What Is It?
According to the Money, Meaning & Choices Institute (MMCI), the term Sudden Wealth Syndrome (SWS) describes the issues and symptoms of people dealing with the stress of sudden success or wealth. Some have struck it rich through entrepreneurial ventures and corporate stock options. Others have made their fortune through an inheritance. The problem is that, like the old adage says, money can't buy happiness.

 

"Money, even though in our culture it is supposed to equal fulfillment and happiness and everything we could ever want — it doesn't," said Joan DiFuria, co-founder of the Money, Meaning & Choices Institute, which offers help to those suffering from SWS. "It's not a panacea for our problems."

 

DiFuria first started seeing an increase in Sudden Wealth Syndrome cases about five years ago, due in part to the huge dot-com boom.

 

"Stock options went up and really, as of the next day, they could stop working for the rest of their lives," she said. "I saw people come to terms with this new identity, crisis of purpose and meaning at a very young age. They were starting to ask more psychological, philosophical and existential questions of 'Who am I if I'm not my job?', 'Who am I if I don't have to work for the rest of my life?', 'What do I really want to do?' and 'Why is it when I have all the money in the world I think I'm supposed to be happy and I'm not?'"

 

Part of the problem comes from the background of these new millionaires. Many of them were raised in frugal homes and expected to have to work for the rest of their lives. JoAnna Watson, a therapist who deals with SWS in her practice, says many of them simply don't know how to be rich.

 

 "One of the advantages of old money is that the children have been bred and trained from birth to know what to do: How to handle it. How to think about it. How to find meaning in it. What it can do. What it can't do. How to maintain it," she said.

 

"People that are new to their money may not even have a sense of that if they spend it it's not going to be there — or if they spend it it's going to affect the long-term results," she added. "They don't necessarily have an idea of what saving does for them and what investing does. In other words, there are no grays between having a minimal amount of money and having a great deal."

 

The Symptoms
It may seem strange to talk about the difficulty of sudden wealth, but the fact is that stress comes from change, and even a positive turning point such as becoming rich can be difficult to handle.

 

"The reality is it's just a different host of issues that come with sudden wealth, as comes with any rite of passage such as childbirth or marriage or death or taxes," said DiFuria.

 

Watson agrees. "It's actually similar to symptoms that people experience during any major change in their lives," she said. "There's the shock period. There's the questioning period. There's the lack of trust — you know, 'Am I going to return to the old state?'"

 

In fact, the MMCI has compiled a list of symptoms and has found that people suffering from SWS tend to have a least three. They include:

"Guilt is a big one," emphasized Watson. "In my new world, there are other millionaires that I'm rubbing shoulders with, living a faster lifestyle maybe, sitting in first class or whatever it might be. Then I go home and visit my parents for Thanksgiving and they're still in their little three-bedroom bungalow."

 

Watson says there are practical challenges that stem from that guilt, such as how to deal with long-lost relatives who show up asking for money, how to handle jealousy among siblings, or whether to increase the size of Christmas gifts. But she says there is a more fundamental and basic issue that must first be addressed.

 

"How do they bridge their old sense of themselves and their former expectations with who they are now? That's a big question," she said. "That's a part of what sends people into this tailspin is they have to change their values. They have to say, 'Okay, what's going to give me day-to-day meaning now that I'm not waiting for my next paycheck or waiting to pay off my mortgage?'"

 

Is Therapy the Answer?
So what is a financial planner to do if he or she spots some of these symptoms? DiFuria says if a client seems to have issues that block them from taking action or if they seem too anxious or even paralyzed to deal with money issues, it may be time to suggest counseling.

 

"I'm going to assume that most financial planners can differentiate when there's something that's sticky," DiFuria said. "They need to find a language for themselves that they are comfortable with to bring these things up very gracefully."

 

"The financial planner doesn't want to also have to be the therapist," added Watson. "Getting them into some kind of therapy, counseling or guidance is a really good idea."

 

Build a Relationship
Whether or not a client goes into therapy, financial planners can take steps to help clients conquer SWS. The first step is to build a relationship with the client, and get to know some things about their background and their values.

 

If you think this all sounds like it steps outside the bounds of a traditional relationship between a financial planner and a client, you're right. Working with clients with SWS takes an extra commitment on the part of the planner.

 

"I think you have to be willing to (a) be very grounded, and (b) be able to connect with who these people are, not what you think they should be," said DiFuria. "Financial planners should also look at what their biases are about high wealth or inherited wealth — because we all come with a set of biases — that might get in their way of working more closely with a client and looking at the client's best interest and their needs."

 

Educating Clients
The sudden influx of money brings with it a kind of adrenaline rush and can push clients into a kind of spending frenzy. Suddenly, they have all the money in the world and can't wait to spend it. As a result, financial planners may have to start with Budgeting 101.

 

 "Ask some real basic questions. The kind of things you educate children on," said Watson. "Do they understand what an allowance is for and that they can spend a certain amount — or if they save it that they have twice as much next week? We're dealing with a large amount of money but, still, every amount can be gone through."

 

Watson says that many of those struggling with SWS are young — in their 20s and 30s — and don't look at the big picture. They think only of now and haven't even thought in terms of retirement.
 
"They think of retirement as 'Wow, I never have to work again!' but they don't think in terms of 'What do I do for the next 60 years?'" she said. "How are they going to pay for their lifestyle and what about inflation? In 60 years the same dollar won't be worth the same amount of money. Educate them about their options like mutual funds — aggressive versus conservative investing. Get them in touch with an accountant, somebody who can help them budget."

 

In fact, budgeting and planning is key for these clients. "Having this money dropped in their laps can cause a lot of spending and a sense of invulnerability such that great debt can actually be built up because they're spending and maybe not making payments on their credit cards," Watson said. "I see a lot of that actually, where people have really bad credit because they don't know how to do that daily maintenance."

 

Values and Philanthropy
In addition to the practicality of budgeting, DiFuria says that helping a client evaluate his or her core values is essential. After examining these values, many clients will find that sharing the wealth is a way to help cope — and that philanthropy can help cure Sudden Wealth Syndrome.

 

"I find that many of these young wealth holders are very interested in the opportunity of giving back in some way, whether it be time, money, wisdom, resources or talent," said DiFuria. "A lot of financial planners feel that's just not what they're supposed to bring up. Certainly I'm not saying to thrust this upon their clients, but nevertheless at least provide this as an option."

 

"I think people are really wanting a connection to the greater community, to the greater world and philanthropy is certainly a way to do that," she added.

Notes
Money, Meaning & Choices Institute (www.mmcinsistute.com)
JoAnna Watson, MFT (www.psycho-therapist.net)