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Genograms Show Where Finance Meets Emotion

By Thomas Coyle January 27, 2015

Taking a page from medical science, some wealth advisors use “genograms” to gain sharper insight into their clients’ financial lives and relationships. But what these advisors look for in genograms, and to what degree they use them as tools for collaborating with clients or other professionals, can vary.

Genograms look like flowcharts but work like annotated family trees. First described in 1980 as a tool for sharing patients’ family-health history among physicians, these diagrams have since taken root in psychology, social work, and — more recently — wealth management. In every field, they’re meant to help professionals spot behavior patterns and hereditary tendencies that may affect their patients or clients.

Genograms can show advisors, for example, which relatives a client has pledged to support through college, how family members get along and to what extent they start businesses or go broke. But whether they’re used primarily to collaborate with lawyers, accountants and other centers of influence or to enhance advisor-client conversations depends on the advisor.

One practitioner who uses genograms mainly for peer-to-peer cooperation is Michael Whitty, an estate attorney and financial planner with law firm Handler Thayer in Chicago. “I usually start with a plain informational family tree that can be useful in itself and shared with other advisors,” he says. But he also makes “a confidential version with special symbols to illustrate personal and family dysfunctions, issues, and challenges.”

Though there are standardized symbols for showing interfamily relationships, some advisors prefer using their own codes, says Kimberly Curtis of Wealth Legacy Institute, an RIA in Denver that manages $54 million and charges by the hour. Similarly, some advisors prefer using free or cheap software — GenoPro is a favorite — to help them build genograms, while others make do with pen and paper.

For her part, Curtis takes a “quick, conversational” approach to genograms. The process often starts with her and a client huddled over a legal pad as they map out the client’s family ties to money. The point of doing so is threefold, she says: first, to get a good sense of how the client’s present and future financial obligations color her financial picture; second, to discern patterns — bankruptcy, say, or divorce — that may recur over generations and shape the client’s financial biases. Finally, Curtis uses genograms to “improve the conversation” with clients. In all events, she sees genograms as part of a collaborative process, undertaken to inform advisor and client alike.

As Kirby Rosplock uses them, genograms are more of a client-education tool and less of an aid in shaping financial plans. But that’s largely because of her customer base. The firm she heads, Tamarind Partners in West Palm Beach, Fla., consults to ultra-rich families, who, Rosplock feels, need a solid sense of where their money came from to keep it from dissipating within a few generations.

Kirby Rosplock

For her clients, “understanding the family system is everything,” she says. “They can’t control markets, but they can control education, awareness and mentoring.” And genograms can help multigenerational families seize opportunities and avoid the kinds of trouble that can cost real money.

For example, a genogram might have kept one family Rosplock knows from giving a particular scion a big legacy too soon — or at least warned of the need to train the young man to his responsibilities. “It’s not that the plan was at fault,” she says. “It was about a need for education,” and a genogram might have brought that to light.

Word of Warning

Genograms are integral to Kinsight, an RIA in Birmingham, Ala., with $560 million under management. “They’re very powerful,” says Charles Haines, who runs the firm. But he thinks advisors should approach them with caution. In the wrong hands, a genogram can highlight traits “a couple has been fighting about” and make matters worse. Handled right, however, they can uncover “positive values” and put a family on track to a healthy relationship with its money.

That’s why Haines works with a local psychotherapist to help him create genograms for clients — with the counselor concentrating on emotional aspects while Haines focuses on financial details. This double-team approach keeps the professionals from getting in over their heads. “Money touches on so many areas of our lives,” says Haines. “You really have to be careful.”