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True Wealth : Understanding your high-net-worth personality is key to investment
success
What do you think about money? How do you feel when you invest? What role
does wealth play in your life?
When it comes to managing your wealth, your personality is an important
part of the equation. Or to put it more plainly: who you are plays as much a
role in your long-term financial success as your ability to pick winning
investments. Over the course of my career, I’ve spent a good deal of time
studying the personalities of wealthy people. And while I would never say
that wealthy entrepreneurs can be “slotted” into pre-set categories, I
have found that most high- net-worth (HNW) individuals fall into one of the
following personality types.
The Caregiver
The caregiver’s motivation is family: taking care of it, nurturing it
and ensuring its long-term financial security across multiple generations.
Because these are longer-term goals, caregivers tend to be less susceptible
to short-term financial thinking. However, they need to be careful that
their desire to care for family doesn’t leave the kids unmotivated.
The Boss
To the boss, money means power. Sometimes this can translate into a
motivated, driven individual who’s attentive to detail and willing to
accept risk. But bosses can also be impatient people and can be prone to
making quick, ill-considered financial decisions.
The Libertarian
When libertarians think of money, they think of freedom – freedom from
work, yes, but most of all, freedom from worry. While this narrow focus
often results in purposeful investment decisions and a drive to save, it can
also leave important goals such as estate or tax planning ignored.
The Runaway
The runaway will go to great lengths to avoid talking or thinking about
wealth. This isn’t necessarily a bad thing. Often, the runaway delegates
important financial decisions to a trusted financial professional, thereby
avoiding many of the self-made problems and financial challenges other
personalities may face. Then again, a complete abdication of financial
responsibility is never a good idea.
The Player
For the player, investing is a game, and wealth is a way to keep score.
If players can separate their “serious money” from their “play
money,” the gambling can sometimes pay off. But the constant pursuit of
high-risk opportunities leads to a portfolio that lacks any clear purpose
and fails to fit into any long-term strategy.
The Recluse
Most HNW individuals want to keep their financial affairs private. For
the recluse, however, this desire borders on obsession. Even when working
with a professional, it’s common for the recluse to withhold key
information and maintain multiple portfolios. That can result in a piecemeal
approach to wealth management.
The Superstar
For superstars, wealth is ultimately a stand-in for status: the more they
have, the better they feel. As such, superstars tend to be focused on
spending. Not surprisingly, this tends to put a great strain on their
financial position.
The Academic
These individuals pride themselves on their financial knowledge. Because
they’re keenly aware of what’s new in the investment world, academics
can be aggressive investors. Their ceaseless attention to the “numbers”
sometimes leads them to forget the big picture.
The Empire Builder
For empire builders, wealth is a way to measure success and self-worth.
Because their primary goal is to build wealth, they’re often more focused
on investment and speculation than some of the more “routine” matters,
such as estate or tax planning. Understanding your own personality allows
you to zero in on the emotions that dominate the way you think and feel
about your wealth.
And that can be an important first step in your continuing effort to
build and secure your long-term financial health. •
Business in Vancouver March 9-15, 2010; issue 1063
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