Today I found this Survey $25 Million Plus Investors 2012 by Spectrum Groups. The site had some good insights that I would like to share plus I added my two cents. Here are their top five factors:
Being in the right place at the right time. For large investors of $25M or more, being at the right place at the right time was more important to frugality. My two cents: Being at the right place happens probably more than you think. Are you reading up on what is going on in the world? Do you associate with similarly situated and minded folks as your aspiration and your interest? I do agree being frugal is important…no doubt. Living below your means is how you take some income and convert it into investments. This is how you create momentum and with momentum comes the ability to cease an opportunity when the right one shows up.
Ah…the difference between high net worth and ultra-high net worth is the latter ranks taking risker higher than those with with investments less than $25M. Do you know your risk tolerance level? That is going to be important if you are going to leverage risk into your investment strategy.
In a recent study by Spectrum Group, millionaires, regardless of level agreed Smart Investing was the third most important factor. From my perspective, allocating your resources into asset classes and vehicles is such a critical decisions that requires thorough analysis and consideration. If someone tells you it is a good thing and yet you know nothing about it….run away from yourself and your tendencies to give your money to someone else to invest. Knowledge is Power and being knowledgeable about your money and investments is how you win.
Higher Education and Advanced Education is an important factor. I would add to this category that we should include daily reading materials on global/geopolitical, political, and economics in order to stay knowledgeable.
Millionaires, regardless of level, credit their wealth to hard work. I do think, also, the harder your work the luckier you get which loops #1 to #5.
And for me, I have added an extra one…number zero, where it all begins.
Be strategic on what you make, how you spend it and what you invest in. Live below what you need, and be respectful of the economy, it can get shaky and you have to be ready for what it will bring you.
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I am listening to an audio of the life of Warren Buffett called The Snowball. Interesting observations so far (half way through the audio book). While these are not overt observations depicted in the book, you can draw the conclusions.
For most folks, their home is where a majority of their wealth is resides. At the time Warren and his wife Suzy purchased their home where he still lives today, he called it a “Folly” understanding that his $100K investment was really a $1M in 30 years. How many of us think of our purchases of cars, homes, shoes, and vices as opportunity costs of what it could be worth in 5,10, 20 or 30 years? Something to think about when you are wanting that new car right after you got done paying off your last car payment.
My second observation is: Those with the most information and knowledge along with a humble disposition will win out over those that are ill informed and/or without humility. Today as back then, Warren reads feverishly reports about his businesses along with possible opportunities presented. How much have you read about the investments you are invested in (401K, IRA, Investment Account)? I have started this process myself. It is definitely a lot of time and effort; however anything worth having requires work…and the harder your work the luckier you get.
My third and by far the most cementing observation is it is better to invest in the “really good” at a fair price than the “really good price” for the fairly good. This applies whether you are talking about buying a business, a home, stock in a business, employees or a product/service. My experience as it relates to hiring employees is to focus on the talent and what their capabilities are in the future and not necessarily their current skills if they are less experienced. If they are more experienced, I am willing to pay more for the experience so we can yield greater results more effectively and efficiently. The saying you get what you pay for…is so true.
We can create our own wealth by taking some tips from Warren Buffett. The Less You Buy, the More You Have.
Find Peace in the Valley….stand still and listen. The answers are right in your range of capturing and capitalizing them!!!!
This week another “what is going on” happened in the financial industry. This time it is UBS and 31-year-old UBS trader Kweku Adoboli who is accused of rogue trading with estimated losses now closer to $2.3B. The activity had been occurring for the last three years but according to UBS it just recently uncovered the activity. Sadly, this comes just a few years after the financial crisis of 2008 and UBS’ commitment to improve risk-controls and management system after it had a $50B write-down.
Accountability and risk management were areas of opportunity for UBS back in 2008 and part of the commitment Oswald Grübel, CEO made when he joined in 2009 to improve the risk management. Fast-forward to September 2011, and apparently the culture is deeply rooted with folks who are working against the mantra of improved operations and risk management or so it seems.
