Why the Wealthiest People in the Room Are Often the Most Miserable — And What to Do About It

Matt Ludmer (0:03)

Why do wealthy people get wealthier? It's because they don't have to sell.

They can handle volatility. It's not brilliance, it's organic understanding of like, well, I don't need to sell my equities because I have so much other stuff to pull from. So why don't we do that as individuals as well to the extent that we can?

Rachel Warren (0:32)

That was Matt Ludmer, 40-year Wall Street veteran and author of The Right Mountain, on why the secret to building lasting wealth has almost nothing to do with being smarter than everyone else. I'm Motley Fool analyst Rachel Warren.

Matt started his career as one of the first wealth managers at Morgan Stanley, and after decades sitting across the table from some of the wealthiest people in the world, he came to a startling conclusion. Most of them are miserable. He joined me to talk about what actually separates people who build wealth and relax from those who build wealth and burnout, including the three-pot portfolio strategy he developed that changed how his clients think about market volatility forever. We hope you enjoy.

Welcome back to Motley Fool Conversations. I'm Motley Fool analyst Rachel Warren, and today I'm delighted to welcome Matt Ludmer to the show. Matt is a 40-year veteran of Wall Street Wealth Management, the founder of Aligned Wealth Management, and the co-author of the new book, The Right Mountain, Practical Wisdom for Achieving True Wealth. Matt started his career as one of the first wealth managers at Morgan Stanley, later becoming a director there, and then of course launched his own firm, Aligned Wealth Management in 2013 Matt, welcome to the show.

Matt Ludmer (1:39)

Thank you, Rachel. Thanks for having me.

Rachel Warren (1:41)

Well, I'm excited to talk about your book and just dig into your experience and background. But I want to start here. We live in the wealthiest society in human history, but anxiety, burnout, dissatisfaction rates have never been higher. I wonder, after decades at the top of your craft, what led to your realization that today's definitions of wealth and success are somewhat broken, if you will?

Matt Ludmer (2:05)

Yeah.

Well, it wasn't me sitting on high and making that observation. It was really my own personal experience. I was at Donaldson, Lefkin and Genrette around the year 2000 I was on one of those corporate outings that were pretty opulent in the four seasons in Scottsdale, Arizona. They were giving out awards for the top producers. I remember it was like winning an Oscar while everybody was in the ballroom, and they called up the fourth largest producer, the third. I had just joined the firm from Morgan Stanley, and I had no idea these things actually went on. Then they announced the top producer at the firm, and I got the award. I was shocked. I was like, what? First of all, I didn't know that was the case. Second of all, at first it felt great, and then it felt actually like the person who won the second greatest producer, largest producer turned to me and said, I want your position. I'm going to get it next year. I was like, whoa, whoa.

I just realized, I have to do this again.

I just felt like the Sisyphusian rock up the hill kind of thing. I felt hollow. I felt achievement, but I didn't feel fulfilled. It really was that realization, and then also seeing it in my clients, the same thing, and then having a father who was content in all ways and didn't really have very much. So seeing the contrast, seeing my own hollowness put me on a path to understanding, well, if this isn't, I'm a wealth manager. I was one of the first wealth managers of Morgan Stanley. If this isn't wealth, if this achievement doesn't bring fulfillment, like what does? That's what I spent the past 26 years on a first principle basis studying.

Rachel Warren (3:58)

What is the three pot portfolio strategy?

Matt Ludmer (4:02)

I had the great privilege of managing money for an offshore captive insurance company in the 90s. One of my mentors invited me down to compete for business for a large portfolio. Anyway, I didn't know anything about insurance and how they invest, but they do it differently than individuals. They don't invest like this is one big pot and you just invest the whole thing. They match assets to liabilities. I thought, wow, that's interesting. They do it over time. When you have an insurance portfolio, you have the working capital portfolio to take care of the insurance needs, you have the insurance reserve, and then you have surplus. The first is for short-term, the second is for intermediate, and the third is for the long-term needs for the people that are insured.