Wealth mentor Diana Chambers explains "financial emotional intelligence" for high net-worth individuals

Diana Chambers

Gordon Ramsay has told his four teenage children that they won’t be inheriting his multi-million pound fortune – nor does he allow them to fly first class or even eat at his Michelin star restaurants.

“It’s definitely not going to them, and that’s not in a mean way, it’s to not spoil them,” the chef told an interviewer earlier this year.

When it comes to making life-defining financial decisions that touch those we love – whether it’s a first-generation business owner concerned about protecting a legacy, or a wealthy couple planning to marry – emotions can run high. We can find ourselves caught up in a complex web of misunderstandings; family ties can be broken instead of strengthened, and wealth squandered in wasteful lawsuits.

As a family wealth mentor, working with individuals and families of significant wealth, I talk to clients about financial emotional intelligence (EQ). It’s a skill few of us have been taught, and is not about handling investments or the tax implications of our estate plans.

Financial EQ is understanding our relationship to money, its impact on those around us, and the skill to talk about it honestly and openly with others who may have very different perspectives. It requires self-knowledge and interpersonal skills.

Money autobiography

To understand the impact wealth has on us and on our relationships, it’s necessary to review our story through the lens of money; how it was handled in our family and what significance it carried. A good way for anyone to deepen their money awareness is to write a money autobiography (the guidelines can be found online) to get to the core of what has shaped our relationship with money.

Knowing what drives us and our belief systems about money, allows us to make conscious choices and communicate them to others.

We can identify the specific money messages we received, couched in absolute language, such as “Never be in debt”, “Always be the first to pay for anything”, and “Money doesn’t grow on trees”. We can decide which elements of these messages still serve us well now and which we would do better to stop.

Knowing what drives us and our belief systems about money, allows us to make conscious choices and communicate them to others.

Wealth transition

If, for example, a family is anticipating a wealth transition, it is most likely to be successful when every family member is well prepared and informed and there is regular and easy communication, with the older generation listening to the aspirations of younger family members.

If a family starts talking about transitioning its wealth only when the process is under way, it’s already too late. That’s a recipe for failure and possible confrontation; before you know it, the family element is lost as lawyers become involved and communication is distanced and contractual rather than direct and personal.

(FILES) A picture taken 17 April 2007 in...
I always encourage constructive conversations about money (Source: Getty)

I always encourage constructive conversations about money and, whatever you think about Gordon Ramsay’s decision to go public with his intentions, at least his children know where they stand. A series of family meetings is a way to reinforce the values which are important to each member; it also allows the children to express their thoughts about how they would like the wealth to be passed on to them and possibly their children. It invites them into the conversation as active participants and is a way for the older generation to gain insights into what motivates younger family members.

Pre-nuptials

Financial EQ is crucial for a couple agreeing a pre-nuptial agreement. Some people see them as calculating or unromantic, but I believe they serve a positive purpose, requiring a couple to have an open, honest conversation about money early in their relationship. If a couple can’t have that conversation they shouldn’t be getting married.

Couple Wed At Festival House In Front Of Blackpool Tower
If a couple can’t have a conversation about money they shouldn’t be getting married. (Source: Getty)

A common mistake is to think a snatched conversation over the kitchen table is a proper discussion; it’s not. A series of frank conversations about attitudes towards financial dependency, risk tolerance, and spending patterns will allow both partners to decide what they want to achieve together and drive the process towards a common goal. Negotiating a pre-nuptial agreement typically takes several months; talking things through at every stage of the process strengthens, rather than weakens, the relationship.

Philanthropy

EQ is an essential life skill. If a family makes money its ultimate priority, the people concerned can lose themselves in the process – they no longer own the money, it owns them. I do a lot of work with wealthy individuals who want to make an impact by committing themselves to philanthropy.

If a family makes money its ultimate priority, the people concerned can lose themselves in the process – they no longer own the money, it owns them

The first step on this path is heightening their financial EQ. Only by understanding and accepting what they have been given can they find the best ways to express their gratitude, finding the right cause and entering into genuine partnerships with the organisations they support.

Once they have understood the real nature of money – both what it does and does not offer – they are ready to claim true wealth: the depths of their relationships, the communities to which they belong and the causes to which they give themselves.

Diana Chambers is author of True Wealth: Letters On Money, Life, and Love (Altitude Press, £21).

Related articles