During my almost 20 years in the business I’ve seen a lot of change. Beyond the events of 9/11 (I was at the top of WTC a few days prior to 9/11), I’ve also seen two “once in a lifetime corrections”, the advent of online trading, the proliferation of exchange traded funds and one get rich quick scheme after another. Change is not necessarily a bad thing but my clients who have been most successful are those who followed the most basic financial principles.
While I like to think my hard work and objective advice has something to do with their success, what really hit home was how many of these clients exhibited the same, smart financial traits. I have a number of clients who have gone from very little to sizable nest eggs primarily from making good financial decisions.
I have the pleasure of meeting hundreds of new people each year and seeing what works and what does not work through real world experience. Here are some practices used by many of my clients to help reach their long-term goals. While not all of my successful clients followed these trends, most of them implemented at least a few. These are not based on opinion but rather what I have seen work time and time again.
- Staying in the same home: Most of my most successful clients have lived in the same home for our entire working relationship. Moving can be expensive and time consuming.
- Driving 5+ year old cars: Almost all of my 20 largest clients drive “well broken-in” vehicles.
- Investing on a systematic monthly basis: Putting away a few dollars each month goes a long way over time. One of my best clients started 12 years ago with a $30,000 portfolio and by maxing out retirement each year they now have over $500,000. Market performance helps but diligent investing is the primary factor in their success.
- Fewer portfolio changes: Replacing poor performing investments is not a bad thing but my most successful clients “fine-tune” their portfolios from time to time rather than trade on a regular basis.
- More engagement with their Advisor: My most successful clients meet with me or chat over the phone once or twice a year. This is an opportunity to review portfolio direction and finances not hard sell new product.
- Diversify: My clients with well diversified portfolios are never in a position of having to “guess” what the next hot asset class will be.
- Business owners: Over 50% of my top clients associate much of their financial success to the ownership of a small business.
- Regular discussion of finances among spouses: My most successful married couples are those who periodically discuss finances and are on the same page. I have seen conflict among families destroy the most well prepared long-term plans.
- Retirement withdrawals less than 4% annually: Keeping withdrawals to a reasonable amount gives the portfolio the best chance for long-term viability.
Living below your means, delaying financial gratification and healthy communication are a common theme among the above items. Unfortunately, I’ve seen an equal number of poor financial traits (early retirement withdrawals, over extended home purchases, etc…) that have ruined the best laid plans. Take some time today to think about what you might be able to change to increase your chances of a healthy, long-term retirement. Small changes, compounded over many years may mean the different between a low stress retirement and one filled with anxiety and worry.
To learn more about Spencer Corzine, view his Paladin Registry research report.