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Tuesday, Aug 9, 2022
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Dull But Profitable Firms

Want to spot a multimillionaire in the Valley? Try looking for a house that may or may not be in a gated community with a car, maybe a Lexus, that’s two or three years old parked out front. Check the same schools that the children of middle-income families attend. Or the same golf courses their parents frequent. Search out the dullest of businesses. Sure, the greater Valley area has its exclusive neighborhoods Lake Sherwood, Hidden Hills and the winding streets along the hillsides high above the south side of Ventura Boulevard but for the most part, the Valley’s affluent live inconspicuously, much the same way that their neighbors, who may not be worth nearly as much, live. “I think that this area has a lot more very wealthy people than you’d ever know,” said Tony Principe, president of Westcord Commercial Real Estate Services in Westlake Village, and a resident of Lake Sherwood. “They tend to be more low key in this area. They have extreme assets, but you’d never know it.” Living in L.A. it’s easy to get the sense that the rich live the high life, driving exotic, imported cars, wearing Prada sneakers and hiding behind huge, gated estates such as those found in Beverly Hills. But those who know wealth first hand, or who work with the wealthy, say that it is that lifestyle that is the exception. To be sure, the assets of most of the Valley’s affluent don’t compare with the likes of many of the richest in Los Angeles with a net worth well in excess of $1 billion. But even among those worth $10 million, there would be plenty to spare for extravagance, should they choose. “Most millionaires are millionaires because of equity in the business they own,” said Richard Peterson, managing partner of Market Psychology Consulting, an investment strategy consulting firm in San Francisco. “Because it’s invested in their business, they tend to see wealth as something that should be taken care of and something that should be earning you money.” Peterson, who is also a psychiatrist by training, points out that, typically, it is those with highly visible professions, entertainment industry folk, doctors, even some attorneys, whether wealthy or not, that spend the most on their lifestyles. “In the San Fernando Valley, they’re not trying to represent anything,” Peterson added. “And that culture of image representation probably doesn’t appeal to them because it’s not authentic. It’s about what’s good for my family, what’s good for my business, where do I find my church?” While a few of the Valley’s richest are highly visible real estate magnate Edward Roski Jr. and Countrywide CEO Angelo Mozilo, for example most have earned their wealth starting and running businesses that are relatively unknown. “You don’t see them,” said Mel Kohn, a partner with accounting firm Kirsch, Kohn & Bridge LLP in Encino. “You drive the rim of the Valley from Chatsworth to Glendale and there are just a lot of businesses you don’t know anything about. Only their accountants know and they know.” Actually, the profile of the rich in the Valley is much like the profile of the wealthy everywhere. In an often quoted book, “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy,” authors Thomas J. Stanley and William D. Danko found that most of the country’s affluent live in the same home for more than 20 years; they wear inexpensive suits; they rarely drive current model cars. “Most of the businesses we are in could be classified as dullnormal,” the book’s authors wrote of the way the wealthy describe themselves. “We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers and paving contractors.” The reasons behind the lifestyle choices have less to do with geography than they do with the way most of the country’s richest came by their wealth. The vast majority is first-generation wealth amassed through owning a business, and that is the typical profile of the Valley’s affluent as well. “I would say for many of them, they didn’t make it overnight and they didn’t make it in one big strike,” said Gordon Gregory, managing partner at Mosaic Capital, an Encino-based investment banking firm. “They made it over time. When you get someone in the entertainment space who’s had a big strike and had it young, they may be more conspicuous in their consumption.” Behavioral psychologists and others say that those who built their wealth from the ground up are more likely to hold onto it, spending frugally. They are also more likely to hold onto the values they had before they became wealthy. “The $800 sneakers, that’s not the Valley,” said Michael J. Narvid a business and real estate lawyer at Narvid Scott LLP in Sherman Oaks. “If you have wealth, and you decide to live in the Valley, you’re living either for the openness of Hidden Hills, if you can afford it, or what’s more important is a sense of family.” There is also something of a self-selection process at work in the wealthy communities in the Valley, many say. The rich choose to settle here or remain here because they are not comfortable with the visibility and flamboyant lifestyles of their counterparts in Beverly Hills. “I think part of the reason they’re out here is because they don’t want to be in that limelight,” said Principe. “They want to raise their families and be in a nice, secure area and they don’t want to fight the traffic and other problems you have in the city.”

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