Wealthy in TC: Privacy worth its weight in gold
The rich aren’t so different from the rest of us. They’re just more obsessed with privacy and time management.
That’s the picture local business owners paint of their wealthy customers and clients, who are largely business owners, professionals and retirees. Very few are trust fund babies who spend their days sailing on the bay or skiing at area resorts.
“Trust is number one when it comes to privacy,” said Eric Braund, founder and chief financial officer of Black Walnut Wealth Management in Traverse City. “Clients want to make sure you’re going to take care of them and not talk about their finances somewhere else.”
Braund’s firm mostly serves clients with at least $1 million to invest. He said the majority of his clients are physicians and retired business owners.
His focus on trust and privacy is echoed by Amanda Danielson, a partner in Off the Map Hospitality, which owns Trattoria Stella and The Franklin restaurants. She also is an owner of the Blue Goat Wine and Provisions shop. All three businesses are located in Traverse City.
When asked what wealthy patrons of her restaurants and wine store value most, Danielson, a sommelier, responded via email one word: “Discretion.”
It’s a concept, she said, that is “not only the cornerstone of hospitality; it is also lost in this era of instant self-gratification.”
High-income people also like to fly in private planes. But they’re usually not jetting off to Manhattan for an extravagant lunch or a ski trip to Aspen. They primarily use these aircraft as a business tool, said Omer ErSelcuk, chief executive officer of Air Services Inc. in Traverse City.
“About 90 percent of our trips are for business purposes,” ErSelcuk said. “You can take a whole team of people for a business meeting and come home the same day. It’s a productivity tool and a strategic advantage tool.”
Air Services operates four aircraft — two propeller planes and two jets. A round-trip flight to Detroit for seven guests on its flagship Cessna CJ3 costs about $6,100, or $870 per person, according to an estimated price on the company’s website.
“These folks are professionals in the legal, medical, technology and skilled trades fields,” ErSelcuk said. “There is a high demand for their services. They don’t have time to sit on the road for hours and hours.”
By and large, they’re not pretentious, overly demanding or mean, he said.
“They might like their coffee a certain way or want a specific sandwich on their flight, but nothing outrageous,” ErSelcuk said. “We try to surprise and delight them.”
ErSelcuk got into the business of serving high-income clients after seeing the need business people had for getting to locations, such as cities in the Upper Peninsula that are not served by commercial airlines and for trips outside of regularly scheduled flights.
Last year ErSelcuk and several other partners purchased Air Services, which was founded in 1994 by Roy Nichols. The company also provides management and maintenance services to other owners of private aircraft.
It’s not just transportation the wealthy seek. They’re also looking for privacy in their workouts.
Formative Fitness’ downtown location and its emphasis on short workouts helped develop a niche in serving an upscale clientele. While the personal training studio serves people of all incomes, owner Sebastian Garbsch said more than half of his clients are wealthy, with incomes “heavily into the six figures.”
“We wanted to be different with no memberships and really efficient half-hour workouts,” he said. “That’s largely because we wanted to be a premium brand without being pretentious.”
That philosophy appeals to successful professionals and others who value their time as a precious commodity.
“They’re very efficient with time and need us to be flexible,” Garbsch said. “They’ll say, ‘I have to be out of here at 8:42 a.m.’ not 8:45 a.m. “Those three minutes matter.”
Shawn Schmidt Smith has been helping the wealthy buy and sell high-end homes for years in the Grand Traverse region. The local market is divided into luxury homes priced at between $500,000 and $1 million, and “hyper-luxury” homes priced at more than $1 million, Smith said.
Buyers in those segments tend to be sophisticated about the real estate market and know exactly what they’re looking for in a home. The wealthiest among those buyers often have multiple homes in various states or countries.
“They’re more educated and they know how the business works,” said Smith, an associate broker at Coldwell Banker Schmidt Realtors. “It’s not their first rodeo. That helps a lot [in finding homes for them.]'”
Smith, who works with clients of all income levels, said she was initially reluctant to get into the luxury market because of a perception that wealthy buyers are hard to please. But she said that hasn’t been the case.
“It concerned me when I first got into this,” she said. “But 98 percent of the people are just fine to work with. It’s simply a matter of listening to what they want and finding it.”
Other local business owners support that view. They say most of their clients are genuinely nice people who don’t try to impress others with their wealth or project a holier-than-thou attitude.
