RSS Facebook Twitter LinkedIn

Featured Advisor

Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

Click to see the full profile

Share |

How to Become a Millionaire - Factor No. 5

In the past few weeks we have reviewed the first four factors that Spectrem Group research finds is consistent amongst Millionaire and wealthier households.  As a reminder, Spectrem Group performs market research with over 6500 wealthy households annually to understand the investments, attitudes and other important characteristics of affluent households.  The eight factors listed below are the characteristics we have consistently seen as common among wealthy households.

1.      Education.

2.      Hard Work and Average Hours Worked.

3.      Business or Professional Practice Ownership

4.      Slightly aggressive risk tolerance

5.      Use of professional advisors (which we will discuss today)

6.      Balanced portfolios, including alternatives

7.      Investment real estate

8.      Willingness to invest in new but well researched ideas and concepts

Keep in mind that not every factor applies 100% to each Millionaire; however, the factors are consistent among many households.

Factor no. 5, the use of Professional advisors, applies to more than 70% of Millionaire investors.  Regardless of how frequently an individual uses his or her advisor, well over 70% of investors with over $1 million use an advisor of some type.  The number of professional advisors used increases as wealth increases.  In fact, households with over $25 Million of net worth tend to have an average of 3.65 advisor that they rely upon regularly.

What types of advisors do these households rely upon?  Most wealthy households have an accountant.  Usage of accountants is common even in households with less than $1 million.  Another commonly used advisor is an attorney, however, for most wealthy households, the use of the attorney is somewhat limited, unless the household has in excess of $25 Million or if they are in the process of buying/selling a business or establishing an in-depth estate plan.

The most commonly used advisor is a financial advisor of some type.  The most commonly used financial advisor is a Full Service Broker, used by more than 30% of wealthy households, although usage of Full Service Brokers has lessened in the past decade when It was well over 40%.  Today RIAs, financial planners and investment managers compete with Full Service Brokers for these households.

And how much do they rely upon these advisors?  While over 70% of investors have advisors, many of these households consider themselves to be Self-Directed.  Just over a quarter of wealthy households consider themselves to be Self-Directed.  The remaining three quarters rely upon an advisor to various degrees with many of these households defining themselves as Advisor Assisted or Event Driven.

What does this mean for those of us trying to become Millionaires?  The largest percentages of Millionaires do receive assistance from advisors of various types.  Spectrem often finds that even Self-Directed investors will still seek input from various experts before making a decision.  The reality is that successful investors are able to rely upon the expertise of others when appropriate.

Make sure that the professional you are relying upon is credible.  Get recommendations from family and friends and review online information about the advisor, regardless of whether he or she is a financial advisor, an accountant or an attorney.  Most importantly, you need to feel an element of trust between yourself and the individual. 

While many would like to believe that the wealthy do it all by themselves, the reality is that they rely upon and consult with experts as they make decisions about their investments, their businesses and their lives.