Even millionaires see benefits of budgeting

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: Paul Sullivan

Someone with $100 million has nothing to fear, not even fear itself. But not long ago, a client with such assets called and asked Bruce Bickel, her wealth adviser at PNC Wealth Management, to put her on a budget.

“She said we’ve never done this before, and we think we should,” said Bickel, managing director of private foundation management services at PNC. “It’s all relative. Their loss has put them in a fear response.”

That mindset is a direct result of the financial panic that turned one year old this week. At this time last year, Richard Fuld was centre stage in the financial crisis; Ken Lewis, chief executive of Bank of America, was being hailed as Merrill Lynch’s saviour; and Bernard L Madoff was little known beyond the financial world.

None of that is true today. And even though a year has passed, wealthy investors remain cautious.

The Boston Consulting Group predicted this week that worldwide wealth would not return to 2007 pre-crisis levels until 2013. It also said it found that the number of millionaires was down 18% and that, across the board, clients of wealth management firms had lost trust in their advisers.

“There is a shattered confidence we haven’t seen in a long time,” said Bruce Holley, senior partner at the firm. “The wealth management business is a very emotional business, and people can react in kind to that.”

This explains how someone with more than $100 million in assets can ask her adviser to put her on a budget. As far-fetched as it may sound to someone struggling to make a mortgage payment, such a request reflects the changes in attitudes about wealth in the last year.

Show me the money

Watching where your money goes is more than just having a budget. “One of my families said, ‘If you’re worried about spending, then you’re not wealthy,’ ” Bickel said. “But across the board, there is greater discernment with use of discretionary income.”

That discernment has taken many forms. One is charity. Many of the two dozen private foundations Bickel advises have become more focused in their giving. In one case, the family used to give to various cancer-related charities, but it now concentrates on cancer research. The family has not reduced what it gives, just focused it on a particular area to have greater effect.