We talked about the risks of holding so much wealth in the place you work at. The stock was volatile, and he was depending on the same company for his paycheck and the bulk of his investment portfolio. Moreover, his boss was well-known for shaking up his team. People were hired and fired regularly, often without much reason. In addition, we knew that competing companies had clawed back stock options when employees were fired for cause. It was a big risk. We began to look at ways to diversify his holdings while minimizing the tax consequences.
However, unlike a lot of financial advisors, I didn’t tell him he had to sell it all or pare back his company stock holdings to 10% of his portfolio, as many investment experts recommend. Every billionaire I know of—from John Rockefeller to Bill Gates — has had and kept a large stake in his original company. It’s a risk, certainly, but it’s also the main route to great wealth.
My conversation with this client got me to thinking about how many of the rules that work well for investors in the top 1% just don’t apply to people with more significant wealth. To manage portfolios of $25 million and up, you really need to think differently about almost every aspect of your strategy. And, I would argue, even investors who are at the beginning of their wealth journey and who have not yet accumulated much in assets can benefit from an unconventional perspective on their careers, their early investments, and their process for accumulating assets.
This blog is intended to help people understand how I look at wealth planning for the top 0.1%, which is not the same way that most advisors view it. It’s told primarily through case studies or client histories, which can make complex ideas concrete and understandable. Most people will find some blog posts more relevant to their concerns than others. Even if you’re not in the top 0.1% now, but aspire to be, you’ll find value in the text.
Before I get started, however, I’d like to share with you how I developed my approach to wealth management and the experiences that shaped it. As you might expect, it’s a little different than the usual career path.
How I got started thinking differently
I grew up in Southern California in a middle-class family. We weren’t poor, but we weren’t rich either. We didn’t have a big house or take expensive vacations.
From an early age, my parents expected me to work. Hard. At whatever I was doing. My dad had always wanted to be an entrepreneur. I almost surely got my interest in starting my own business from him.
However, it was my mom who really instilled in me the idea that you could solve problems by thinking differently. She knew me really well, weaknesses and all. When she saw that I was having trouble with something, she would never remind me of my faults. Instead, she would build up some counteracting strength in me. For instance, in middle school, I wanted to play basketball. I was 5’6”. My mother never said, “You’re too short to play basketball.” Instead, she would tell me, “I think you should really work on your outside shot.” She knew I couldn’t succeed the way a bigger kid could, but there was always another way. From her, I got my willingness to look at problems from all angles and find a solution that works, even if it’s not the usual one.
In high school, I got a job parking cars for the valet service at a local restaurant. I worked hard at it, always thinking of the customer. For instance, I wouldn’t move the seat up or back when I brought the car around. I left it right where the customer wanted it, even if I had to sit on the edge of the seat to drive. I brought the cars back clean, with the heater or air conditioner on when the customer got in. It wasn’t a complicated job, but I took it seriously. I was promoted to a manager within months. Shortly after that, the company that ran valet parking at my restaurant got out of the business. The restaurant owner asked if I wanted to take it over. I was 22 and still in school. I said, of course.
As a result, during all of college, I was running a successful business. I hired college kids to drive the cars. I did all the scheduling and management. I even worked with customers when they thought we had damaged their vehicles. Most valet parking companies try to maintain that whatever happened wasn’t their fault. I took the opposite approach. The customer was always right. People loved our service.
While I was running the company, I went to college and majored in history. Eventually, I got a master’s degree in US Foreign and Domestic Policy. I also did all the course work for a pre-med major and my certified financial planning designation. I loved learning, and at one point debated becoming a historian or entering the medical field. It turned out, I would have had to go out of state to study medicine and my thesis advisor discouraged me from getting a Ph.D. in history. What next? I looked around at the successful people I knew. A financial advisor was active in my church. He had a big lake house where he hosted youth events. He seemed to have enough money to live well and enough time to enjoy life. It was exactly what I was looking for. I started to think seriously about financial advice as a career.
An unusual path to success
I did what all aspiring financial advisors do before joining a firm. I read everything I could on the financial markets and started studying for my CFP exams. I began thinking about how I’d find clients.
Also, I went on a game show.
My best friend from childhood and I tried out for a show called Deal or No Deal. We went through rounds and rounds of auditions and finally ended up in a warehouse with 250 other people. When we started the show’s producers said they were looking for teams, but by the time we got to the end, they had changed their minds, and only individuals would be competing. As we waited, nervously, for them to call the names of finalists, I said to my friend, “If I get on, I’ll split my winnings with you. If you get on, you split your winnings with me. That doubles our odds.” He agreed and a couple of minutes later, they read my name. I went on to win $416,000, which was a lot of money for a kid right out of college. And I did cut my friend a check for half of it. A deal is a deal.
