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Wealth is about more than money. By finding purpose, building relationships, exploring new experiences and giving back, families and individuals can find deeper, more meaningful levels of wealth.
People want more from life than money. They want to develop understanding. Pursue dreams. Have incredible experiences. Give back. They want to cultivate a true sense of wealth—abundance, joy, satisfaction and, above all, meaning.
Many wealthy families know that money doesn’t come filled with deeper meaning or equate to a sense of prosperity. That’s why families are adopting a more comprehensive view of wealth based on the idea that growing financial capital isn’t an end in itself, but rather a facet of building three additional types of capital: social, intellectual and human. Think of these “four capitals” as pillars of a house—they balance and support one another.1 The new standard for wealth is to create meaning and build these pillars first.
Each of the four capitals deserves in-depth exploration, but focusing on human capital is a good place to start, because it’s what gives us the capacity to develop into something greater in the future. Human capital is the sense of potential that aligns our talents and experiences with our values and strengths to achieve our unique purpose. That’s why wealth creators, many of whom are driven to succeed by a deep sense of purpose, often have human capital in spades. Financial capital tends not to be their primary goal, but rather a by-product of their hard work and determination to follow their calling.2
Wealthy families know that money doesn’t come filled with deeper meaning or equate to a sense of prosperity.
But not everyone is born with a clear sense of purpose, or the know-how needed to cultivate it. Just as fostering financial knowledge requires different strategies at each stage of development, human capital is fostered by taking certain steps during each of life’s chapters. We define and hone purpose as we age, transforming and maintaining it into a satisfying calling well into adulthood. Talents, skills, knowledge, experiences, values and strengths all feed into human capital, and the process outlined here provides scaffolding to support those elements.
Think of people you admire who have various forms of wealth. Perhaps they have a lot of money, or financial capital, but more likely you admire them for their achievements, experience or sense of fulfillment in other areas of life. They likely know the answer to the question: What kind of life do I want to live?
Asking questions to prioritize the kind of life one wants is essential to defining one’s purpose.
When families don’t explicitly talk about the purpose of life, the rising generation may base life decisions on how they think they should live, rather than on the life they want to live. They might, for instance, feel they should follow in a parent’s footsteps and take a high-powered position in the family business, without acknowledging that what they want is a simple life with different, less-pressing obligations. It’s easy to be guided by inertia instead of intent.
Every life has elements of luxury, meaning and aspiration. These are not mutually exclusive, and asking questions to prioritize the kind of life one wants is essential to defining one’s purpose. So, what does purpose look like? First, it’s powerful, a form of inspiration. Some think of it as a calling, others define it as a niche. It’s intricately related to our interests and strengths, which can grow over time into talents. Think about a person with a natural ability for chess. If that person also enjoys the game, they can focus and stay in “the zone” for years, building their skill. The fact that the player likes chess allows him or her to be absorbed by it, which in turn strengthens his or her talent.3 That type of aptitude can excite our passions and make us feel alive.
Consider, for example, a daughter who demonstrated a passion for literature early in life. She knew her purpose was related to the field, and that she wanted to build a meaningful life devoted to it. With her family’s encouragement, she earned an advanced degree in writing and worked with revered authors. Then, after gaining knowledge and experience, she was able to manifest her greater purpose by starting a small, independent publishing house that funded struggling writers and published underrepresented voices.4
Because she made choices that aligned with achieving her purpose and reaching her potential, the daughter was equipped to leverage her family’s financial capital to build her own human capital. She didn’t see herself as just an inheritor—someone who passively receives money—but rather as a steward— someone who takes on a responsibility to use wealth in a meaningful way.
A clear sense of purpose provides the motivation to increase one’s knowledge, experience and skills. And this is not just a loosely formed idea: New Paths to Purpose, a multi-million dollar academic research project led by behavioral scientist Richard Thaler, is exploring the links between purpose and many aspects of life ranging from wealth to well-being. Yet, because purpose can be elusive, helping the rising generation find theirs can require structure and guidance. Families can help their next generations drill down to their purpose by pushing them to explore activities that they enjoy and to find out which ones they do well. Start by asking: What are you good at? What gives you strength? 5
Determining what drives you can be satisfying. But defining passion and purpose isn’t the same as knowing what to do with them.
The next stage in building human capital is knowing how to translate purpose into meaningful, lasting work or service. Bill Burnett, co-author of “Designing Your Life: How to Build a Well-Lived, Joyful Life,”6 notes that connecting purpose to your work is fundamental to what he refers to as a “coherent life.” Burnett defines this as a life “lived in such a way that you can clearly connect the dots between three things: who you are, what you believe and what you are doing.” Sometimes the connection between a day job and one’s purpose is obvious, but many times it is not. A young artist working as a barista might not find pouring espresso relevant to making art. But experiencing daily struggles and learning firsthand how much persistence is required for a life in the arts can be a necessary test of one’s commitment.
