There are many ingredients to achieving the American Dream, but the key ingredient, the egg to the omelet of success, is hard work.
For 20 years, Spectrem has been surveying wealthy investors, asking them to name the factors that led to their affluence. For those same 20 years, investors have noted that “hard work’’ was the top key factor, followed by “education”.
The same results came from Spectrem’s new study of the wealthiest investors. In The Wealthiest Americans: $25 Million Plus Investors, the wealthiest investors not only confirmed the long-standing tradition of crediting hard work, they claim to still be working. And many of them have no intention of taking themselves out of the workplace.
“The most demonstrative facts that come out of our research with the wealthiest investors is that they keep getting younger as a group, and they are very likely to still be working,’’ said Spectrem president George H. Walper Jr. “It sort of flies in the face of the standard American timeline of acquiring great wealth and then retiring to enjoy it, but perhaps their work ethic is why they are among the wealthiest Americans.”
An investor who remains active in the workplace often carries unique traits into their investment habits, and that can be especially true for investors with great wealth who still want to work and contribute to their own financial success and perhaps the success of others in their firm.
From the Spectrem study, 58 percent of the wealthiest investors still work, with 28 percent retired and 14 percent semi-retired. One factor leading to that high number of working multi-millionaires is that the average age of the group is only 52, well below the average age of the three less wealthy segments Spectrem studies. For an example, the average age of Ultra High Net Worth investors with a net worth between $5 million and $25 million is 66, a marked and much older difference from the $25 million population.
So those investors with great wealth are more likely to be working than those with less wealth. And guess what? Among the $25 million plus population, the wealthier investors (those with a net worth of over $125 million) are more likely to still be working than are those with a net worth between $25 million and $49.9 million.
With the average age of the wealthiest investors at 52, that means there are many who are well below that figure. Since 20 percent of the wealthiest investors are professionals like lawyers, doctors and accountants, they may be young and owning a thriving private practice and it is simply too early to consider retiring.
That goes along with the research that shows that 20 percent of the wealthiest Americans have no intention of retiring, and another 46 percent say they are more than 10 years away from their planned retirement date.
This overwhelming population of wealthy investors is going to continue to work.
For advisors who work with these industrious and prosperous investors, they must understand the effect employment has on the investor. There are time commitments, but their investments might also be tied to the work they do or the industry they work in. Because they remain in the workforce, the investors are likely to know as much if not more than the advisor about the industry in question.
There is also a propensity for the younger investors in the wealthiest segment to live with someone who is also still in the workforce. More than three-quarters of the wealthiest investors say their household income is derived from two salaries.
Finally, the research shows that retired investors are more dependent on their advisor than those that are working. So advisors advising working multi-millionaires must try to determine if the investor has retirement on his mind, because the relationship is likely to change when the investor finally slows down.
Top Takeaways for Advisors
It’s none of the advisor’s business why his investor client is working despite having a small fortune already in his portfolio. But advisors can determine if there is a trigger for these investors that will determine if and when they will finally retire. Wil it be a level of success for the company? Is there an asset level the investor feels he or she needs to reach to retire? If the investor plans to never retire, how does that affect his or her investments as well?
*According to Spectrem research, there are currently 29.8 million households with $100,000 - $1 million in net worth (not including primary residence, NIPR). There are 9.1 Millionaire households ($1 million - $5 million net worth, NIPR), 1.21 million Ultra High Net Worth households ($5 million - $25 million net worth, NIPR) and 145,000 households with more than $25 million in net worth, NIPR.
©2016 Spectrem Group