What To Do About Affluent Guilt

By Patrick Palmer

Is there any hope for the moral fiber of today’s high net worth individuals? In her recent New York Times Op-Ed (What The Rich Won’t Tell You) Rachel Sherman describes the harrowing plight of today’s affluent. The nagging guilt. Discomfort with disclosing wealth. Painful awareness of income gaps. Even hiding price tags so that nannies won’t learn how much was paid for a loaf of presumably organic (and unfairly delicious) bread. The article circulated with collective groans of mock pity. How unfortunate, the lengths to which one must go, these days, merely to ease the pains of unimaginable wealth! But Sherman makes her point: once people have the wealth, and have started to feel squeamish about income inequality, “it’s hard to know what they can do, as individuals, to change things.” Deflecting the stigma is counter-productive, she argues, as it merely promotes silence and “makes that issue of inequality more difficult to talk about—or to change.”

If today’s affluent are truly concerned about inequality, or other social issues, perhaps they can change things—in the form of markedly different decisions about how, where and why they invest their money.

That would require reprogramming of the American psyche around wealth—impulses that run far deeper and began much earlier than our recent discussions of income inequality. That’s because wealth in America represents more than the idea living comfortably, spending lavishly, or even leaving something to one’s heirs. It has historically been a form of keeping score—a method for tangibly knowing how you’re doing relative to other workers, and creating visible separation between classes. As the French psychiatrist and market researcher Clotaire Rapaille observed, this was an essential and unique function of wealth in America, as class distinctions in Europe and in other regions were more dependent on lineage or caste. Only in America, where wealth could be earned and accumulated regardless or even in spite of birthright, were such distinctions needed. So, the concept of upward mobility, as marked by wealth (and resultant spending) became important, as these were the only tangible ways to define your own class, and the only way to demonstrate when you might be “moving on up.”

Keeping score has outlived its usefulness. When you’re already winning the game 49-7, where’s the joy in scoring another touchdown, other than increasing the already insurmountable distance between haves and have-nots? And as many of today’s affluent will tell you, luck and fate are undeniable factors. When so much of your accumulated wealth isn’t the result of hard work or talent, but being born into the right family, or buying Apple stock in 1997 on a hunch, or even being employee number three in a fortuitous start-up—it’s harder to look in the mirror and say, yes, I’ve earned every penny of this and deserve every ounce of enjoyment it produces. As Sherman notes, so much of the desirability of wealth comes through its pursuit. Once you have it, other feelings set in—like ambivalence, dissonance, and guilt.

This may be especially true among Millennials. Already we see higher levels of altruism among younger Americans, and also higher levels of wealth at younger ages. As a 2016 study of high-net-worth individuals published by U.S Trust / Bank of America noted, most of the wealthy people in America came from middle-class families, and about 20 percent emerged from poor upbringings. But fully 45 percent of today’s affluent Millennials came from wealthy families, “offering this generation an accelerated start to wealth,” and the capacity to transform awareness of income equality and other social issues into tangible actions. The most concerned generation in American history is also the one with the means to do something about it.

Meanwhile, to assuage their discomfort and navigate the sudden unpopularity of their affluent status, today’s high net worth individuals have a set of choices—not necessarily mutually exclusive, but each representing a different path:

  • They can wallow in their embarrassment, hide the price tags, and ignore an issue that may well help define this particular moment in American history.
  • They can flaunt it, and do their part for the economy through rampant spending, which may in fact be common practice outside the liberal, well-educated and self-actualized enclaves of New York and other cities. Where I live, in the Chicago suburbs, I can drive in one direction for thirty minutes and find the quiet, nervous rich people Rachel Sherman interviewed. But drive in the opposite direction, I find myself at a Bass Pro Shop where different sorts of affluent plop down $112,000 for a pontoon boat with all the options. And a new Ford F-150 King Ranch edition to tow it home. No hidden price tags here, and they don’t seem the type to fret over income inequality.
  • They could give more of it to charity, which seems logical—except they don’t. In fact, affluent people tend to donate less, as a percentage of income, than people with limited means. As reported by The Atlantic a few years ago, “the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income.” For whatever reasons, philanthropy just doesn’t seem to reduce the guilt—at least not enough to make a difference.

But there is a fourth path, and it precipitates a different kind of scorekeeping. In our work with clients in financial services, we’ve noted pronounced interest in what has been called “impact investing,” in short, pursuing ways to do more good with investments, in forms that don’t resemble philanthropy, and without compromising the principles of earning solid returns and preserving wealth. The Global Impact Investing Network defines these investments as “made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” As the U.S. Trust / Bank of America study points out, interest is increasing, especially among high-net-worth women, Millennials, Gen X and those with at least $10 million in investable assets.

Why wait until you’re that rich? Investing in companies that exhibit strong social, environmental or sustainability strategies isn’t just good for the soul—it’s good for the portfolio. In her 2015 TEDTalk, Morgan Stanley CMO Audrey Choi revealed a stunning statistic from Harvard Business School. Over a twenty-year period, an investment in companies that focus on growing their business and addressing important environmental and social issues would outperform the same investment in companies that focus only on the bottom line—by nearly double.  But we still have a hard time believing it. As Choi puts it, we have a “fable in our heads. We believe that the market is this magic pot that obeys only one command: make more money. Put in the wrong words like ‘promote social justice,’ and you might see your gold coins shrink or even vanish.” Like running up the score, the perceived dichotomy between making money and doing good has outlived its usefulness.

 

As Partner and Strategy Practice Lead, Patrick Palmer leads VSA’s brand development, marketing, digital media and data science disciplines. He spearheads brand development for every VSA client and has been instrumental in the agency’s growth over the past five years, fostering relationships with iconic global companies AB InBev, Kleenex, Harley-Davidson, The Breakers, Marvin Windows and Doors, CUNA Mutual Insurance, and Dairy Farmers of America, among others. Drawing from over 30 years of expertise, Patrick’s cross-functional strategic development process incorporates quantitative and qualitative research, data analytics, digital behavior, trend-spotting, media strategy and retail-shopper insights to create branding and activation strategies that convert promise into performance. Prior to joining VSA, he was Executive Vice President and Global Strategy Director at Leo Burnett USA. His leadership and work have been honored with the industry’s top awards, including multiple Cannes Gold Lions, Gold and Silver Effies, and the Yahoo! Purple Chair for Innovation.

Patrick can be contacted at ppalmer@vsapartners.com.