UBS’ story is too familiar to those following the market, corporate culture and the financial industry. In fact UBS’s story is eerily similar to Société Générale SA and Jérôme Kerviel, who racked up a $7.2B loss doing the EXACT same thing. Kerviel was accused of making fake trades to hide his losses and repeatedly deleted those trades just before inspections, re-entering them afterward.
If you read Kerviel’s and the Soc Gen story, Kerviel will tell you that his leadership knew what was going on and he alleges even helped circumvent the system controls to allow him to make incredibly large trades given his previous successes. Others were also involved, knew what was going on and in fact left the business shortly after the discovery. Regulators on the Soc Gen case, The Bank of France, made 17 routine on-site investigations of Soc Gen in the two years prior to Kerviel’s capture and did not detect the matter.
So what is the answer to protect business owners, investors, customers and employees? First off businesses today are operating in a much more complex environment and with a weaker economy. When knowledge and money are scarce, we see the true ethical fabric of people and corporate cultures.
Knowing that we have complex and fast-paced environments, and financially weaker economics, we have to acknowledge that financial controls, IT security, risk management and a “do the right thing” culture are critical to ensuring protection of economic value.
As leaders, I would recommend the following to help create a culture of accountability and oversight:
1) Automation of controls is good but it alone will not do it. Human observation is critical to catch activity when systems do not. In the cases I have been involved in; it was the person who has a funny feeling that triggered the review.
2) Instill in all levels of management the understanding and expectation of risk management as part of their core responsibilities.
3) View new processes, systems, people selection all with the eye of risk avoidance. How can we ensure our data is protected, our systems are secure, our people support a culture of taking care of each other, the investors, the customers and the broader economic community?
4) If you find a flaw, promote it, tell others so they know how it happened, how it was fixed, and that leadership is always on the lookout for other errors.
- If it is a system error, do a full sweep of the systems to inventory and determine if others are out there.
- If personnel related, investigate how rooted the infraction is on the culture. Usually people cannot commit a crime alone…typically there are others who at least know about it if not participated in the act. Determine the depth and breadth of the web of knowledge.
UBS, the world’s largest private wealth manager said no client’s positions were compromised. However its reputation has been seriously harmed and with their letter to clients this weekend they attempt to provide some assurances “We fully understand this incident has caused you concern. We too are very disappointed, and we assure you that UBS is taking the matter extremely seriously.”
Well, what about the letter to its shareholders that lost $2B in operating income, or the 3,500 employee force reduction announced in August with a value of $2B which will appear to cover the loss or the broader market that is teetering in its confidence of the financial industry and market in general?
This was not a single person acting alone in a cone. Several people either activity or passively through lack of controls and accountability played a role in the situation.
We as leaders of companies must understand we are all connected…when we create an environment of strength, values, sustainability and corporate citizenry then we create our own destiny of greatness. Looking away is not an option for us. If internal controls and accountability are not on your short list as a leader….this is your wake up call to make some changes. Too many people are counting on us.
- ‘Rogue trader’ losses engulf UBS (telegraph.co.uk)
- Swiss Bank UBS: Rogue Trader Took Us for $2 billion (spectrum.ieee.org)
- UBS Loss Shows Banks Fail to Learn From Kerviel, Leeson (businessweek.com)
- UBS Discloses $2 Billion In Unauthorized Trades (informationweek.com)
- A rogue trader at UBS or a rogue bank? (blogs.ft.com)
- Moody’s reviews UBS credit rating (bbc.co.uk)
- John Bates: Make It So: Get a Grip on Risk and Surveillance (Lessons Learned From UBS) (huffingtonpost.com)
- UBS revises loss up to $2.3 billion in unauthorized trade (cnn.com)
- UBS unauthorized trade loss now up to $2.3 billion (edition.cnn.com)