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Mercedes and McMansion owners aren't always 'Prodigious Accumulators of Wealth,' according to the late advisor and researcher
March 10, 2015 — 4:36 PM UTC by Guest Columnist Gerri Leder
Brooke’s Note: I particularly like RIABiz when an e-mail from the famous author of No eff-ing way: Goldman professionals can’t e-mail profanely? arrives in my inbox saying she’d like to write a little piece remembering a person relevant to RIAs, but whose passing was at risk of getting by us. Gerri Leder added a little contemporary news that makes us understand that Tom Stanley is gone but his subjects are still hiding in plain sight.
The community of Brattleboro, Vermont was stunned when a working man left almost $8 million to the local hospital and public library last year. Ronald Read, 92 at the time of his death, held down jobs as a janitor and at a filling station. When locals saw him foraging for wood or selling scrap metal fencing, they mistook his frugality for financial need. This working man was the millionaire next door whose hobby was investing.
The fact that the 'millionaire next door’ is a term you know, is thanks to Tom Stanley, who coined the term for his 1996 bestseller with co-author William D. Danko. Stanley died this month in a car crash.
In “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy,” Stanley shifted our assumptions that you can judge someone’s wealth just by looking at lifestyle, when in fact, your skinflint next-door neighbor in your middle-class neighborhood can have a surprising level of wealth. Back in the 1980s, when $1 million was a king’s ransom, a millionaire was thought to comport himself like the ascot-wearing Thurston Howell III, the millionaire who lock-jaws today in reruns of the popular shipwreck sitcom, Gilligan’s Island.
Stanley, who shared a blue collar background with Danko, had scant exposure to the species in his youth. But as a marketing professor, he was asked to present his work at a meeting of the Securities Industry Association, according to a timeline on his website. He wrote about a “really big segment” of Americans that the industry had ignored for years: “The wealthy Blue Collar do not need to purchase the expensive artifacts that are part of the white collar worker’s status knapsack.”
Even he was later surprised by the size of the segment. This and Stanley’s subsequent work taught a generation of financial advisors and wealth managers that the people who were driving Mercedes, taking fancy vacations and living in McMansions, may not be the wealthiest prospects. Instead, there were people much wealthier secret millionaires.
These secret millionaires — or Stanley’s Prodigious Accumulators of Wealth (PAW) — drove 12-year -old cars, lived in the same small house for more than 30 years and worked until after dark every day into his 70s. They may own a company in a “dirty job” like machine parts manufacturing or another business most people don’t think about as wealth producing. They bank the considerable difference between income and household expenses, ending up the wealthiest in town, or surprising everyone — as Ronald Read did after his 2014 death – with a sizable bequest to charity. See: Strategic philanthropy: Exactly how to bequeath your values — not taxes — to the next generation.
Hard to live by
Sure, you knew some of your super successful clients had surprisingly small investment accounts. And, many other clients who didn’t seem to act well off had unexpectedly large amounts of money to invest. Still, you wondered how they did it. Stanley taught us they end up on top by delaying gratification and denying materialism.
Easier said than done. Even financial people who understand compounding and agonize over a basis point in performance, have been known to drive the fancy cars and spend, spend, spend. See: Why buy-high-sell-low-scarred retail investors are poised to catch the market wave.
His formula for acquiring wealth is easy to understand and hard to impart to spenders and purchasers of status symbols. Perhaps that’s why mothers would buy the book to give it to their children, Danko told the New York Times.
Stanley wrote several award-winning books, but his fourth book, “The Millionaire Next Door,” landed him a guest spot on the Oprah Winfrey Show and 170 weeks on the “New York Times” Best Seller list.
His observations and simple truths crept into mainstream culture. This online comment posted to the New York Times article, “Paying Tribute to Tom Stanley and His 'Millionaire Next Door,” reflects a common affection for the author revealed in social media. “I no longer look at 'fancy people’ and 'fancy things’ in the same way, one poster wrote. Living by the lessons in that book have made a major positive impact on my household net worth these past 20 or so years.” See: What the RIA Hippocratic oath would look like — in plain English.
Tom Stanley was 71 when an Acura MDX struck the driver’s side of his prized Corvette, while driving near his Atlanta home. He was a husband, father and grandfather who achieved financial success and was proudest of his children and grandchildren. His insights and work will certainly endure in the wealth management and financial advice business.
Gerri Leder is founder of LederMark Communications, which provides marketing strategy and communications services to firms in the wealth management and financial advice industry.
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