The Rich Are Different From Us: They Admit Fault and Move On
Stereotypes about the top 5% keep the rest of investors from making the right decisions, Financial Advisor magazine writes. And those stereotypes are mostly wrong.
The very wealthy — for present purposes, those with at least $2.5 million in assets and a minimum income of $370,000 a year — are not very different from the merely mass affluent, or those who have an average $600,000 in assets and earn an average of $88,000 a year. This is according to a study — cited by the magazine — of 1,096 clients working with FAs, conducted by Bradley Klontz, a psychologist and financial planner. Contrary to popular conceptions of this group, the top 5% of wealth holders came from middle-class families, went to public high schools and “did not have private chefs or chauffeurs,” Klontz tells the publication.
But the very rich are different from the mass affluent in one important regard that financial advisors should take into account. The top 5% are less likely to blame others for their mistakes, according to Klontz. This means they’re more likely to admit mistakes and take corrective action, as well as learn from those mistakes, he tells the magazine. Meanwhile, mass-affluent investors are more likely to hold on to bad investments — as well as envy the wealthy while believing that the rich get a free ride, Klontz says. He adds that advisors can use this information to challenge stereotypes and to encourage their customers to be more honest with themselves in hopes of attaining greater wealth.