On Wall Street

[Michelle Lodge]

If you fly a lot, commute by train or fill your down time trying to improve your business, chances are, you read a lot. Maybe the latest book you've tackled touts a new way to evaluate stocks, weighs the pros and cons of China investing or the upside of the recession or delves into the life of a major Wall Street figure.

With those scenarios in mind, On Wall Street has created the OWS Book Club. The book club features a series of reviews, podcast chats with the authors, and an online discussion with the authors. We will also give you a running list of what books you'll find at airport newsstands and recommend classic books valuable to any broker. And, naturally, you'll have a chance to contribute your thoughts and ideas to the OWS Book Club. We would like to hear from you about everything -- your opinions of the books, the review and the authors and which other books you would like to see on the classic book list.

So to get you, and the OWS Book Club, started, we invite you to join our discussion with co-authors Catherine S. McBreen and George H. Walper Jr., who wrote Get Rich, Stay Rich, Pass It On (Portfolio, 2008). They've proposed a two-pronged approach to generating lasting wealth.

Click HERE to read the book review.

Let us know if you agree with them -- and keep your thoughts coming!
 

[George H. Walper Jr.]

Thank you for your interest in our book. On behalf of Catherine McBreen and myself, George Walper, we welcome any comments or questions you may have.

[Michelle Lodge]

George,

When I read the subtitle of your book--The Wealth-Accumulation Secrets of America's Richest Families--I imagined stories about the Bill Gates family or Warren Buffett or Oprah. Who are the people you and Catherine interviewed?

Thank you,

Michelle Lodge
Contributing Editor/onwallstreet.com

[George H. Walper Jr.]

The people interviewed come from diverse backgrounds and wealth levels. As I see it, there are two types of multi-millionaires in America. The first type is made up of those who are in the public limelight. Celebrities and professional athletes fall into this category. The second type is comprised of private citizens. They're everyday people that come from diverse backgrounds and live in the neighborhoods we live in. The second group is the primary focus of our book. Some have already attained perpetual wealth. Others are on the fast track to getting there.

[Michelle Lodge]

You and Catherine are officers of Spectrem. What does your firm do, and how long have you been in business? 

[George H. Walper Jr.]

Spectrem Group is a consulting firm specializing in the financial services industry. We use a holistic approach to solve business challenges. In addition to consulting, we're involved with mergers and acquisitions and regularly conduct market research in the affluent and retirement markets. Over the 18 years our firm has been in business, we've worked with many of the key players in the asset management, banking, and insurance industries.

[Michelle Lodge]

What can brokers learn about the work you do at Spectrem and from your book?

[Vig Oren]

Sorry,  I need to read the book first in order to be able to discuss it. As a Wall Street Journal subscriber (print & online) where do I find it?

[George H. Walper Jr.]

A common theme in the book is that advisors should expand their knowledge beyond their basic skills sets. To help clients build perpetual wealth, advisors need to become well versed in real estate investments and in helping their clients spot innovative entrepreneurship opportunities.

[George H. Walper Jr.]

Whether you're referring to the mass affluent or ultra high net worth, different estimates of market size will emerge based on different methodologies. That having been said, it's important to ensure that the comparisons being made are of the same groups. In terms of Spectrem Group's methodology in calculating investable assets or net worth, we do take retirement plans into account, especially if it's an IRA. Although I can't speak on behalf of OWS, the term "mass affluent" is simply a category of people that have a certain level of wealth. In terms of our book, we're not trying to imply that investing in securities, such as mutual funds, is inappropriate. We're simply pointing out that when studying people that have built perpetual wealth, the common themes are investment in real estate and innovative enterprises.

[Vig Oren]

Hi George, I have not read the book, but imo, a million dollars in "net worth" (balance sheet approach) , does not indicate affluence any more. Any American couple who prepares for retirement should have more than that if they want to avoid going on Medicaid. Going by the BLS 2005 stats for the median and averages annual expenses for American couples at ages above 55 and inflating these amounts into a future 30 years of retirement, I have calculated the needs for a Present Value (upon retirement) of more than one million dollars. Not including the $250K to $550K needed as extra costs of health care (besides costs paid by Medicare and any LTC), depending on life expectancies, per the EBRI & Fidelity recent reports. So how could you go by NWs of just above $100K as being affluent?

IMO, unless you define NW by also including present values of future cash flows and Human Capital, and go by $5 million NW as a minimum, you should have dropped the word "affluent" from the title of the book. 

[Michelle Lodge]

George,

What surprised you the most about the wealthy Americans you interviewed? And who were some of your favorites?

[Tad Borek]

Hi George, I have not read the book, but imo, and as I noted above,  a
million dollars in net worth, does not indicate affluence any more. Any
American couple who prepares for retirement should have more than that
if they want to avoid going on Medicaid.