The rising generation often doesn’t see the struggle.
Self-reliance, determination and resilience can be prominent highlights of a wealth creator’s narrative. But the rising generation often doesn’t see this struggle. They typically see the family wealth creator only as a successful, powerful figure. In fact, personal failure may not seem to be an option. This may result in pressure to succeed without experiencing any trials or tribulations, which may lead young adults to abandon a productive path at the first sign of difficulty.
Young adults—and their families—may want to consider reframing how they relate to their work by “job crafting.”7 That is, determining how their work helps others and defining what aspects of their job align with their purpose. The process is about understanding how one’s role, however small to start, affects the bigger picture.
Take, for instance, a client who quickly exited an investment banking job when she was younger to pursue a career as a fashion designer. Through job crafting, she says that she might have come to value the analysis she was providing to the more senior bankers—and appreciate the experience and exposure she was gaining—rather than focusing on the long hours and routine tasks. She is determined to share her own experiences with her son and help him job craft so that he is empowered to pursue his passion and purpose in anything that he does.
Sustaining your purpose isn’t always about growing your own business venture. It can also be about helping others plant their first seed.
For executives, redefining their purpose is the essence of retirement. When someone retires, especially if it’s from the intensity of a high-powered career or running their own business, it can be jolting to have such wide-open days. To help fill that void, Leslie W. Braksick, Ph.D., M.P.H., and Mark Linsz co-founded My Next Season, an organization to help retiring executives. One aspect of their unique strategy is to connect the talented pool of retiring executives with nonprofit leaders who are looking for strong mentors. The scenario allows the executives to build retired lives that are anchored in purpose, while also fueling growth for nonprofit organizations, whose success matters to everyone involved.
Finding and manifesting purpose are just the beginning of a dynamic process that doesn’t end when a job or even a career does. The real challenge is sustaining purpose and passion over a lifetime.
Consider a highly successful entrepreneur who started a chain of grocery stores. His low-cost, high-quality concept for organic products revolutionized the food industry, and he took pride in fulfilling his purpose in making healthy food more accessible to everyone. But eventually he realized his stores weren’t serving lower-income families. He decided to use his expertise to bring healthy lunches to struggling schools and to supply organic produce to “food deserts,” those places that lack fresh fruits, vegetables or other healthy foods, which are usually found in impoverished areas.8 His passion for food and helping people eat healthier hadn’t changed; it had evolved.
When wealth is equated only with monetary gain, it presents challenges to building human capital.
That’s why building self-reliance early on is important. When this entrepreneur approached a turning point in his career, he was able to pivot by applying the confidence, experience and leadership skills he’d gained in his previous venture to his new goals, rather than shrinking from a challenge.9
And sustaining purpose and passion isn’t necessarily related to a career. Empty nesters often recalibrate their passions when children leave the house and transfer the energy that went into raising a family to new projects or hobbies. Older adults can continue to challenge their capabilities in new ways. Sustaining one’s purpose isn’t always about growing your own business venture. One prominent entrepreneur is using retirement to speak at conferences and work as an advisor to new business owners. Another, who had been an executive at a motorcycle company, now uses his brand recognition to ride for charity and raise money for causes he believes in.
There once was a boy who loved a tree. Despite their mutual love, the boy began to use the tree—for food, money, even a boat. As the boy continued to take from the tree, the tree died, and eventually became a stump.
This scenario is from a classic children’s story.10 Some families read the story as an ode to parental love, but some may see a cautionary tale: The parent gives, and the child takes without boundaries or accountability. The boy never thinks about sustaining the tree’s resources to allow future generations to eat its fruits or enjoy its shade. It’s possible to see the tree as an “extreme giver” who doesn’t set parameters and, in that light, it’s a disturbing tale about unsustainable family behaviors.11
By giving endlessly with the intention of supporting their children, parents can end up undermining themselves, their children and future generations. When powerful individuals map out their children’s future or buffer them against failures, they may deny them opportunities to build self-reliance or undercut the satisfaction they would derive from blazing their own trail. As a result, the younger generation may end up feeling disempowered, a situation that can deflate the search for purpose and make them more likely to depend on family money.12 It’s important to make sure every generation asks these key questions:
• Is earning money important? Need can be psychological. Some individuals need to earn their own money because it builds their self-esteem, while for others it gives a sense of control and security. Still others may find meaning in lifelong volunteer work, and receiving financial support may not have an impact on their sense of self-worth.
