Everyone wants money. But what's it mean to be wealthy?

May 9, 2024 4:25 PM

Financial advisors can help clients "give themselves permission to place proper importance on their wealth accumulation," planner Preston Cherry said.

"When it's attached to a purpose, then it has a meaning," said Cherry, CEO of Green Bay, Wisconsin-based registered investment advisory firm Concurrent Financial Planning and a former president of the Financial Therapy Association. "It's very important to know that it's OK to have money. I would say that it places proper importance on growing your money to fund your 'enough.'"

For planners like Cherry (who's also writing a book on the distinction between wealth and well-being), the question of defining when a client becomes "wealthy" reflects the psychological underpinnings of a profession devoted to improving peoples' lives. The slideshow below displays the many different factors that he and seven other advisors and industry executives say are connected to the meaning of wealth.

There are as many types of clients as there are types of relationship with money. Clients who come into an advisory practice may be searching for everything from peace of mind around financial affairs to advice on a hot stock to buy or a clever tax strategy.

People often discuss wealth and income "interchangeably, highlighting a common misunderstanding of the distinct roles they play in our financial lives," said Anh Tran, the managing partner of Irvine, California-based advisory practice SageMint Wealth.

"While many of us work hard to earn a steady income, transforming that income into lasting wealth is a journey that requires strategic planning and discipline," she said. "By understanding the key differences between income and wealth and how to manage each effectively, you can take steps to plan your financial future and potentially leave a legacy for generations to come."

Financial Planning spoke with Tran, Cherry and the following six planners and executives about how to guide clients in finding a larger meaning behind the goal of attaining and enjoying wealth:

Louis Barajas, co-founder of Irvine, California-based RIA firm International Private Wealth Advisors, CEO of Business Management LAB and an "opportunity coach" on the PBS television show, "Opportunity Knock$"
Peter Mallouk, CEO of Overland Park, Kansas-based RIA aggregator Creative Planning
Emlen Miles-Mattingly, founder of Madera, California-based RIA firm Gen Next Wealth and host of the "Hello Retirement" podcast
Chloé Moore, founder of Atlanta-based RIA firm Financial Staples
Abby Salameh, chief growth officer of Birmingham, Alabama-based hybrid RIA firm RFG Advisory
Palash Islam, principal of San Ramon, California-based RIA firm Synergy Financial Group

Planners have been homing in on long-developing fields such as behavioral finance, financial therapy or any manner of psychological concepts related to money for decades — to the point that an understanding of them is required for advancement in business and the profession.
Since 2021, the CFP Board has included "the psychology of financial planning" as one of the "principal knowledge topics" covered by its examination for aspiring certified financial planners. Legends of the profession like George Kinder and Dick Wagner, the writer of a seminal 1990 article in the Journal of Financial Planning titled "To Think ... Like a CFP," have taken planners to areas far outside stock returns yet fundamentally tied to personal finance.

Those pursuits have not only expanded into new areas of research about how best to serve clients, but also paid off in business and portfolio gains, too. At up to 200 basis points above what customers would otherwise not have without hiring an advisor, "behavioral coaching" represents the biggest boost to clients' wealth from hiring a professional to manage their finances, according to the Vanguard Advisor's Alpha report.

In an often-cited 2007 commencement speech called "Enough" that he later adapted into a book with the same title, Vanguard founder John Bogle shared an anecdote about measuring success in money, business and life.

"At a party given by a billionaire on Shelter Island, the late Kurt Vonnegut informs his pal, the author Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel 'Catch 22' over its whole history," Bogle said. "Heller responds, 'Yes, but I have something he will never have … enough.'"

For eight views on the nature of wealth from financial planners and other experts in the field, scroll down the slideshow. For other coverage at the intersection of behavioral finance, professional development and planning, see:

The core

Louis Barajas

International Private Wealth Advisors

Barajas wrote perhaps the simplest definition of the word "wealth" in an email: "When a client's finances are used as a tool to live a life that is aligned with their most important core values (i.e., health, family, faith, philanthropy)," he said.

Doing what you want to do

Peter Mallouk

Creative Planning

In trying to assign a specific figure to achieving wealth, what people are "really saying is, 'I can do what I want, when I want, with that number,' and that's why everyone is giving you a different number," Mallouk said in an interview.

