Think the wealthy live a stress-free life? Think again. How an advisor can address their specific needs
People who complain about not having enough money often thinks wealth solves all problems. Obviously, they have never seen any of the Real Housewives franchises or read Kevin Kwan’s book Crazy Rich Asians (also a movie.) As an FYI, the third book in his trilogy is Rich People’s Problems. So what are the impediments to money buying happiness?
We all know you can’t take it with you, although there was a great cartoon years ago showing a cloud in heaven with a well-known brokerage office name and several in white robes and wings getting service. The caption was “This is for the lucky folks who did take it with them". Seriously, they know people don’t live forever, but the best medical care can keep you going. They are worried about their health. They see lots of doctors.
You might think people with money are obsessed with making more. The two Wall Street firms (1987, 2010) give this impression. Their goal is actually different. Funny thing about the rich: they want to stay that way! They are concerned with keeping what they have while at least keeping pace with inflation. Many are risk adverse.
Intergenerational wealth transfer
Capitals gains tax is a good example of the government as the investor’s silent partner. The investor puts up the capital, assumes the investment risk and hopefully makes a profit. When they sell, the government expects a piece of the action. Death provides more problems than the obvious one (dying.) Unless their estate is properly structured, often years in advance, the estate can be left with a hefty tax bill. They need advice on how to structure their assets to legally minimize estate tax liability.
Wealth preservation by the next generation
It’s one thing to transfer the money more or less intact. It’s another to keep your heirs from spending it. In a Blacklist episode, Raymond Reddington observes “65% of family fortunes are frittered away by the second generation, 90% by the third. They are concerned their heirs might think wealth comes easily, it’s their right or the good times will never end. This worry can be addressed by teaching their children to be philanthropic, requiring them to have jobs or in extreme cases, tying the money up in trusts.
Children marrying badly
Zsa Zsa Gabor famously said: “I have never hated a man enough to give his diamonds back.” Another joke remarked in Beverly Hills, “the homeless” are people who didn’t have good divorce lawyers. The wealthy are worried if an heir has messy divorce, a large amount of the family wealth might be lost in the divorce settlement. This is sometimes addressed by allowing heirs income from assets held in trust, but not the outright ownership of the assets.
People separating them from their money
Lottery winners might find long lost relatives come out of the woodwork. They want to share in your good fortune. Family members and friends ask for loans or the opportunity to invest in their new restaurant. Charities, often very worthy causes, ask for big checks. The wealthy often have an intermediary, an advisor, law firm or private office handle their wealth. This intermediary organizes requests and presents them to the decision-making family members.
The obligation to help others
Many wealthy families have traditionally felt great wealth comes with the requirement they make life better for others. They take this seriously, assuming on Judgement Day, they will meet their Maker and be asked: “What did you do with the great wealth I entrusted to you?” The wealthy will often choose one of more mainstream charities and become major national benefactors.
It’s been said Old Money whispers, New Money shouts. They don’t brag about wealthy or drive exotic cars. It’s been said when Theo Albrecht, a German supermarket magnate was kidnapped in 1971, he looked so ordinary the kidnappers demanded identification to confirm they were nabbing the right guy! The wealthy prefer to move around like regular people, preferring not to draw attention to themselves. You can see how confidentiality in the financial services relationship aligns with this need.
Those with great wealth aren’t necessarily concerned with taking the beast vacation, buying the rarest objects or owning the priciest cars. They have concerns that often need specialized advice to address.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” can be found on Amazon.