The Wealth Matters column was first published in December 2008. The column was first written in December 2008, when the economy appeared to be on the rise. However, the economy was in deep trouble by the time that the first column was published. Americans were worried about their savings, investments, and homes.
Many Americans struggled to recover for years. For the wealthy, it took 13 years to recover.
I’m writing my last column — No. 608 — as the Covid pandemic has highlighted how stark income inequality has become. Multiple billionaires are flying into space on their rockets, way above the economic, health, and financial problems of the rest.
So for this Wealth Matters column, I called a group of people who work with or study the wealthy, people I’ve leaned on repeatedly over the years for insights, and asked them this open-ended question: How has the perception of wealth changed from 2008 to today?
“I got death threats the first time you mentioned me in your column and the last time, too,” said Brad Klontz, a financial therapist whom I first quoted in February 2009 and most recently last month in a column about whether $400,000 in annual income qualified someone as rich for tax purposes. He was one of my go-to sources to explain why there was often such a visceral hatred of the wealthy in America — for which he was thanked by online attacks.
“There’s this psychological drive to disparage those who have more money than us,” he said. “Yet if you make $50,000 a year, you’re one of the top 1 percent richest human beings who has ever walked the earth. But my question is: Do you feel rich?”
That line, said on a CNN show, got him “an email about building a guillotine and stacking financial therapists like firewood,” he said.
(Just last week, after I wrote about the private aviation industry dealing with a surge in demand in the pandemic, I received this email from a reader: “Mr. Sullivan, what can I do to help these private plane owners who are so devastated by these terrible times? I look forward to your suggestions on how to help these troubled parties. Thank you.”)
From one perspective, the columns attracted critics of my efforts to write about the concerns and actions of the wealthy.
James Grubman is a psychologist and consultant to wealthy family members. He said that wealthy people and their advisors share these negative views about wealth.
“We’ve been told rich people destroy their children and families, and it’s taken as a truth,” Dr. Grubman said. “But fears are not outcomes.”
In particular, Dr. Grubman said, the belief that someone’s wealth will be squandered in three generations — the shirtsleeves to shirtsleeves story — isn’t supported by more recent research.
Many inheritors are moving away from the stereotype of the do-nothing trust funds kid, according to Dennis Jaffe, who consults wealthy families and has worked with Dr. Grubman in research.
“The biggest thing is younger generations have stepped out of the shadows,” Dr. Jaffe, a sociologist, said. “The story of wealth today is second- and third-generation leaders and innovators not being a pale imitation of their parents.”
If there is one thing that the wealthy and the middle class have had in common since 2008, it’s the memory that a crisis can shake perceptions of wealth. They have had time to develop a financial plan in the years since.
“I reflect back on that period of 2008 and 2009 quite a bit,” said Michael Liersch, head of planning and advice for Wells Fargo’s wealth and investment management division. “For many, it felt surprising. Although it was unexpected, it allowed people to learn. Something unexpected causes people to update their beliefs.”
People are now more open to talking about wealth, he said, asking questions like: “How did you make that trade-off? How much did it cost?”
And investors realized that they needed a plan to protect what they’d earned, whether they were a tech billionaire or a tech worker.
“When times were good, it can seem like they’re always going to be good,” said Sharon Klein, president of family wealth for the Eastern United States at Wilmington Trust. “Sometimes you don’t understand that until you have a really disruptive event like we had in 2008. A lot of people learned that you need to be really coordinated and have a team so you can pivot and change on a dime.”
She added that more of her clients today “are poised to take advantage of opportunity but also be defensively positioned if something happens.”
Also, the perceptions of wealth in relation to taxes and investing has changed. Many people now believe the wealthy have an advantage over everyone else. Even accountants and lawyers who work with the wealthy can accept some of this criticism. For example, ProPublica reported that Peter Thiel, a tech entrepreneur, has $5B in a Roth I.R.A. on which he will not pay taxes when he withdraws the funds. Congress created individual retirement accounts in order to help the middle classes save for retirement.
“I’m convinced that changes to planning tools are in the cards,” said John Dadakis, a partner at the law firm Fox Rothschild. “Look at the Roth I.R.A. What happened there. It’s great for some people, but the concept of creating a $1 billion Roth I.R.A. Or even a $100 million Roth I.R.A. where you don’t have to pay any taxes is clearly the wrong result.”
Richard A. Behrendt, a former inspector for the Internal Revenue Service who then worked for a decade helping people hold down their tax bills, said that when he was at the I.R.S., “one of the biggest takeaways for me was the mechanizations that very well-meaning people in the law and accounting world would undergo for their clients.”
“There’s a duty of loyalty, but it’s the extent,” he added. “It has always struck me the degree to which people would go.”
Mr. Behrendt is now a Milwaukee-based lawyer who serves middle-class taxpayers. He also cited the Pandora Files, which showed how top business leaders, heads and other politicians moved money offshore to avoid tax.
“We as a profession can do our jobs and serve our clients well without pushing the envelope,” he said.
Michael Sonnenfeldt, founder and chairman of Tiger 21, an investment club for people who have at least $10 million in assets, said he had seen a marked shift in the group’s membership. Many members see their wealth as a way of achieving change and not a chance for relaxation.
“People aren’t retiring no matter how wealthy they are,” he said. Yet that isn’t driven by a feeling that they’re going to lose it but more by what they can do with it.
“I can only speak for myself,” said Mr. Sonnenfeldt, who has built and sold three companies, “but my assets allow me to be more consequential in making climate-related investments.”
Any investor can invest in climate-change investments. And that was my original goal for this column — to give readers a look at what the wealthy are doing and apply it in their own financial decisions.
But through the years, some of the things I wrote about — superyachts, $31,000-a-year personalized workouts — were totally inaccessible to even the merely rich. These columns were my anthropological perspective on wealth in America. Or at least some wealth voyeurism. Those columns did however excite some readers.
One of the most memorable was Harris Lirtzman from Yonkers, N.Y. “I really find your column disgusting,” he wrote in one email. “This is what YOU earn YOUR living writing about in this freaking economy?”
Well, Mr. Lirtzman, if you’re still reading, I bid you farewell.
Source: NY Times
