Over the last 20 years I’ve had the privilege of working with high net worth families all throughout the United States. In almost every case, these folks are self-made and if by chance they were blessed by fortune from others, they tend to also have inherited the same financial characteristics which have allowed their funds to grow and multiply rather than be squandered. It is during a year such as 2020 where these character traits tend to become more pronounced due to the chaotic and uncertain environment we’ve found ourselves in. I have learned from these qualities over the years and I thought it may be helpful to pass some along.

1.) Sweat the Small Stuff…In the onset of the relationship – One of the reasons our firm has had the privilege of beating out some of the country’s largest firms when it comes to a number of our largest clients is their desire to dive into the weeds when it comes to due diligence. They realize they’re not just investing in a name such as Northern Trust or JP Morgan but rather they want to know who’s pulling the levers and making the decisions. They dive into the details of the way our business is structured, how fees are handled, how accounts are managed, how performance reporting is calculated and who the team is behind the company name. These are the folks who read the fine print and when they do, they dig deep to make sure they understand precisely who they’re working with and feel secure with the process. They sign nothing without understanding what they’re signing, and it is this due diligence process that allows them to confidently pursue trait #2.

2.) Unwavering Trust – Once a high net worth client has vetted us appropriately, they move forward and truly allow us to do our work. They certainly ask questions along the way and desire to stay informed, but they embrace 100% the fact that they’ve hired us to do a job and they will allow us to do that job. I remember sitting with one of my largest clients in 2013 after we started accumulating a position in Facebook in his private client account. He was not on social media and quite frankly didn’t see the point. When we chatted, he genuinely wanted to understand what I saw in the company and how, when so many others wrote about the company never making a dime, could I determine they would become profitable? After the end of our conversation he encouraged me to stand even more firm on my research and take a larger position. I was floored. This was the same man who lived by a principal when it came to his employees or business associates “I give them a rope, it’s their decision whether they make a lasso or a noose.” Even if our views are unpopular or unconventional at times, it never seems to be our most financially successful clients who question these ideas.

3.) Prudence in the Pennies – There was a great book written by Thomas J. Stanley called ‘The Millionaire Next Door’ where he wrote about the fact that most millionaires are very unassuming modest individuals. There is no question this is true, however folks that have liquid investments of $5 or $10 Million aren’t always exactly driving clunkers or living in 1,500 square foot ranch style homes. While these folks may enjoy some of the finer things in life, I can tell you that without a doubt these are the folks that are making the best decisions possible when it comes to these items. If they can save money on a financing opportunity, they will do it in a heartbeat. If they find that they’re paying too much or anything at all for something that isn’t necessary, those things are cut quicker than you can say ‘compound interest.’ Occasionally you may hear someone say something like “Oh, he doesn’t care, he has so much money” when in reality I can tell you, they do care and one reason they’ve been able to accumulate so much is because of this. Most of the wealthiest people I know live by a simple rule: “Watch the pennies and the dollars will take care of themselves.”

4.) Genuine Optimism – I don’t know a pessimistic wealthy individual. Before writing this, I thought long and hard about folks I’ve known over the years and I just don’t know a single one. I know what you may be saying – “I’d be positive too if I had $50 million dollars.” Ah, but here’s the rub, these people were optimistic when they didn’t have that money at all. Remember what I mentioned above, most of these folks started with nothing. These are the people that during horrible market environments call or e-mail to check on me making sure I’m doing ok. Think about this for a moment, in the midst of the Covid Crash when a balanced account for us was down around 10%, someone who was down $2M on a $20MM portfolio is calling to encourage me! Inevitably I’ll ask them how they’re doing, how they feel about things and without question each and every time they relay how they’re optimistic about a vaccine, optimistic about business, optimistic about America!

5.) Self-Health – Over the years I’ve watched most of our high net worth clients put their personal health above all else. They cherish life and work hard to preserve it. One client mountain-bikes for fitness and drives race cars for passion. I love this! Another couple just built a home on cross country ski trails in Michigan while others run, practice yoga, eat clean and always explore new ways to improve their health and well-being. It is really refreshing to see someone in their 70’s living life to their fullest just as they did in their 40’s.

6.) Fear – I know what you’re going to say – “If I had that much money, I wouldn’t be fearful either.” Ah, but here’s where you’re wrong. I have found that fear is directly correlated to decision making and thus proper decision making has the opportunity to significantly impact one’s future. While it is true, I rarely encounter fear of loss within my high net worth clients, I also see this across the board when it comes to our clients as a whole for those that are making wise and prudent decisions. Those who are not, however, making wise decisions are often led or directed by fear. While I am not a trained psychologist, I often encourage folks to look deep within themselves to identify the root of this fear and hopefully find a way to overcome this when it comes to investing. The reality is there will always be risk in an investment. In fact, if folks don’t realize this going in, it is probably even more of a concern. Folks who are able to compound their money on a consistent basis have learned to accept this risk, correlated of course to their goals, time horizon and objectives, and then let the investments run their course. Again, it is with these folks that fear just does not play a role. This does not mean they’re reckless, in fact, they measure their steps and decisions more than most, but they are not afraid of the outcome once they’ve made an educated decision. It is one of the biggest differentiating factors I’ve seen in those who are successful investors and those who are not.

7.) Work Ethic & Gratitude – I have a wealthy client who became a client in or around 2009. Unfortunately, he wasn’t with us during the 2008 and 2009 crash and consequently lost most of his initial wealth. Prior to this downfall he had accumulated enough to enjoy retirement but quickly found himself in a very challenging position. He may have spent all of 5 minutes with a ‘woe is me’ attitude feeling sorry for himself and blaming others and 5 minutes may even be an exaggeration. He realized and accepted that he would have to start again, so later that year he utilized his remaining funds and credit to purchase an HVAC company in our town. He had not been in the HVAC business and had no experience with HVAC, but he knew it was a line of business that could gain significant market share, had solid margins and he may be able to turn it into something great. After significant due diligence, this one-time corporate executive traded in the coat and tie and began crawling around attics and basements. We had some tough conversations around those times when he was forced to downsize a home, sell any and all toys, and really get serious about finances once more. Last year he sold that business for several million dollars. There are two things I learned from watching him go through that experience: 1.) his work ethic was absolutely impeccable. The long hours took their toll but I’m sure he and his wonderful supporting bride feel it was worth it. Despite having already experienced success once, his work ethic never wavered for an instant; and 2.) The entire time . He was grateful for health, grateful for family, grateful for the opportunity and even grateful for me! I watched him always look at the bright side of things and was always grateful for simply having the opportunity to succeed. Oh, and did he ever succeed.

I’d love to have had a nice round number of ‘10 attributes of success’ or a ‘Dozen traits to live by’, but the reality is that is not what this piece is about. This is truly a look deep within our business and the 7 traits I’ve seen across our most successful clients. I certainly have learned a lot by watching these folks over the years and attempting to put these into practice in my life, hopefully you can do the same.