For me, one of the most gratifying benefits of having been around the financial advisory industry for a long time is when old friends do something particularly noteworthy. The new book, The Middle-Class Millionaire: The Rise of the New Rich and How They are Changing America, by Russ Alan Prince and Lewis Schiff, is an excellent example.
I’ve known Russ Prince for close to 20 years, have always admired and respected his research, and even worked with him a while back on a white paper publicizing his ground-breaking data on client-oriented advisors. Lewis Schiff and I worked together at Worth magazine in the early ’90s, and I followed with great interest his best-selling book The Armchair Millionaire and Web site of the same name that created a national sensation.
A couple of weeks ago, these two pals asked me to write a blurb about their new book, which I found to be a must read for investment advisors (and anyone else) who wants to understand the growing class of self-made millionaires who, according to Prince and Schiff, are changing the consumer markets and indeed the American economy. More to your interests, they also happen to be the target market of many independent financial advisors. The authors were also kind enough to send me a copy of a study they created by segmenting the middle-class millionaire advisors in their data, to determine how those advisors got that way. I found the results of this study as troubling as I found their book inspiring (an excerpt of said study can be found on in the article “Like Client, Like Advisor”).
In The Middle-Class Millionaire, Prince and Schiff purport to have uncovered the rise of new class of wealth that is changing the face of America: “These 8.4 million households [with $1 million to $10 million in net wealth] make up a new generation of millionaires who began to emerge from the middle class in the late twentieth century…As their wealth has grown, so have both the cost of maintaining their lifestyles and their need for products and services that make their lives run smoothly. Now, through the influence of their affluence, this group is helping to bring about momentous changes throughout American society.”
It’s a little unfortunate that the authors don’t reference the work of Dr. Tom Stanley, formerly of Georgia State University, whose book The Millionaire Next Door published in the late 1980s, became the bible for independent advisors trying to move “upscale” and attract the working-class affluent as clients. But it’s undeniably true that today’s working “millionaire” identified by Prince and Schiff is vastly different from those uncovered by Stanley some two decades ago.
Stanley’s millionaires were almost retro-middle-class, even for the ’80s. They owned and operated small businesses–dry cleaners, gas stations, or cement companies. They stayed married to their wives, drove non-descript station wagons into the ground, bought their clothes more often off the shelf than off the rack, and went to church. They worked hard, sent their kids to college, avoided debt, and saved their money. In a word, they were the total opposites of the 1980s’ high-flying executives–overspending, conspicuously consuming individuals that many financial advisors thought were their target clients. Tom Stanley set them straight.
But a funny thing happened over the past 20 years. The Reagan/Bush/Clinton/Bush economic boom (undeterred by the bond and stock market corrections of ’87, the recession of ’92, or the dot.com crash of 2000), fueled by low interest rates, low taxes, and almost non-existent inflation has, among other things, replaced Tom Stanley’s retro millionaires with a new generation of small business owners who are, if anything, more driven to attain success, far more socially liberal, and cutting-edge consumers of the first order. Prince and Schiff’s book is a study of what it takes to get into that class today.
The Four Horsemen
I won’t go into the details of today’s working millionaires–I have bigger, more industry-focused fish to fry. But in short, the authors identify four characteristics that dramatically separate today’s middle-class millionaires from their less successful classmates:
Hard work. While nine out of 10 of respondents to Prince and Schiff’s survey believe that “anyone can become a millionaire if he or she works hard enough,” the average middle-class head of household works 41 hours a week while the average middle-class millionaire puts in 70 hours. The millionaire is also five times more likely to be “always available” via e-mail (76% vs. 16%), four times more likely to work nights (52% vs. 12%), and three times more likely to be in the office or store on weekends (67% vs. 21%).