Rich investors use these money tips to build wealth

What do they do differently to the rest of us mere mortals that sets them apart, and how do I learn the secrets to their success?

Is it all down to coming from a wealthy family? It’s true, there’s a lot of family wealth dominating the top suburbs, but that’s not the whole story. There’s plenty of people who build substantial assets from a standing start.

How do they do it?

I’ve been a financial adviser for more than 20 years and here are the things I’ve noticed that my wealthiest clients tend to do.

They ask tough questions

They are quite prickly to deal with initially and they will ask a lot of tough questions on a wide range of things. I get asked what I invest my own money in, how much wealth I have, why they should pick me and what happens to their money if I get hit by a bus? They want to know how many clients have left me and why? You get the idea.

If you pass the initial interrogation process, my wealthiest clients generally become my most loyal and my biggest advocates.

They seek experts

They value the skill set of their team of professionals.

They have a defined go-to team, including a banker, accountant, lawyer and financial adviser. They take on the advice but in the background they ­analyse every number and make sure things are running as they should. If it’s not, expect a blunt conversation.

Seeking opportunities

When it comes to making investment decisions, the old Warren Buffett saying of “never invest in a business if you cannot understand it” rings true, says Gemma Dale, National Australia Bank director of self-managed super funds and investor behaviour.

“The financial elite are constantly on the hunt for opportunities with consistent or very high potential upside and minimal downside. And if they do not understand the downside, they will not invest in it,” Dale says.

“They only invest in what they truly understand, and they do the work – reading company reports, attending AGMs, and digging into the details themselves. These people are relentless in their pursuit of insight, asking tough ­questions and consulting multiple experts but never relying on just one.”

They look for the next move

Justin Fung, lawyer and partner at Avant Law, a member-owned organisation for doctors established in 1893, says his wealthiest clients play life like a game of chess, understanding the implications of their next move and then forecasting the ripple effect five moves down the track.

“Our clients want lawyers who see the big picture and help them make strategic decisions, not just solve legal problems,” Fung says.

“They ask ‘what could go wrong and how do I handle it?’ They ask us to map out all the risks – not just legal ones, but reputation damage and financial impacts that could hurt their whole operation.”

For instance, a contract dispute might trigger government investigations, damage relationships, or create bad publicity.

“These clients know that legal problems rarely stay small,” Fung says. “They want to stay ahead of issues and manage them early. They want us to plan different scenarios: best case, worst case, and most likely outcomes with real numbers attached.”

They have a close-knit circle

One of my clients, who is well on their way to building an eye-watering fortune says it can be lonely at the top. If you get wealthy, he says, be prepared to let go of friendships that hold you back.

“I do believe in the saying, ‘You’re the average of the five people you spend the most time with,’ so pick your friends wisely and avoid people who bring you negative energy,” my client says.

“Also, just like how you notice the same model of car that you bought almost everywhere you drive whereas you’ve never noticed it before, the same applies to making money. Adopt the mindset that opportunities are everywhere, you just have to have see them. Because if you don’t, then somebody else will and capitalise on it instead of you.”

They’re not usually showy

How do you pick the richest person in a crowd? It is probably not going to be the one wearing the thick gold chain, Swiss watch and Italian designer outfit. The ultra rich are less inclined to feel the need to impress you with how they look. They are confident in their own shoes and many will purposely underdress to blend into the crowd.

In fact, the more they stand out, the more that family, friends and strangers alike are likely to try and take advantage of what they have built. It could be pitching a business idea, asking for a loan or placing expectations on their wealth such as always picking up the bill. As the late American rapper The Notorious B.I.G. succinctly put it in the title of his 1997 hit song: Mo Money, Mo Problems.

James Gerrard is principal and director of financial planning firm www.financialadvisor.com.au

This article first appeared in The Australian as Rich investors use these money tips to build wealth, leading financial adviser reveals