I’m telling this story because a few months later I was an entry level advisor at American Express, trying to drum up business. My friend was working at a tech company. I emailed him to ask if he’d consider hosting a luncheon for me. “I’ll pay for it. Just invite some of your colleagues,” I said. He refused. I played my best friend card. Still nothing. Finally, I said, “I just wrote you a check for $200,000, will you please host a lunch for me?” And that did it. I don’t fault him for pushing back on my original requests. This was a big deal for him, because he was such a well-respected person, that he knew endorsing me as an advisor came with the risk of damaging his reputation. We have remained good friends ever since, and he frequently tells me he has appreciated the financial advice I’ve given him and his colleagues over the years. A few weeks after he agreed to host an introduction, 20 of his co-workers left the company to form a start-up. I ended up hosting the good-bye lunch.
I’ll never forget the way my friend introduced me. He said, “I don’t know anything about Mike’s business, but a couple of months ago, we promised each other we’d split our winnings on Deal or No Deal if either of us managed to get on. He got on, and he kept his promise. If that means anything to you, listen to what Mike has to say.”
I ended up signing 18 out of the 20 people at that lunch as clients, and though their start-up eventually failed, they ended up with successful careers at major tech firms in Southern California. I became an expert on stock options and equity compensation, a key component of their wealth. I learned to devise complex, customized strategies to protect their assets and reduce their tax exposure. Most of them eventually hosted their own luncheons for me, and today, half of my clients are in the technology industry.
I didn’t stay long at American Express. I got frustrated with the big firm’s emphasis on cookie-cutter solutions and proprietary products. As a business owner, I gravitated towards serving entrepreneurs and executives who have complex financial challenges that require customized solutions. I now run my own RIA firm where we do things differently. I started Provence Wealth Management to change how people with complex financial needs manage their money and lives. I partnered with colleagues who specialize in working with business owners, executives, and people with equity compensation. Together, we built a roadmap to help these clients navigate their careers, manage money, and build effective tax and legal strategies with the common purpose of living a rewarding, balanced life. Over the past 15 years, we have helped clients define the vision, values and legacy for their families, while simultaneously manage the complexity of their financial lives.
We love working with our select clientele and have been proud to watch their successes and accomplishments. But there are only so many hours in the day, and we can only help so many people. We want to reach more families and help them live life on their terms. To do that, we have written this blog to bring our formula, expertise, and guidance to more people than we can help in person.
It’s Not About The Money
That might seem like a strange header to include in a post about money, but this isn’t a text about money. This post is about the ability to enjoy your life, and it takes less money to do that than you probably think.
In 2018, research was published in Nature Human Behavior. The study found “that the ideal income point is $95,000 (per year) for life evaluation and $60,000 to $75,000 (per year) for emotional well-being…this amount is for individuals and would likely be higher for families.”
Adjusted for inflation, in 2021, those numbers are $100,376 and $63,395 to $79,244 respectively. These amounts are associated with the highest levels of day-to-day happiness, and the study found that exceeding those amounts saw a reduction in levels of happiness and satisfaction. The study posited that this might happen because those earning higher incomes are “more driven by material gains and social comparisons that can ironically lower those levels.”
So, what is the key takeaway from the study? Once you make $100,000 per year, you can put your feet up because you will have achieved perfect happiness? No, if it were that simple, there would be many more happy people in the world. The part we need to learn from is that it’s not so much making more money that erodes happiness but the feeling of having to make more and “social comparisons,” which is a fancy way to say Keeping Up With The Joneses or in more modern terms, FOMO, Fear of Missing Out.
On the surface, there is nothing wrong with having the drive to succeed, but if your only definition of success is making a lot of money, you may not find happiness when you achieve that goal. Partly because the goal is so nebulous. How much is a lot? And no matter how “a lot” you make, there will always be someone who makes more.
And what toll has your career success taken on your personal life? Do you work 80 or more hours per week? Do you have time to see your friends and family? Does your job constantly intrude on your life when you’re not in the office? When was the last time you took a vacation? Do you have time to enjoy your hobbies? Are you on medications for conditions that could be addressed with stress management techniques if you had time to practice them? Did your career cost you your marriage?
To paraphrase a Teddy Roosevelt quote, “Social comparisons are the thieves of joy.” Social media has made FOMO so much worse. We can open any number of social media sites and see people we know and people we don’t know enjoying exotic vacations draped in designer clothes, expensive dinners, living in perfect houses, driving cars that cost six or seven figures. We see those things, and we want them too.
Does spending money make you happy? It can, but buying “stuff” no matter how expensive and Instagram-worthy won’t buy happiness. In 2020, Science Daily published a study from the University of Texas at Austin that concluded “people are happier with experiential purchases over material ones irrespective of when you measure happiness: before, during, or after consumption. Experiences also provoke more satisfaction even though people typically spend more time using their material possessions. The researchers said a possible explanation is the endurance of experiences in people’s memories.
I think memories are only part of the happiness factor. Experiences are also anticipated and can be shared. Think of your last vacation. You spent time planning it and looking forward to it. Maybe you went with your spouse or your best friend. You made memories together that you can talk about and look back happily on for years to come.