"Wealth is different for everybody," he said. But those who feel they are wealthy share one thing in common.

"You've arrived to a place where you do what you want when you want, generally," Mallouk said. "There are people who have a lot of money, but they're slaves to their money. So they're rich, but they're not wealthy."

Linked with love and autonomy

Emlen Miles-Mattingly

Gen Next Wealth

A client who has "more money than he's ever going to spend" once broke down in tears after Miles-Mattingly scheduled a family vacation for him, he said.

"Having true wealth is to be able to have the autonomy to spend time with people that you love doing the things that you love," Miles-Mattingly said in an interview. "It wasn't the money that he wanted. It was the time that he wanted."

In that sense, preparing clients for retirement involves helping them come to the realization that they spend the most money on the weekend days that they're not working, he added.

"The biggest transition that people have to make when they're going from working to retired is understanding that you have so much more time," Miles-Mattingly said. "When you retire, every day is the weekend."

Freedom and flexibility

Chloé Moore

Financial Staples

No particular number "applies to everyone or magically puts a person in the 'wealthy' category," Moore said in an email. She pointed out that "some can achieve this state with more modest means and live a very free, happy life," while "others might have what most consider to be wealth and they don't have control over their time or are not living a fulfilled life."

"I believe wealth in a financial sense gives you the ultimate freedom and flexibility," Moore said. "While we can always make more money, time is our most valuable resource. When you're wealthy, you have the resources available to allocate our time as you please. You have the option to focus on experiences and things that make you feel happy and fulfilled."

Wealthy is healthy

Abby Salameh

RFG Advisory

For some, wealth denotes "a happy family," Salameh said. For others, the word revolves around health, travel or creating "mountains of money for the next generation," she said in an interview.

"It's such a personal topic, and I don't think that there's one right answer," Salameh said. "It's the intersection of being financially secure, feeling financially free from stressing about debt — having your health and being able to enjoy your life."

A larger lens

Palash Islam

Synergy Financial Group

A person's definition of wealth "is subjective based on perspectives, cultural norms and their societal values," Islam said in an email.

"I read recently that the person who is healthy has many worries, but the person who is not healthy has only one worry. Interesting to think of wealth this way," he said. "We look at wealth from a balance-sheet as well as an income-sheet perspective — but it ties into whether the person has the lifestyle they want and access to opportunities they are looking for themselves and their family. Those opportunities could be quality of education for their kids, health care, personal and professional networks, etc. I find our self-made wealthiest clients are driven by purpose, intentionality and family."

Income vs. wealth

Anh Tran

SageMint Wealth

Income "refers to the flow of money that an individual or household receives regularly to support their basic needs and standard of living," Tran said. "While most people associate income with employment, it can also come from business profits, investments, rental payments and other types of earnings like pensions and government benefits."

In contrast, wealth relates "to an individual or household's net worth (total assets minus total liabilities) at a point in time," she said. "Assets can include things like savings accounts, investments in securities, real estate, business ownership and personal property, while liabilities include any debts an individual or household owes."

"The primary difference between income and wealth is that income refers to money earned over short periods, whereas wealth represents the accumulation of financial resources over time," she said. "Yet, despite this distinction, the relationship between the two is dynamic and interdependent."

"Being wealthy means that you have accumulated enough financial resources, assets and investments to support your desired lifestyle without solely relying on income from work," she continued. "It signifies financial independence, where you can create a lifestyle that aligns with your goals and passions and work becomes a choice rather than a necessity. Being wealthy goes beyond just having money; it's about having the financial stability and flexibility to live life on your own terms."

A distinction between wealth and well-being

Preston Cherry

Concurrent Financial Planning

There is a division between "wealth" as "a dollar amount that we need to fund our overall aspirational well-being" and the meaning of "well-being," which refers to the "holistic well-being that we want to experience in our life now and for our future retirement," Cherry said.

Those seeking "to bridge those two together" may be discounting "the importance of the role money plays in our lives, the dollar amount," he said.

"Folks like to include well-being into wealth, and I'm saying that they're distinctly separate," Cherry said. "Wealth is living abundantly, but it is a management and accumulation of your finances in order to fund what matters most."