Values and Discipline, not Privileges, Are Your Paths to Wealth

As much as everyone likes a good get-rich quick story, the rich typically didn’t make their wealth overnight. This thesis is supported by the ‘2016 Insights on Wealth and Worth‘ survey conducted by U.S. Trust.

The study explored the common success traits of wealthy Americans across all generations, surveying close to 700 individuals with at least 3 million USD in investable assets (See the survey results.)

‘Perceptions of the wealthy in history and popular culture have been painted with a broad brush that doesn’t reflect the majority of financially successful people in society,’ said Keith Banks, president of U.S. Trust. ‘The insights we gained through extensive research over the years give us a more accurate portrait of the modern day wealthy.’ 

According to the survey, more than 75% of the wealthy investors surveyed came from middle-class or lower backgrounds, and earned their wealth mostly through income from work and investing. They took one of three basic paths to wealth:

• earning 
• investing 
• or becoming an entrepreneur

Their advantage in life was not financial privileges but rather basic values, discipline and sense of potential shaped by their families from an early age, which equipped them to make the most of every opportunity.

When asked what they attribute most to their success, the top three responses were:

• hard work
• ambition 
• family upbringing

Through extensive analysis of survey findings, U.S. Trust found these 10 similar characteristics about the wealthy:

• They built wealth over time: 75% of those surveyed came from middle class or lower backgrounds, including 19% who grew up poor. They earned wealth over time, most of it through income from work and investing.

• Basic, long-term approach to investing: 86% of HNW (‘High Networth’) investors made their biggest investment gains through long-term buy and hold strategies, traditional stocks and bonds (89%) and a series of small wins (83 %) versus taking big investment risks. Their use of more sophisticated investments grows as their wealth increases.

• Opportunistically optimistic investors: More HNW investors are optimistic than pessimistic about investment returns over the next 12 months. Nearly 3 in 5 keep more than 10% of their investment portfolios in cash positions, including one in five with more than 25% in cash on hand. Their top reason for doing so is for opportunistic purposes, including being in a position to invest on a sudden market downturn or rising trend.

• Use credit strategically: Nearly two-thirds consider credit as a means to strategically build their wealth. Four in five say they know when and how to use credit as financial advantage.

• Make tax-conscious investment decisions: HNW investors know that real investment returns are really negative returns if they are gobbled up by taxes. Fifty-five percent agree investment decisions that factor in potential tax implications are better than pursuing higher returns, regardless of the tax implications.

• Invest in valuable tangible assets: 48% of HNW investors invest in tangible assets, such as farmland, investment real estate and timber properties that can produce income and grow over time with legacy value. One in five collects fine art, including one in three ultra high net worth art collectors who are now using art as an alternative asset class and a core part of their wealth structuring and philanthropic giving strategies.

• Disciplined savers, opportunistic buyers: 81% of HNW investors say that investing to reach long-term goals is more important than funding current wants and needs. This disciplined approach to saving and investing was instilled at an early age and becomes easier with the financial freedom that wealth affords.

• Advantage in life based on family values and upbringing: Four in five wealthy people came from families where their parents encouraged them to pursue their own talents and interests, but set firm disciplinary boundaries and, for the most part, were tolerant of failures and mistakes along the way. The five family values most strongly stressed during their formative years were: academic achievement, financial discipline, work participation, family loyalty and civic duty.

• Strong family tradition of philanthropy: 65% say there is a strong tradition of philanthropy and giving back to society within their family.

• Marriage is a lifelong partnership: 86% of the wealthy surveyed are married or are in a long-term relationship. Most stayed married to the same person, avoiding the financial setback that divorce often creates. They tend to divide, rather than share, roles and responsibilities at home, including financial and non-financial contributions to family wealth, such as caretaking for children. Almost all discuss important goals and values about the use of money.

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Over 75% of the wealthy investors surveyed came from middle-class or lower backgrounds, and earned their wealth mostly through income from work and investing and basic values as discipline.