Vig, based on every study of US wealth that I've seen, (Survey of Consumer Finances, or the IRS studies, for example), $1 million in 2008 dollars is still a net worth figure that very few will attain - and certainly the Medicaid level is far far below that, except for a spendthrift retiree. Perhaps you're not adjusting your framing of the issue for the value of Social Security and the Medicare subsidy?

To the authors...I'm curious about the sample group surveyed -- how many were there, how did you choose and contact them, etc.? It seems wealth data must be hard to obtain because of concerns about privacy.

-Tad

[George H. Walper Jr.]

Some would be surprised to learn that only 22% of the investors we studied inherited their wealth. The remaining achieved wealth through hard work and investing wisely. One of my favorites is the story of Mark Prentice.

[George H. Walper Jr.]

We have been in the business of doing research on wealthy investors for many years. Over that time, we've developed thousands of trusted relationships. In any given year, we conduct research with 5000 - 6000 of these investors. For the book, we talked with wealthy investors in all parts of the country, whether they be in rural or urban areas. The investors we study are chosen primarily based on net worth or their level of investable assets. Whenever someone is willing to provide us with information, we consider it a privilege and take the necessary steps to ensure privacy.

[Vig Oren]

George, I am wondering how have you defined "Net Worth" ( or is it in the book)? Was it  per the accountant s approach of assets minus liabilities (traditional balance sheet) or per the total personal equity (TPE) measure i.e. what i s  left after subtracting debts and liabilities from the totality of financial assets and human-capital assets?

 

[Amber]

I understand the study concluded that 7 in 10 rely on advisors.  Thats encouraging for us.

[Michelle Lodge]

What was his story and how was he like others you interviewed?

[Michelle Lodge]

Encouraging, yes. Were you surprised by it, too?

[George H. Walper Jr.]

The concept of net worth is referenced in our book. It is more in line with the former approach you mentioned.

[George H. Walper Jr.]

Althoug Mark hasn't obtained perpetual wealth yet, he's well on the track to getting there by investing in income producing real estate investments and innovative enterprises. At the time we interviewed him for our book, he was the owner of one apartment building. Since then, he has used the equity from his existing property to purchase another. He is also able to produce income from his hobby, collecting baseball cards.

[Vig Oren]

 

withdrawn, need to read the book
 

 

[Vig Oren]

-Tad, you asked: Vig, based on every study of US wealth that I've seen, (Survey of Consumer Finances, or the IRS studies, for example), $1 million in 2008 dollars is still a net worth figure that very few will attain - and certainly the Medicaid level is far far below that, except for a spendthrift retiree. Perhaps you're not adjusting your framing of the issue for the value of Social Security and the Medicare subsidy?

Reply: notice that in my definition of NW for retirees,  I go by

Assets =>in addition to a portfolio,  to  include present values of future cash inflows such as pensions, annuities, Soc Sec benefits, etc. plus any future Human Capital if applicable.

Debts and liabilities =>to include any mortgages, margin loans, etc.

In the discussed book they have NOT followed this definition.

[Michelle Lodge]

What's his innovative enterprise and how does it work?

[George H. Walper Jr.]

Mark utilizes eBay and other online market places to earn money. Just as an example, he has a knack for finding great deals on closeout items and subsequently selling those things for a profit. In addition, he's created an innovative way of selling baseball cards.

[Michelle Lodge]

What are some of the items he's found and sold? And how does he sell baseball cards?

Also, one reader wants to know where he can find your book.

[Vig Oren]

Michelle Lodge:  if so why according to the 2008 Phoenix Wealth Survey, 50% of hi- net worth investors said that they DO NOT  seek financial advice?

See it  in this forum on Articles,

Link:

http://www.financial-planning.com/community/threaded/587371/high-net-worth-changing-retirement-plans.html?pg=

[George H. Walper Jr.]

The list of things he's bought and sold is quite extensive. I'll provide two examples. He purchased used hard wood floors from someone that had recently purchased a home and was looking to change the design of the house. The floors were high end and almost brand new. He purchased it for a fraction of what it would normally cost and used it to improve the value on one of his existing properties. He also purchased a huge lot of shoes for pennies on the dollar, many of them brand name, and subsequently sold these on eBay for a sizable profit.

Our book is available on Amazon.com and Barnes and Noble.

[Michelle Lodge]

Vig,

Backtracking, which study is Amber referring to?

[Michelle Lodge]

Of all the people your coauthor, Catherine McBreen, interviewed for the book, who was her favorite and why?

[Catherine McBreen]

I particularly enjoy hearing about people that start with little and end up wealthy. Some of the ways that they make money may not be viewed as glamorous, but it works. An example of this would be "Tom Kramer" who started to build wealth by plowing snow. His business helped him to branch out into other other ventures, such as real estate.

In closing, I sincerely hope that anyone interested in developing perpetual wealth (the kind that will last through generations) will consider picking up a copy of our book. We thank you for the opportunity to address some of your questions and comments and wish you all the best of luck.