Does Your Affluent Client Feel Inadequate?

Once upon a time, being a millionaire meant you were rich.  Remember the start of every Hart to Hart episode. “Jonathan Hart, a self made millionaire…”  Today there are about 12 million of them in the US.  Your affluent client has followed your recommendations, invested wisely and accumulated a decent sized nest egg.  So why don’t they feel rich?

The news and programs they see on TV are good at creating a divide between the “super rich” and everyone else.  Apparently there are about 614 billionaires in the US.  Your client feels a million isn’t what it used to be.  They feel they aren’t wealthy, just another member of the mass affluent.

It’s time to give them some perspective.

1. Being rich means financial independence.  Once your client gets to a point where working is a choice, not an obligation, they are rich.  They are what British murder mysteries describe as people who are “Independently wealthy” or have “private means.”

Reality check:  This is exactly why you and your client have been working with a financial plan for years.

2. Deep pockets.  Being rich or feeling rich means knowing if you spend sensibly and don’t go crazy, you won’t run out of money.  Put another way, when you reach into your pocket to buy something, you aren’t pulling out your last dollar.

Reality check:  As long as you don’t start spending like the characters on the Real Housewives series, you should be fine.

3. The top 1% in income.  To get into the “Top 1% in the US” in terms of income, you need about  $ 539,000 in 2020, according to USA Today.  The average in this group is about $ 1.7 million. (1)

Reality check:  When the government raises income tax rates, who is the first target they always have in mind?  You don’t need this dubious honor.

4. The top 1% in assets.  To get into the ”Top 1% in the US” in terms of assets, you need about $ 4.4 million in assets, according to Statista. (2)

Reality check:  Your client may already be there.  If not, they have a plan.

5. How did your client do in 2020?  Lets assume your client has a substantial amount of assets in equities.  The S&P 500 was up 16%+ in 2020.  The NASDAQ was up about 43% over that same period.

Reality check:  Following your advice, your client ended the years wealthier than when they started.  There were probably times when they wanted to bail out.  You gave them appropriate advice, focusing on the long term.

6. The rich are cheap.  I confess.  I watch Below Deck on Bravo.  I don’t understand how a handful of people tips the crew $ 15,000+ for a three day, two night cruise.  I don’t care how good the food is!  Rich people generally don’t behave like they do on TV.

Reality check:  Is your client cautious about how they spend money?  So are the rich.  Your client is in good company.

7. Inheritance.  Your client might know people with spectacular jewelry.  These are often family pieces handed down through the generations.  As a friend of ours remarks: “These are from the previous administration.”

Reality check:  Your client doesn’t need fancy jewelry to keep up with the Jones’s.  They likely didn’t spend their own money to get it.

8. Leasing doesn’t count.  What’s the ultimate rich person’s luxury status symbol?  Possibly a Rolls Royce.  The cost of a 2020 model is about $ 330,000. (12 miles per gallon in the city.)  Leasing one costs about $ 3,600/mo.

Reality check:  You might see people riding around in fancy cars, but if they are leased, they might not have the money to own it.

9. Company perks don’t count either.  Your friends brag about always traveling business class.  They look down their noses because you fly coach on vacation.  They stay at the best hotels.  If they are traveling for work, they aren’t spending their own money!

Reality check:  They are probably earning lots of airline miles and hotel points while traveling for business.  It’s more interesting to find out where they stay when they actually need to spend their own cash.

Your affluent client has avoided immediate gratification to put themselves in a position to stop work and live comfortably later.  There’s no reason they should feel inadequate.  They are making a success of their lives.  You are helping them on that journey.

Related: Why Isn’t Everyone Rich?