The Two Portly Gentlemen Are Entrepreneurial Philanthropists

The following is a guest post from Marotta Wealth Management.

As I do every December, I have been enjoying rereading "A Christmas Carol" by Charles Dickens. This year I've been thinking about Scrooge's interaction with the two portly gentlemen who stop by to collect for the poor. These entrepreneurs represent one of my favorite financial personalities.

In his book "Why Smart People Do Stupid Things with Money," Bert Whitehead describes different financial personalities. He depicts an "entrepreneur" as someone who tends toward greed rather than fear but is balanced between a propensity to save or spend.

Whitehead maps financial personality on two different scales. The first measures people's tendency toward greed or fear. As entrepreneurs, the two portly gentlemen are motivated by greed (high risk acceptance). Ebenezer Scrooge shares this same inclination. The two men see opportunities and the risk excites them. Even soliciting funds for the poor is an integral part of their entrepreneurial spirit.

When the two portly gentlemen stop by Scrooge's office soliciting charitable donations, they discover his partner Marley has been dead for seven years. One comments, "We have no doubt that Marley's liberality is well represented by his surviving partner." The narrative continues, "It certainly was; for they had been two kindred spirits."

Liberality toward others cannot come from someone motivated by fear. Distrust drives out emotions like kindness and compassion. Later in the story, Scrooge confirms this condition in Marley as he looks through his ghostly form and remembers ironically that it was said of Marley he had no bowels. Marley had no empathy for others because he was overly anxious for himself.

When fearful misers like Marley move from savings to spending, they move first to a bon vivant and then to a shopaholic personality. Their fear motivates them to spend more but only on themselves.

Scrooge, in contrast, is more of a risk taker. Thus as he shifts toward spending some of the wealth he has accumulated, he moves squarely into the entrepreneurial financial personality shared by the two portly gentlemen.

Whitehead's second scale measures an individual's tendency to save or spend. Here the two portly gentlemen are balanced between thrift and spendthrift, whereas Scrooge is a practiced saver. A risk taker who is also profligate would be considered a gambler personality. These two gentlemen are balanced between these two extremes.

Many of our clients are small business owners. They are fascinating and passionate people to work with. They are willing to take the risks required to cultivate a business, and they devote their time and effort into doing what it takes to make it succeed. Their family and friendships grow out of running their business. They employ their children.

Interestingly, their sense of mission about their companies extends to combining corporate and charitable intent. According to a 2010 Ernst and Young study, Entrepreneurs and Philanthropy, nine of ten entrepreneurs extend their personal giving practices to the corporations they run. The motivations they cited as most important were to give back to their local communities and to incorporate their personal philosophy into their corporate culture. In addition to starting their own businesses, 43% have started their own charities.

Most entrepreneurs surveyed have a quiet or passive giving style. Although their involvement may be known, they prefer not to be overtly recognized. Most have made charitable giving an essential part of their personal financial planning. They are as intentional about the causes they champion as they are about their companies.

You might think entrepreneurs possess the perfect financial personality, but they do have their weaknesses. First, they have a tendency to overwork. Perhaps this is how the two portly gentlemen acquired their girth by sitting behind their desks too long. Nesters spend less money and more time at home; travelers spend more money enjoying diverse experiences. In this regard the philanthropy of entrepreneurs is a healthy diversification of their business interests to "making mankind their business."

The second weakness is a tendency to run out of liquid assets. Entrepreneurs often sink all of their treasure as well as their time in their work. They are also much more tolerant of risk and wild swings of fortune. When times in their businesses get tough, they need to have liquid assets to survive a negative cash flow. Having a diversified base of liquid investments and lines of credit established during the good years can mean the difference between survival and bankruptcy.

Most entrepreneurs have complex finances but don't have the time to handle all the moving parts. But with great complexity comes great opportunity. Fiduciary advisors are invaluable to an entrepreneurial family. They can free them from some of the details and allow them to focus on their core business. They can also be proactive in suggesting aspects of comprehensive wealth management where small changes can have an enormous impact.

Delegating and accepting advice is the other impediment to entrepreneurs working with a financial advisor. They are accustomed to being the smartest people in the room, and a traditional commission-based agent or broker has little of value to offer. They need an expert, a savvy and reliable advisor to whom they can delegate key aspects of their financial well-being. They need a fiduciary who sits on their side of the table and has a legal obligation to act in their best interests.

The National Association of Personal Financial Advisors is the best organization I know to find such an advisor in your area. Visit www.napfa.org to find a fiduciary advisor worth trusting.

Comments

[Apex]

Very long post to get to the final goal which is a pitch from financial advisors to hire a financial advisor because entrepreneurs are money dumb.

Nice post.

This is almost as good as a pitch from life insurance sales men to use life insurance as a bank.

It seems a number of guest posters here simply use it as opportunity to get on a blog with good exposure and pitch their stuff.

[FMF]

Apex --

1. This is a syndicated column -- it doesn't just appear here but in newspapers as well.

2. He's not pitching himself, he's advocating using fiduciary financial advisors.

3. You need to take some happy pills.

[Apex]

1. This is a syndicated column -- it doesn't just appear here but in newspapers as well.

Doesn't change my opinion.

2. He's not pitching himself, he's advocating using fiduciary financial advisors.

Which is a service they offer as members of the NAPFA being referenced and they link to themselves in hopes that some will use them. It's marketing.

3. You need to take some happy pills.

I don't use drugs.

[FMF]

Apex --

Sorry I've done so much to contribute to your misery.

[FMF]

Apex --

Just to be clear on #1 above, my point was that the newspapers this piece runs in don't consider this as advertising/marketing that's over the line -- and they usually have pretty high standards. So it's "funny" to me that you find it offensive/inappropriate.

[Old Limey]

I agree with Apex that this was rather a long and drawn out, but nicely written, story designed to encourage its readers to use a financial advisor.
I don't have a CFA or CFP after my name and personally have never found the need for one, however I am of the opinion that there are many people that would be wealthier today if they had used one. After I retired and during the 90's when I was very active making presentations at financial seminars and describing and demonstrating the financial software that I had written I met many financial advisors and of course listened to their presentations. There are some excellent financial advisors out there that I learned a lot from, the really good ones tend to charge a percentage of the profits that they make for you, whereas the majority charge a fee for services.

If you are to actively manage your own money successfully there are quite a few things that you need. The first being lots of time every day. You also need the use of proprietary tools and a proprietary database - just having internet access and a computer isn't nearly enough. You also need experience, and gaining experience comes from making plenty of mistakes but learning from each one of them. I have been very good at managing my own money and that of my children but I could never, ever, manage money for a variety of people with a variety of objectives. I have found the comfort zone for investing that suits me but I would be very nervous and stressed out if I was forced to go outside of it. My comfort zone has also become more and more conservative as the amount of money involved has grown and also as I became older. Thus even though I was a good engineer for 36 years I would have never been good at managing money for a living. For one thing it would involve far more personal contact with people than I like. How about all the frantic phone calls you would likely receive during bad periods, and all the second guessing you would be subjected to from clients.