The 3 forces reshaping how to build wealth (and what to do about it)

I’ve been sitting on this idea for a while now.

Every week inside the Lifestyle Investor Mastermind, I’m surrounded by some of the smartest investors I know. We’re having conversations that challenge conventional thinking, dissecting deals and debating strategies that most people will never hear about.

And until now, those conversations have stayed inside the room.

But, I want to change that. I wanted to create something that pulls the most interesting, most counterintuitive, most unconventional ideas from our community, and share them with you directly.

I’m calling it the Lifestyle Investor Lens.

Every week, you’re going to hear from me with what I’m seeing. My hope is that this will serve as a lens… into the future, into what’s happening in the investment world, and inside the most impactful conversations taking place inside the Lifestyle Investor Mastermind and community.

The reason I’m doing this now? Because I think we are going through a major change in the world and I’m seeing it play out in real time.

In fact, there are three shifts that I see reshaping the investment world as we speak. And because this is our first issue of the Lifestyle Investor Lens, I thought I’d break them down for you right here.

Shift #1: From Public Markets to Private Markets

Here’s something that surprised me when I first discovered it: Most people think the majority of wealth is created in the stock market.

It’s not.

Twenty-five years ago, there were over 10,000 companies on the New York Stock Exchange. Now? Just over 4,000. Your options keep shrinking, and everyone has access to the same ones. 

Meanwhile, private businesses? There are literally tens of millions in the U.S. alone.

That means the companies on the stock market represent less than 0.1% of the available private companies.

Think about that.

Here’s what the data shows: The wealthiest people in the world, family offices managing billions, have over half of their net worth in alternative investments. UBS reports their family office clients have 59% in alternatives. I was at an event recently where a very prominent family office shared their asset allocation: 70% in alternative investments.

The alternative investment for wealthy people is the stock market. Not the other way around.

I’m not against the stock market. I think it should be part of everyone’s portfolio. But overpaying for positions, lacking diversification, being over-concentrated? That’s where people get hurt. The wealthiest families I know treat the stock market as just one piece of a much larger puzzle.

Shift #2: From Investment Advisor to Family Office Paradigm

Most investment advisors make their money based on Assets Under Management (AUM). They have a financial benefit when you keep your money with them, and when you don’t have utility of your money.

I’ll tell you something interesting: Less than 5% of money managers in the United States can actually outperform you just investing in the S&P 500 index over a 15-year period. Over 30 years? Less than 1%.

So most people pay more money to have worse performance. They pay more for worse and their assets erode from fees on top of it.

The wealthy don’t operate this way. They have what’s called a family office, a team of specialists dedicated to their wealth: tax strategists, estate planning attorneys, deal flow, asset protection, everything coordinated together. They’re not outsourcing their financial future to someone incentivized to keep their money locked up.

Traditionally, you needed to be a billionaire to afford this setup. It costs between $4-14 million a year to run a fully staffed single family office. But that’s changing. Today, you can access much of this framework without the billionaire price tag.

Shift #3: From Net Worth Focus to Cash Flow Focus

Here’s something that might sound counterintuitive:

I had financial freedom before I was ever a millionaire.

Before I ever had a million dollars in net worth, I was financially free which means I didn’t actually ever have to become a millionaire. Net worth grew as a natural byproduct of passive income growth.

The outdated wealth model, passed down from baby boomers to Gen X to millennials, has been: accumulate, then deplete. Build a stock pile. Hope it’s enough. Then spend it down in retirement.

But here’s the problem: When someone tells me their net worth, I always think… it’s probably half that. Most people inflate the value of their business. If someone goes to sell, they’re going to make way less, because part of the value is the person who founded the company and is running it. They don’t consider taxes and how they’ll lose the majority of their current write-offs in retirement. 

That big number on paper? It’s not what you think it is.

I want to live in a world of helping people experience the utility of financial freedom today. Not someday. Today.

When you’re financially free, you make better decisions for your business and your family. You’re not asking “can I afford it?” – you’re asking “is this best for my business, my employees, my customers?” That’s a completely different mindset.

So What Do You Do About It?

If the old paradigm is obsolete and we need to think about a new paradigm… where does that leave us?

What’s the next step? Where do we go from here?

That’s going to be the topic of next week’s Lifestyle Investor Lens. Stay tuned.

I’ll see you next week.

– Justin

P.S. I’d love to hear from you. Of these three forces: the shift from public to private markets, from investment advisor to family office, or from net worth to cash flow, which one hit you the hardest? What’s your biggest takeaway?

The reason I ask is because I’m intending on sharing once a week, just like I’ve done here today, some of the wisdom showing up in our community. If there’s a topic, question, or area you’d love for me to touch on, let me know!  I’d love to incorporate it into a future newsletter to make this as useful for you as possible.

Just send me an email and let me know.