“They’re extremely nice people and humble. They don’t flaunt their money,” Braund said. “One of my wealthiest clients drives a beat-up Jeep Cherokee. That’s really a big part of this area. They don’t act like they have a lot of money because they know it’s perceived as being bad.”
Some business owners say they benefit beyond the fees they charge to transport their clients, manage their money and provide other goods and services.
“You’re spending time with people who charge hundreds or thousands of dollars an hour for their services,” ErSelcuk said. “A quick conversation with them can be meaningful for you, your life and your business.”
Garbsch said a wealthy client he worked with at another studio before he started Formative Fitness helped him get his own business off the ground. Pressed for time, she asked him to design a workout she could do in 27 minutes instead of her regular 50-minute session. She liked it so much, she offered to give him a loan so he could start his own studio without him asking for the money.
Her offer, which he accepted, shows “just how caring and generous I’ve found the wealthy in our area to be,” Garbsch said.
Signs of Growing Wealth in the GT Region
It’s not Aspen or Palm Beach. But there are signs that the Grand Traverse region is becoming wealthier, driven in part by newcomers with high incomes and big investment portfolios.
In Grand Traverse County, four percent of tax filers had incomes of more than $200,000 in 2016, according to the latest Internal Revenue Service data compiled by University of Michigan economist Don Grimes. That’s up from 2.6 percent in 2011.
In Leelanau County, the wealthiest in the region, 5.8 percent of tax filers had incomes of more than $200,000 in 2016, up from 3.8 percent in 2011. The IRS does not break out income brackets above $200,000, Grimes said.
But for those in Grand Traverse County with incomes above $200,000, the average adjusted gross income was $470,031 in 2016, up 5.6 percent from $445,029 in 2011.
Benzie and Kalkaska counties had smaller percentages of their populations earning more than $200,000 a year than in Leelanau and Grand Traverse counties.
Grimes said the IRS figures are not adjusted for inflation, which could account for much of the increase in incomes. But business owners who provide services to wealthy clients say they’re seeing more of them flocking to the area.
Shawn Schmidt Smith, an associate broker at Coldwell Banker Schmidt Realtors, said she’s dealing with more wealthy clients from other parts of the country and the world, including England and Asia, looking for homes in the region.
“A lot of them have ties to the area,” she said. “They might have family here or remember a family vacation.”
The market for luxury homes costing more than $500,000, while still small, is growing at a strong pace. Data provided by Smith from the Traverse Area Association of Realtors show that the market share of luxury home sales in the five-county Grand Traverse region jumped from 7.4 percent of total homes sold in 2014 to 10.7 percent last year.
Those counties are Antrim, Benzie, Grand Traverse and Leelanau. The most expensive home sold in the region last year was on Glen Lake in Leelanau County and went for $2.75 million, Smith said. In Grand Traverse County alone, the market share of luxury home sales nearly doubled, from 4.8 percent in 2014 to 8.2 percent in 2018.
Eric Braund, founder of Black Walnut Wealth Management in Traverse City, said in the past two years about half of his new clients have been retirees new to the area or those who moved here a few years ago, anticipating retirement.
He also said a large share of his clients are physicians, a mostly high-income group whose ranks have grown with the expansion of Munson Medical Center over the past decade. While exact figures weren’t available, Munson estimates that its medical staff has expanded by about four percent over the past five years, spokesman Dale Killingbeck said.
Incomes in Grand Traverse County have been among the fastest growing in the country since 2007, according to data from StatsAmerica, a research service at Indiana University, and provided by Networks Northwest.
Per capita income in the county jumped 39 percent, from $33,942 in 2007 to $47,165 in 2017. Grand Traverse County ranked 12th among U.S. counties in the percentage rate of income growth during that period, according to StatsAmerica.
Signs of the growing wealth can be glimpsed throughout the region, from fancier waterfront homes to the burst of new wineries on the Leelanau and Old Mission peninsulas.
Sebastian Garbsch sees it up close in his downtown Traverse City personal fitness training studio, where he estimates 60 percent of his clients have six-figure incomes.
“There are definitely more affluent people in this town,” said Garbsch, the owner of Formative Fitness. “But they’re not ultra-rich. I’d say 75 percent are still in the workforce. The wealthy here are more first generation. They’re self-made.”