Infusing values into your wealth planning? Avoid these mistakes.

Few people spend their lives solely pursuing money. While financial gain motivates people up to a point, most eventually pursue other goals. Beyond satisfying their material requirements, people seek to achieve their potential or explore travel, or support causes they care about.

If you feel your financial future is secure, and you want to think about how and where to put your wealth to work in new ways, you may be wondering how to apply your values to your life and wealth. By setting your intentions and checking in regularly, it’s possible to align your entire wealth strategy with your personal values.

What is the benefit of incorporating values in my wealth strategy?

Values are the fundamental beliefs that motivate your actions, and are often intrinsic motivators for many facets of your life. Studies have shown that families who share a common mission are more likely to sustain their wealth over time.

Behavioral science shows that people get more engaged with wealth planning when they connect their goals to their values. This also makes them more likely to stick to those goals. They also report feeling more satisfied with outcomes when they’ve planned carefully and made intentional choices.

However, people often struggle to apply their values consistently. Instead of connecting their goals and their wealth, and having them inform each other, they assign philanthropic or values-related investments to one portion of their wealth, and leave the rest disconnected.

For example, protecting the environment is an important value to some. However, many individuals will only apply that value to the charitable giving portion of their wealth instead of applying it throughout their portfolios. This can cost them, and it underserves their priorities. We think there is a better way.

What mistakes prevent us from applying our values consistently?

There are two main reasons why values are not applied consistently. One is mental accounting, and the other has to do with myths about sacrificing performance.

1. Failing to integrate values and goals.

A fundamental step in goals-based planning is mental accounting. This process categorizes money based on its purpose. The idea is to devote funds to each of your most important goals, such as buying a house or leaving money for your children. However, people often make “values” or “philanthropy” into a category of its own. This separates their values from their money. There is a better way: asking if there is a way to apply that value to all of your goals.

2. Falling for myths about sacrificing performance.

Often, people mistakenly assume they won’t receive financial returns from money earmarked for philanthropic goals. Simultaneously, they expect invested money to generate returns unconnected to their values.

When people invest this way, they are willing to sacrifice returns from their philanthropic funds because they are receiving other nonmonetary benefits from that money, such as social impact.

You don’t need to sacrifice returns to invest according to your values because we have seen that sustainable investment strategies can outperform the market. Returns versus values is ultimately a false choice.

How do I apply values across my wealth strategy to achieve my goals?

1. Identify your values. It may be helpful to set up a family meeting to share family stories and traditions, and identify shared values.
2. Identify intentions for your wealth. What is the primary purpose for your wealth? What path do you want your wealth to take?
3. Use those intentions to establish goals for your wealth. Goals support the chosen intentions we have identified for our wealth. These goals typically have four components: a dollar amount, a label, a time horizon and priority level.
4. Reconcile your goals with the values you’ve established in Step 1. Your intentions support your goals, and your values underpin those intentions and goals. When you’ve established your goals and wealth plan, review them to see if they’re aligned with those values.
5. Check in periodically. Annual reviews or significant life changes (e.g., a sale of a business) are a good time to check in to see if your goals have changed, and if your values are still aligned with those goals.

Show me some examples of how this works*

Example 1:

A multigenerational family is sitting down for a meeting to discuss its objectives. The parents want to encourage their children to get more involved in financial decision making in order to prepare them for taking over the family’s wealth.

The family made its wealth by starting a grocery chain, and partnerships with local farmers are a cornerstone of its business. The children grew up in a rural town where farming was a key part of their daily lives.

The parents and children discuss their values and agree that sustainable agriculture and community impact are shared family principles. They decide to establish a wealth plan for the children, weaving these principles through multiple facets of the plan.

Example 2:

An entrepreneur started a company that provides inclusive financial services for the LGBTQIA+ community. He is preparing to choose a successor. While considering the transition, he is concerned that his successor may not uphold the mission and values he established for the firm. He decides to establish a checklist for the search, incorporating mission and values alignment as key qualities for the company’s next leader.

Example 3:

A family decides to make a large gift in support of cancer research to honor a relative who died recently. The death was also a catalyst for the family office to look at all of its investments to see if they could be aligned more closely with the family’s desire to support healthcare and cancer research.

The family office researched investment options, and discovered that it could generate alpha in these investments and align them with the family’s values. The office has since deployed funds across public and private investment options to support healthcare and biotech innovation.

We can help

It’s a good time to talk to your J.P. Morgan team about ways in which you can integrate your values and intentions across your wealth.