Lisa MintoAssistant Vice President - Personal Financial Planning
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Eugene StanleyVice President - Fixed Income & Foreign Exchange
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Marva ChangVice President - Finance & Compliance
Wayne WalkerVice President - Operations
Rich People Part 2
In my article dated February 2017, I discussed several characteristics of rich clients I had observed over the years. I mentioned that rich people were optimists, long-term thinkers, they follow their passions, they loved money and they were not afraid to use other people’s money (OPM). The article generated some fun discussions, with lots of people adding additional insights that they had observed. Now in this follow up article, I am exploring their investment habits rather than their characteristics. Hopefully, you will find it instructive as you seek to build wealth for yourself.
Strong Relationship with their Investment Advisor
Have you ever found yourself calling a financial institution and asking to speak to an agent? That wouldn’t happen with a rich person. They are usually closer to their advisor than their own family. They speak to their advisor on an almost daily basis. They have formed a relationship with that person who understands their investments needs and quirks. Depending on the strength of the relationship, they may prefer to follow the advisor as he or she moves to different institutions. They generally expect special treatment and they get it. An investment advisor is an integral part of their daily life. Their investment advisor keeps them informed about the latest investment offerings, and updates on their portfolio. However, most rich people have strong ideas about the investments that they prefer.
I recall a client saying that he took quite a lot of risk in handling his business on a day to day basis, therefore he absolutely did not want to take risks with his money. In other words, despite his obvious ability to take risks, he had a distinct unwillingness to take what was perceived as additional risk with his hard-earned money. This is a little ironic, as oftentimes it is the people who have much less money who are willing to give their money to people they don’t know and take very high-risk positions.
Rich people almost always have an attorney and accountant on their payroll. Similar to their relationship with their investment advisor, they tend to be very close to these professionals with personal friendships being par for the course. There is a synergy to be had when they maximize the strengths of these three professionals. This is the reason they create companies with the most efficient tax structures for their businesses and investments, while utilizing the most efficient regions with the most friendly investment environments.
Fees and Record Keeping
Rich people are infamous for their dislike of paying fees. Most regular people either don’t ask about fees or they just accept whatever the fee is. However, you may find yourself arguing for hours with a rich person about even the smallest of fees. They look at the expected return, but the attendant fees are a large component of the consideration for a new investment. In addition, they keep impeccable records. I have a client who keeps a record of all his investments on one sheet of paper, written in the tiniest hand-writing. He is always accurate. Record keeping doesn’t have to be the most technologically advanced, as long as there is a record. Each investment for him, is carefully checked and must balance exactly with his calculations before another step can be taken. Rich people don’t leave things to chance and they monitor their investments daily, of course some do it hourly!
Warren Buffet has refused to invest in companies where he did not understand their business model. In the same way, rich people do not go into things that they don’t understand. They are usually very intelligent, and even if they are not familiar with the jargon, they quickly grasp the big picture about any decision that they are making. Importantly, they are not afraid to ask questions. Not for a minute do they fear sounding foolish by seeking clarification. They make sure that they have a complete understanding before “jumping in.”
What does this mean for you? While you study the habits of rich people, certain things may resonate with you. They may be worth incorporating in your investment life and may redound to your increased success. Happy Investing!
Yanique Leiba-Ebanks, CFA, FRM is the AVP, Pensions & Portfolio Investments at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: firstname.lastname@example.org
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