Three Types of Super Rich People & How They Differ.

Three Types of Super Rich People & How They Differ.

There are three distinct types of Super Rich:

  1. Self-Made. The Super Rich who earned wealth through working and entrepreneurship often have a strong belief that they control the outcomes of their lives. When something happens, they usually believe it was their doing that caused it to be.
  2. Inheritors. Locus of control varies widely among inheritors. Some — typically those whose personalities are on the narcissistic side — believe they have tremendous control over their lives and outcomes. Others, in contrast, have anxiety about their wealth and their place in the world. Those inheritors may feel very little control over what comes their way.
  3. Single-family offices. Single-family offices are designed around the idea of control, and therefore are essentially extensions of the other two types of Super Rich.  Someone with a very strong locus of control may create a single-family office to institutionalize that sense of control in all his or her family’s matters. Likewise, someone with a low sense of control might look to a family office to provide a structure of control that he or she craves.

Most probable cause of downfall

Sometimes, unforeseeable factors can cause great wealth to dissipate. At other times, the causes of fiscal disasters are quite apparent.

In the case of the self-made Super Rich, extreme hubris can play a starring or strong supporting role in wealth destruction. By failing to understand their own weaknesses, or deluding themselves that their judgement is above others, the self-made Super Rich can sometimes make awfully poor decisions. When multiple poor decisions are combined, they act as multipliers: promoting a plunge into financial oblivion.

Super Rich inheritors can also make poor decisions, but they tend to be of a different variety. Inheritors’ errors in judgement mostly result from a lack of expertise and experience. They may find themselves in difficult situations with complex implications, but fail to seek out good counsel.  At times this is a function of being caught unaware by circumstances beyond their control. At other times, it is because they became distracted.

Single-family offices have been known to precipitate and extenuate the eradication of great fortunes. When it happens, it’s often because of mismanagement — poor judgement by the senior executives. It can also happen when there are serious conflicts between family members that infect the single-family offices.

How the super rich source professionals

self-made super rich

When additional expertise is required, the self-made Super Rich typically will look to their existing cadre of professionals for recommendations. They are also very open to meeting new professionals if these same professionals think it is a good idea. To a much lesser degree, generally, the self-made Super Rich will solicit referrals from their peers.

Super rich inheritors

Because these members are often younger than 40, they might also source new experts through the professionals who currently work with their parents, as these inheritors often haven’t yet developed their own deep bench of professional relationships.

This group is often much more inclined  than the self-made Super Rich to get referrals to experts from their peers.  They seek out other Super Rich inheritors in similar situations. There are many venues where Super Rich inheritors gather together. These opportunities to mingle and network enable inheritors to get comfortable with each other, to share ideas and to solicit information — including which talented professionals to employ.

Single-family offices

The primary way senior executives at single-family offices find new professionals is by reaching out to the professionals they already employ (not shockingly.)

They will also to a lesser degree tap third-party professionals with whom they’re currently working with/have previously worked with. Keep in mind that these senior executives tend to be experienced financial or legal professionals. As such, it is common for them to already have people they know, trust, and consider highly competent.

More than ever before, single-family office senior executives share information among themselves. They are looking for best practices to make their single-family offices as productive as possible. The number of well-attended single-family office events, for example, has multiplied. There are also formal and informal peer-to-peer networks where single-family office senior executives exchange information, sucha s which professionals are best for which services.

Lessons to learn

  • The importance of creating additional wealth
  • The role of family in your life
  • The level of control you want or need to have over your life
  • The weaknesses or blind spots that could potentially torpedo your financial success
  • The methods you use to find high-quality professionals to help guide you

You can use your own personal clarity about these topics to inform your decision making about a broad range of financial and wealth management issues.  This can range from how you might pursue the growth of your current assets and whom you want those assets to benefit to how you identify and seek to mitigate financial risk in your life as well as whom you enlist to help you with all those goals.

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