Now think of the last thing you bought that wasn’t an everyday item like groceries or kitchen towels. Maybe a new outfit or a watch or piece of furniture. When you make a more significant purchase, there can be anticipation, but that usually consists of research into the best brand, price, etc. Some people enjoy that, but it’s not the same anticipation you experience when planning an event or activity. Buying something isn’t a shared event, even if your spouse or a friend tags along. And we don’t really have fond memories of buying things. Some things, sure, like the first car that you saved up for or your first home. But those “event” purchases are rare. Even if you make a big purchase like a new car or a top-of-the-line mattress, you use those things every day. Even the fanciest car and most comfortable bed eventually fade into the background of everyday life because you use them daily.
It’s easy to test this for yourself. What is the last thing you bought? What is the vacation you took? You may have had to think for a bit what the last thing you bought was, and that’s about all you can do, name it. But when you think back to your last vacation, it probably brought up many memories. Maybe you even went through your phone and looked at a few pictures.
It doesn’t matter if you can afford a five-star vacation if you don’t have the time to go or, once there, are working the entire time. It’s not the accumulation of wealth but the ability to enjoy it that will last a lifetime. So this blog is not just about money.
The best compliment I’ve ever received from a client who told me, “In meeting you, what I noticed is you care far more about people than money. That’s super important to me.”
That is not an unusual perspective for wealthy people to have. Yes, they have a lot of money but what they want in an advisor is not just someone to secure a maximum return on their investments or save them money on their taxes. They want to feel that what I’m doing for them is helping them meet their other goals, not just the financial ones. One of the cornerstones of my work is to help clients build a good life, a life that isn’t consumed by work and money. It is a life that allows them to enjoy their financial and career success and maximize them to benefit themselves, their families, and others around them.
The goal for my clients is not to accumulate a certain amount of money-say $50 to $100 million-and, then quit working altogether. If you retire at 45 or 55 because you hit that “numbers goal,” what then? It takes a certain amount of drive to accumulate that kind of wealth, and people who do it will not be content playing golf for the next couple of decades. They still want to have some purpose and structure in their lives and feel like they’re contributing to the world. But hitting that numbers goal is the message that many financial firms promote. But what then? They don’t have an answer because the “what comes next” is not part of their business plan.
I believe in creating a more rewarding plan for life, one where we structure our career more purposefully and our financial life more effectively to enjoy a more flexible work schedule during the earning years while finding increased financial success that will allow us to accomplish more than working and accumulating money. I actively discourage clients from the concept of working long hours until they hit their numbers goal so they can quit. Working 80 hours a week in pursuit of a number is no life for anyone. Nor do I want to see someone lose the engaging professional community they have built and been a part of over their lifetime by simply walking away.
There is a happy medium, and that’s what this blog is about.
Set a foundation first…
There are three ideas that are foundational to the work we do with our clients… Vision/Values/Legacy
Every client relationship starts with a discussion about these three intangibles. What is the vision for the rest of your life? What do you want to achieve with your wealth? What are your most important values? What do you want to be able to pass along to your children or the charities you support?
I used to begin by learning about each client’s portfolio, and current financial situation—and that’s important—but when it fits into a holistic view of what we’re trying to accomplish. Most advisors I know start by asking clients what their needs are, and then prepare solutions to help. I find that most ultra-successful clients don’t have a clear understanding of their needs. They simply feel that they think their missing something and want expert guidance.
I since learned that we need to understand our vision, values, and legacy before we can draft a financial plan. We take several meetings to build an understanding of a client’s vision, values, and legacy. After our initial process, my team will present you with a written statement of your vision, your values, and the kind of legacy you want to create. Do you want to start another business? Do you want to have the security to pursue a long-deferred passion for painting? Would you like to be able to pass on your commitment to social justice or the arts or education to your children and grandchildren? The vision/values/legacy process will help you identify and focus on the life you’d consider well-lived. By defining your ultimate goals at the very beginning of the process, we can determine together what your need is, and then make a plan that helps you get to your objective.
Thinking differently is important but you must really know what you’re doing to make it work. Our team has deep, nuanced understanding of complicated topics like tax planning, estate planning, closely held business issues and incentive compensation programs. For instance, we have an ERISA attorney on staff to help keep business owners’ employee benefits plans in compliance with regulations. We can think creatively about solutions because we have such a firm grasp of all the tools available.
Leadership and Critical Thinking
My firm serves very successful people with significant wealth and extraordinary expertise in their fields. These individuals have gotten to where they are by working hard, being intelligent and making some very tough decisions. Most of them could figure out their investments, and manage their own estates, but here’s the problem. These successful people are already managing so much—their careers, their families, their charitable commitments, their personal passions. What they need in a financial advisor is someone who is just as good at making difficult decisions as they are. They need to know that they can stop thinking about this one single area of their lives because someone else is thinking creatively and knowledgeably about their wealth. If I can do just one thing for my clients, it’s that: to free up whatever mind power they were spending on their financial lives and empower them to use it for something else.
This blog was written to share how we manage the financial lives of the .1%. How we provide leadership, expertise, and most importantly, the creativity needed to give our clients the freedom and time needed to live better lives. The mainstream financial services industry teaches that cookie cutter approaches are relevant to everyone. We believe that only by taking a unique approach, customized for you, you will truly be successful. How can thinking differently transform your life, your job, your investments, and your future security? Let’s take a look.