Behavior may be better predicted by understanding the roles people think they occupy. Personality factors may do no more than simply give style to one’s basic role performances. In the extreme, the self can be conceptualized to be no more than the roles it plays. Take away one’s roles and nothing is left.
—Professor Michael C. Kearl¹  

As advisers, we often think we are discovering the real goals of our clients through a questionnaire that our firms have prepared or that we have created on our own. It would be nice if it were as simple as that! What we don’t find out through such a questionnaire is the underlying factors that were present when those goals were formed. This deficiency can have a direct yet clandestine impact on the goals that clients set and, subsequently, on the investment decisions they make. That’s the critical point at which this topic matters to us. The critical point where it matters to our clients comes much later, when they find that their wealth management strategies are not working as well as they might wish or that gaining agreement on an important family wealth decision is impossible.

In fact, if we go back to the roots of the goal-setting process, we see a continuum that allows us to identify the influences on wealth management decisions in a very efficient way. Basically, the continuum is as follows:

1. Generational biases and prejudices assign roles to family members.
2. Family leadership determines the family’s needs on the basis of these role perceptions.
3. Goals are set, most often to satisfy a set of needs that are based on role perceptions rather than on the genuine needs of the family.
4. The resulting goals then become the determining force in designing investment strategies to fulfill them. They affect asset allocation, asset location issues, and investment selections, among other components. 

The influence of generational viewpoints on the roles that family members perform cannot be ignored. Family roles may be unwittingly “assigned” by older generations that lead the family or may be assumed by family members as a result of the set of dynamics through which the family functions. Our basic generational templates — our generational frames of reference — were built during our formative years, back when we were teenagers. What makes us so sure that generational perspectives have such an impact?  

Karl Mannheim’s work (circa 1970) confirms the formation of an initial set of impressions that give meaning to one’s life experiences during the mid-to-late teens. These impressions are surprisingly strong: “Even if the rest of one’s life consisted of one long process of negation and destruction of the natural world view acquired in youth, the determining influence of these early impressions would still be predominant.”²

Although the biases and prejudices stemming from our generational templates are often subconscious, they are real. They color a person’s view of a role, causing decisions to be made that are based on information or criteria that may be merely assumed. Thus, all the work we do as advisers that is based on the goals our clients tell us has the potential to become, at best, unsuccessful and, at worst, completely irrelevant! 

How Role Assignment Translates into Goal Setting
If we take a look at the differences in outcomes when family members operate within the family system in certain capacities, we can readily see that roles are critical components in goal setting.³ When goals are set that match the family’s authentic needs, effective strategies can be designed for achieving those goals. This approach supports the notion of a continuum for family and individual investment goal setting and, ultimately, for the entire wealth management process.

In understanding this continuum, we can take the wealth management process to a much higher level by directly aligning our services with our clients’ needs. The roles that family members perform, either accurately identified or inaccurately imposed, are foundational components of the process of identifying goals for every aspect of wealth management for the family. 

Whatever the generational frame of reference of family leaders, it will color the leaders’ perception of the role of each family member as well as their own. For example, a family member who is viewed as the “black sheep” may cause family leaders to identify a need to “protect” the material wealth from the “irresponsible” actions of that family member. Whether the family member is indeed an irresponsible black sheep or if that is merely a perceived role assigned by family leaders seems irrelevant to the identification of the need to protect the material wealth by the leaders and family members (other than the black sheep). Family leaders are subsequently motivated to set certain goals — either alone or with the help of family members or external advisers — designed to fulfill the need to protect family wealth.

Or one adult child may be viewed as more competent than another to take over the family business simply on the basis of family leaders’ perception, with no effort to understand either child’s true passions or abilities. Needs are identified, goals are set, and mechanisms are put in place to transfer control of the family business to the adult child who is perceived to be the most appropriate person to fill that role.

An Unmatched Level of Client Service
Brunel (2006) observed that individuals have multiple goals with a different risk level for each goal, and the achievement of those goals may be pursued simultaneously although with different priorities. He points to Statman’s observation that people who buy insurance may also buy lottery tickets and are thus risk averse when buying insurance and risk seeking when buying lottery tickets.⁴ This observation means that investors may identify multiple needs, yet their true concerns may be less obvious. In the second case study cited by Brunel and Gray (2005), the key to unlocking the authentic needs of the family hinged on the fact that the patriarch was performing a role that was inappropriate for his stage of life. Therefore, his need to continue building wealth within the perceived CEO role that he was carrying over to the family office was an inauthentic, inaccurately identified one. His underlying concern was that the three pools of wealth within the family would spoil his grandchildren. This concern was masked by his focus on performing the CEO/build-wealth role as head of the family office. Through the process of education used by the adviser, the patriarch’s acceptance of his new and more appropriate role of educator and mentor allowed the identification of the family’s authentic needs, which subsequently enabled joint decision making by the family and the design of a workable goal-based allocation. In the process, he was able to move beyond his generational biases to see the authentic roles of his children and to give their needs the validation that had long been withheld.

Needs — and the goals formulated from the motivation to satisfy them — are identified through the family governance system over which generational perspectives hold sway. What we find, then, is that we have been operating in the dark in assuming that the goals our clients tell us are indeed the goals that will work for both the family and its individual members. Knowing this, we advisers can begin to see our own roles with much greater clarity. We can become much better equipped to discover how our clients’ goals have been formed and if the needs that have been identified match up with the real goals of the family.

This foundation is one upon which real trust can be built. It is a formula for continually earning our clients’ loyalty on the basis of an authentic desire to address their needs directly and in as robust a manner as possible.

Lisa Gray is the founder and managing partner of Gray Matter Strategies, LLC. Segments of this article have been adapted from a previous article by the author published in the Winter 2008 issue of the Journal of Wealth Management.