Many might think that only loss or decrease of wealth can cause a deterioration of person’s psychological health and wellbeing. However, this is not the full story. There are many cases where people who experienced a sudden increase in wealth had severe emotional difficulties to cope with such a change, as well as negative impact on their quality of life.
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Whomever is following financial news, have heard about the latest developments in cryptocurrency, stock, commodities, and futures investing field where some professionals with diverse profiles, working styles and guiding principles quite suddenly became multimillionaires or even billionaires. A good example is a recent cryptocurrency exchange’s Coinbase Initial Public Offering, which made its management and early investors ultra-wealthy[1]. In circumstances like this, when a large amount of wealth is suddenly obtained, an individual might be dealing with so called “Sudden Wealth Syndrome”, which is a type of distress[2] that negatively affects persons emotional state and impacts daily life.
However, there is also a so called “another side of the coin”, which is a sudden loss of wealth by an individual, a family, or a company. Just recently Bill Hwang, an investor and founder of Archegos Capital Management built a fortune of around USD 20 billion but just in a matter of days lost it due to an unsuccessful total return swaps operation[3]. Even though those two examples are opposite extremes, individuals involved in both cases are experiencing significant emotional challenges.
Here are a few more scenarios of a sudden gain or loss of wealth:
- Booking an extremely high amounts of profits or losses from trading / investment activities or business operations;
- Buying at “the top” or selling at “the bottom” of stocks, cryptocurrencies or other financial instruments;
- Getting the position liquidated during margin trading;
- “Hodling” (holding) their position of cryptocurrencies through the entire “bear market”;
- Experiencing financial losses due to high market volatility;
- Taking a company or startup public;
- Experiencing an impact of unexpected events, such as financial crisis or viral information spread about a market, product or company on the asset’s portfolio;
- Creating a successful blockchain protocol, blockchain assets management fund or cryptocurrency exchange or another technological invention;
- Winning a lottery;
- Getting a company / start-up acquired;
- Receiving a lump-sum payment from retirement or legal settlements;
- Inheritance process where high amounts are received or awarded to a party.
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I will not look into a bigger societal impact of the above-mentioned changes in wealth. However, I find it important to re-consider how those changes can impact the psychological health and wellbeing of individuals involved with questions of wealth management. What effect does the sudden change might have on them or their close social circle?
Dealing with impacts of gain or loss of wealth
You might also wonder: who are the people dealing with losses or gains in wealth as part of their profession? My list is not exhaustive but those are:
· employees of assets, wealth management, alternative investment, private equity, venture capital, financial advisory, family offices, investment banks, hedge / crypto assets funds;
· private investors, lawyers, accountants, professional traders, estate attorneys as well as C-Suite executives or entrepreneurs;
· founders of successful stock / currency / cryptocurrency or derivatives exchanges and technology start-ups.
Those individuals often are exposed to wealth management questions and therefore risks are part of their daily work. I did not mention yet amateur stocks / currency / cryptocurrency or derivatives traders who are not necessary professionally trained on the subject but are operating in those businesses. Finally, we should talk about (ultra)-high-net worth individuals or heirs for whom wealth management questions might be a profession, legacy, mandate, or a lifestyle.
I would like to have a look at 3 important areas, which usually are impacted by one or a number of events associated with a change in individual`s wealth:
Decision making – due to such a change, individuals are to make decisions they would not make if they would have not become wealthy extremely fast. Such a decision can create risks or cause losing or deteriorating of their wealth. A number of findings from “Sudden Wealth Syndrome” studies confirm this significant challenge. On the other hand, decision-making capacity, including creativity and analytical skills is also getting impaired in acute stress or under emotionally triggering circumstances. This is very common in high-stake situations when, for example, large amounts of money are in question or a high value is attributed to certain possessions.
Interpersonal relationships – whether it is a gain or loss of wealth, individuals affected by this change often report negative impact on their relationships with significant others and friends followed by feelings of isolation and loneliness. Dramatic changes also significantly increase a likelihood of conflicts in the family due to a mismatch of expectations regarding questions of inheritance, sharing a wealth in case of divorce, financial performance, or philanthropic activities.
Emotional swings – emotional turmoil is very characteristic during any substantial change, including wealth topics. Affected individuals are often dealing with a broad spectrum of intensive emotional reactions: initial shock, extreme feeling of happiness, feeling of guilt about their wealth, and severe fear of missing out (FOMO) or losing their money. Questions of trust and safety often surface which might cause anxiety and additional tension in social situations.
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Specialized and exclusive support is available
Wealth related topics or challenges are not new therefore there are professionals specialized in this area. Wealth psychologists could be a good choice. Those specialists would apply principles of psychology and / or cognitive science to support specific psychological needs of a customer. Wealth psychologists are also receiving more publicity (articles, blogs, interviews, podcasts) and even represented in movies and series. Quite an intensified and condensed example is Wendy Rhoades (played by: Maggie Siff) in the Billions TV series, which does not represent a real life but conveys some concepts of work and involvements of a Wealth Psychologist.
To define it better, a Wealth Psychologist is a professional who specializes in supporting individuals and organizations dealing with wealth-related psychological challenges. Psychological assessment, counseling, and training is often conducted to aid the clients. A big part of work with individuals involves walking a client through this entire change, developing stress resilience skills, helping to eliminate negative feelings, fear, and anxiety as well as putting in place strategies needed to cope with intensive emotional reactions before they appear. This kind of support may make this transition easier and help to avoid taking decisions which could cause damage to the wealth. What is more, an experienced Wealth Psychologist can help as follows:
· coping with new emotions and feelings as well as relieving stress caused by a decrease, loss or gain of wealth;
· understanding individual`s inner motives of life and increasing motivation and productivity;
· reducing a potential negative impact on individual`s psychological health and wellbeing as well as interpersonal relationships;
· eliminating feelings associated with the sudden Wealth Syndrome such as guilt, shame, and fear of losing the wealth.
Wealth Psychologist can also support organizations in improving productivity and psychological wellbeing of their employees who are dealing with wealth management questions by training them to apply emotional intelligence principles and conflict management techniques during their meetings with clients. This helps to communicate more effectively, avoid stress and anxiety. The company and a Wealth Psychologist mutually define the collaboration to focus on areas prioritized by the company. Additional support might also include engaging in a counseling of an important customer of an organization which is beneficial to both a firm and a customer.
I hope the examples above can better illustrate the work of Wealth Psychologist. From one side, this professional can offer an exclusive personalized support to individuals dealing with wealth-related challenges and on the other side, support the companies to serve their clients better as well as to be more efficient in what they do. Ultimately a Wealth Psychologist is a valuable source of new insights. The closer one works with this professional and invests time and effort, the better are the results and speed of development.
Limitless Mind Institute