• Do other people’s opinions matter? For some, pursuing a passion without the blessing of their parents may erode confidence. For others, the prestige of a high-profile position may be worth more than money. An individual’s self-confidence can be informed by asking whose opinions matter to them.
• How much is too much? According to a recent survey of high-net-worth individuals, about half of the respondents believe wealth could provide a disincentive for the recipient to achieve full potential if they were to give the next generation too much.13 Each family has a different definition of “too much.” (For more, read How Much Should I Give to My Family? at pbig.ml.com/howmuch.) This conversation can also lead to the discussion about what a family can actually afford to give (in order to sustain wealth) and what parameters should be put inplace around gifts. (Research shows young individuals find parameters empowering; for more, read Can You Make the Money Last? The Road to Sustainable Wealth., at pbig.ml.com/sustainingwealth.14)
Connections between money and its meaning must be built over time.
When wealth is equated only with monetary gain, it presents challenges to building human capital. By emphasizing money over meaning, young adults lose the urge to draw, revise and shape their own life plan.
The connections between money and its meaning must be built over time through day-to-day actions and choices. It is important that each individual and family be given the opportunity to walk his or her own path to create that meaning.
If a family creates a culture in which a broader definition of “capital” is highly valued, their children can be better poised to use wealth as a means to find purpose and pursue passions, rather than as an end in itself.
Behavioral Finance and Goals-Based Consulting at Merrill Lynch Wealth Management helps clients understand their own behaviors and potentially make better financial decisions as well as helps guide clients to conduct more rational investing behaviors.
STACY ALLRED is a managing director leading Merrill Lynch’s Center for Family Wealth, which includes Center for family Wealth Dynamics and Governance® and the Strategic Wealth Advisory Group. Allred supports multigenerational families in deliberately navigating the opportunities and challenges of wealth and creating learning families—building core competencies to effectively integrate wealth. She earned her B.S. in accounting and business, and received a master’s in taxation, with distinction, from DePaul University.
1 James E. Hughes Jr. developed the four capitals. See Family Wealth—Keeping It in the Family: How Family Members and Their Advisors Preserve Human, Intellectual, and Financial Assets for Generations, Bloomberg Press, 2004.
2 Alvin Lee, “The Entrepreneur’s Motivation: Not What You Think...” Forbes, 2012.
3 For more on being in “the zone,” read Mihály Csíkszentmihályi, Flow: The Psychology of Optimal Experience, Harper Perennial Modern Classics, 2008.
4 Jennifer Maloney, “A Literary Koch Launches New Publishing House,” Wall Street Journal, 2015.
5 Adapted from Tal Ben-Shahar, Choose the Life You Want, The Experiment, 2012.
6 Bill Burnett and Dave Evans, “Designing YourLife: How to Build a Well-Lived, Joyful Life,” Knopf, 2016.
* Justin M. Berg, Jane E. Dutton and Amy Wrzesniewski, “Job Crafting and Meaningful Work,” American Psychological Association, 2013.
** Amy Wrzesniewski, Justin M. Berg and Jane E. Dutton, “Turn the Job You Have into the Job You Want,” Harvard Business Review, 2010.
7 “Managing Yourself: Turn the Job You Have Into the Job You Want,” Harvard Business Review, 2010. To create a visual plan for redesigning your job, read the Job CraftingTM Exercise booklet at jobcrafting.org.
8 “Trader Joe’s Ex-President to Turn Expired Food Into Cheap Meals,” NPR, 2013.
9 For more on turning points, read “Are You Ready for Life’s Big Changes?,” Merrill Lynch Advisor, 2015.
10 Shel Silverstein, The Giving Tree, Harper & Row, 1964.
11 For more on givers and takers, see Adam Grant, Give and Take, Penguin Books, 2014.
* For more, watch “Why 30 Is Not the New 20,” TED Conferences, LLC.
** For more, see Meg Jay, The Defining Decade, Twelve, 2013.
12 James E. Hughes Jr., Susan E. Massenzio and Keith Whitaker, The Voice of the Rising Generation: Family Wealth and Wisdom, Wiley, 2014.
13 For Merrill Lynch Private Banking and Investment Group’s “Approach to Strategies About Giving” survey, 206 high-net-worth (HNW) individuals, with assets of $5 million or more, completed an online survey in October 2014 about their approach to giving.
14 “The Meaning of Sustaining Wealth” survey was conducted in December 2013 by Phoenix Marketing International, an independent market research firm, on behalf of Merrill Lynch Private Banking and Investment Group.
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