Wealth Mistakes the Super Rich Don’t Make!

The message: Sidestepping errors is just as important as making a lot of winning moves.

No one is perfect—not even the smartest among us. But some make adjustments better than others. Take the self-made Super Rich—a group we define as those with a net worth of $500 million or more that they earned through efforts such as starting a business. These individuals aren’t immune to making mistakes with their wealth. But we find that they do tend to avoid certain errors that might impact their bottom lines and financial futures. These are the same mistakes that can trip up families at any level of wealth.

With that in mind, here are three of the biggest financial blunders that the smartest Super Rich make a point to avoid.

THE MISTAKES TO AVOID

1. Losing sight of goals The Super Rich are generally skilled at developing and spelling out their goals and even determining their deeper philosophies and beliefs about wealth and values. They might, for example, craft a family-vision statement about their family’s optimal outcomes and the reasons (both practical and psychological) for wanting them. Then they create an action plan with the steps to take to realize their vision. From there, all decisions about wealth are made after considering the family’s vision, values and action plan. By having systems in place to never lose sight of their key goals and the factors underlying those goals, the Super Rich do a superior job of not chasing hot investments or “opportunities” that don’t amount to anything. The big lesson: Be very clear about what you want to accomplish. While it is important to be flexible, any decision to make adjustments or large shifts in strategy should be deliberate and carefully considered. Likewise, your decisions should certainly not be the result of a lack of guidelines for making smart decisions or because you’ve discovered a “shiny and new” investment product that has nothing to do with your financial goals, values and philosophy.

2. Working with professionals who are subpar—or worse! The Super Rich know there are far too many “professionals” who are actually pretenders (who have good intentions but lack necessary skills), predators (who want to steal from them) or exploiters (who promote overly-aggressive solutions).

That’s why they take specific steps to help confirm they are working with consummate professionals:

  • Look for leading authorities. The objective is to work with recognized experts—such as industry thought leaders.
  • Rely on referrals. The most consistently effective method is to garner referrals from high-quality professionals they are currently engaging.
  • Pay for quality. While they make a concerted effort to minimize costs, they don’t forgo desired results simply because it might require them to spend some money.

The big lesson: By turning to leading authorities from known thought leaders and soliciting referrals from high-caliber professionals you already know and trust, you can potentially greatly increase your chances of working with truly skilled professionals.

3. Failing to get second opinions and do stress tests. “Trust, but verify”—the phrase made famous by Ronald Reagan. The Super Rich are fully aware that even the top professionals can make mistakes. They also know that changes in their lives or the world at large can impact how a solution they have in place will behave. Therefore, they rely on second opinions and stress testing. Ideally, a second opinion occurs before action is taken. Example: You’re considering a tax mitigation strategy. You might get a second opinion from another noted leading tax authority to be certain about the validity and viability of the strategy. Second opinions are commonly sought whenever there is any question, but they can really be done at any time.

Stress testing is typically done when they want to evaluate an existing strategy that’s already in place. It is a check to see whether what they implemented in the past remains (and is likely to continue to remain) both viable and valid. Stress testing, like an annual medical checkup, hopefully will not reveal anything wrong, but it is a very good way to catch a problem before it becomes severe.

The big lesson: Getting a second opinion when you are unsure or uncomfortable about a strategy, idea, or product and then periodically stress testing your overall wealth plan or aspects of it can enable you to avoid problems now and down the road.

The conclusion: Adopt best practices The smartest self-made Super Rich have proven that they know what to do— and what not to do—in order to create, grow and maintain sizable wealth. By avoiding major slip-ups on your own path to wealth creation, you can potentially encounter fewer financial potholes along the way. ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2020 by AES Nation, LLC. This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Kevin Best and Best Times Financial Planning are not affiliated with AES Nation, LLC. Commonwealth Financial Network® nor Best Times Financial do not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.

Kevin Best CFP®, MS, AEP® Personal CFO Best Times Financial Planning 345 Woodcliff Drive, Suite 2A, Fairport, NY 14450 Office: (585) 504-3600

 

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