in Charles Dickens’ A Christmas Carol, is estranged from society, plagued by miserly greed, and tormented by ghosts until he reaches an epiphany that true well-being and fulfillment comes only in generosity and using his riches in service to others. Wealth, as opposed to riches, connotes a greater sense of purpose, continuity, and congruence between what you own and who you are; how you came by it, and how thoughtfully you handle it; how it affects you, and to what extent it defines you; how you pass it on, and how well you prepare your successors to receive it.

So wealth is a multi-dimensional concept. Much like an iceberg, where only a small percentage is exposed above water, what one discovers about exploring personal definitions of wealth is that the largest and most meaningful dimensions are frequently deep beneath the surface.  Those dimensions are less obvious, but often much more important precisely because they are often overlooked.  Your personal definitions of wealth should provide ballast, stability, weight, and meaning to a long-term wealth-management plan.

Material wealth is the comparatively small part of the iceberg that catches one’s eye and attention. It’s the easiest part of your wealth to define and quantify.  It’s the part of wealth that’s is easiest to feel, touch, and count. It’s what you own, what you can sell to a stranger, what you can convert relatively quickly to cash. It’s what the banker asks you to quantify when you apply for a loan, what the insurance company asks for to decide how much coverage they’re going to sell you, or what the IRS wants to know when determining if your estate is subject to taxes at your death.

In many respects, it’s the shallowest most impersonal dimension. Unfortunately, it’s also the dimension many financial professionals hesitate to venture beyond.

Think about the last time you applied for a loan, or refinanced the note on your house. You had to list everything you owned, and assign a fair market value to it – property, business interests, investment accounts, retirement accounts, savings, antiques, jewelry and collectibles, etc. Then you had to subtract from that everything you owe – mortgage, car loans, consumer debt, business loans, outstanding taxes etc. There, staring you in the face was your “net worth.”

How did that feel? Was it an accurate measure of all that you are and all that you treasure? Did you feel a sense of comfort, confidence, and well-being? Or were you left with a sense that you’d been reduced to a mere shell of your true self?

“Wait!” you wanted to say, “That isn’t the whole story, there’s so much more…”

There is. And that’s why it’s so important to go beneath the surface to explore what else is there.

Continued next month