How wealth managers define rich

[Amethyst]

Not meant as a challenge, but...how did you know their net worth?

I'm ready to believe you, though, b/c a former S.O., who was an SEC-registered "financial adviser" (did actually possess the training and certifications) had a rather low net worth, and was one bad life event (which happened) away from bankruptcy (which happened). He used to say he wished he was better at taking the advice he gave his clients.

so called wealth managers over the years. Most are sales people only interested in accumulating assets and collecting their cut of the annual fee. All of the one's I met didn't even have a fraction of my current net worth.

 

[Freedom56]

Not meant as a challenge, but...how did you know their net worth?

I'm ready to believe you, though, b/c a former S.O., who was an SEC-registered "financial adviser" (did actually possess the training and certifications) had a rather low net worth, and was one bad life event (which happened) away from bankruptcy (which happened). He used to say he wished he was better at taking the advice he gave his clients.

It's one of the first questions I ask. Just after, "Hello and why are we here". It's a question everyone should ask. Over 30% of registered financial advisers in California have disclosures (fraud, bankruptcies, loss of funds from inappropriate investments, theft of funds) under FINRA. Yes things happen in life, but you don't have to turn over your hard earned money to these people.

 

[VanWinkle]

I still would not use a private wealth manager. At 9 figure net worth, I would be even more conservative than I am now and bias towards treasury notes and CDs. That wouldn't take very much of my time to manage. At that point , there's no need to take any risk and the strategy would be complete preservation of capital. I have met with a lot of so called wealth managers over the years. Most are sales people only interested in accumulating assets and collecting their cut of the annual fee. All of the one's I met didn't even have a fraction of my current net worth. Why would I turn my money over to them to manage?

+1

 

[Winemaker]

Maybe that is what some billionaires do but I would not be one of them.


Real estate is a headache. And what's the point? As a billionaire you have already "won the game" many times over. Unless someone is obsessed with money and wants to accumulate another billion.


My first priority would be to assemble the best "team" of lawyers I could find.
One as a tax specialist. Another as a litigation specialist.


Then I would hire my "staff." Maids, chauffers, butlers, and most important " a personal assistant." The weather is a little chilly? Have the assistant schedule a flight thru Net Jets for St. Kitts for next week.
Or maybe charter a private yacht to sail the Caribbean for the winter.


And keep perhaps $800million in short term treasuries. The rest in an S&P 500 index fund. What could be easier?

And the tax specialist would recommend real estate. Headache? Only for my property manager.

 

[friar1610]

A number of people have mentioned sticking with index funds (of which I am a proponent). I wonder, if you were in the $25M range, what sort of wealth management services you could obtain from Vanguard? How much more complex/sophisticated might their recommendations be than for some ordinary shlub like me who gets the standard 4-fund recommendation from PAS for .3% of AUM? And how might the VG recommendation differ from those of firms that typically deal with such clients? Just wondering.

 

[JoeWras]

A number of people have mentioned sticking with index funds (of which I am a proponent). I wonder, if you were in the $25M range, what sort of wealth management services you could obtain from Vanguard? How much more complex/sophisticated might their recommendations be than for some ordinary shlub like me who gets the standard 4-fund recommendation from PAS for .3% of AUM? And how might the VG recommendation differ from those of firms that typically deal with such clients? Just wondering.

They have an answer for that. It is called "Flagship Select" and kicks in at $5M or more.

https://investor.vanguard.com/wealth-management/

They add a bunch of stuff like more access to CFP, legacy planning, etc. You may also qualify for the institutional fee structure, which is even lower than Admiral. Etc., etc.

Edit: I looked at one of their institutional funds. The Minimum is $5M. So, fits right into the $25M networth customer's wheelhouse.

 

[Dash man]

If I had $25M, I wouldn’t keep it all at one broker. I’d spread it out to diversify in case a broker went under, or some other catastrophic event.

 

[Milton]

I have met with a lot of so called wealth managers over the years. Most are sales people only interested in accumulating assets and collecting their cut of the annual fee.

Amen.

And the tax specialist would recommend real estate.

You need a new tax advisor.

 

[Winemaker]

You need a new tax advisor.

I don't need a thing.

 

[athena53]

I'm ready to believe you, though, b/c a former S.O., who was an SEC-registered "financial adviser" (did actually possess the training and certifications) had a rather low net worth, and was one bad life event (which happened) away from bankruptcy (which happened). He used to say he wished he was better at taking the advice he gave his clients.

On the other end of the spectrum, there's a 75-year old book on investing with a title that's a quote from a wealthy lady being shown a section of the yacht basin with the brokers' yachts. Her response: "But where are the customers' yachts?"

Smart lady.

 

[scrabbler1]

So here's a question. For those of you managing your own portfolio now, would you start using such a service if you somehow found yourself in, say, 9 figures net worth? And why? And if your answer is so that you don't have to spend the time to manage it, how would you see the process taking more time, as opposed to just doing the same as today, just with larger numbers?

I would keep managing my own portfolio. It would not be much different from today but with bigger numbers. I would branch out to more brokerage companies so as to not have too many of my eggs in one brokerage basket. That would add some time to my record keeping, but nothing I couldn't handle.

I would also skew my portfolio to a slightly more conservative tilt than today, including more muni bond funds because I would be in a higher tax bracket. Just give me a reasonably reliable income stream on auto pilot like I have set up today, and I'll be fine.

 

[audreyh1]

So here's a question. For those of you managing your own portfolio now, would you start using such a service if you somehow found yourself in, say, 9 figures net worth? And why? And if your answer is so that you don't have to spend the time to manage it, how would you see the process taking more time, as opposed to just doing the same as today, just with larger numbers?

That’s where I struggle to understand, but if I take into account managing funds for generations (no kids here) then maybe it starts to make more sense.

I’m not spending more time managing funds compared to 18 years ago when we retired, even though our NW has grown a lot. Money management has scaled. I probably spend less time now as I’ve gradually simplified things over the years.

 

[audreyh1]

I am curious what changes folks here really will make when they reach $10M, because inflation will cause it to happen for some of you.

 

[audreyh1]

With real estate you have more control over day to day matters than the stock market. That is my experience for the past 19 years.

No way would I be tempted to invest directly in real estate.

 

[ERD50]

So here's a question. For those of you managing your own portfolio now, would you start using such a service if you somehow found yourself in, say, 9 figures net worth? And why? And if your answer is so that you don't have to spend the time to manage it, how would you see the process taking more time, as opposed to just doing the same as today, just with larger numbers?

As far as investment, I wouldn't make any change at all.

Some say "you won the game", why take any 'risk', but the flip side of that is, with that much you can accept the volatility of a reasonable AA, so why not? I think either is defensible, no right/wrong.

I probably would consult a lawyer (if I could find one I felt would give me the straight scoop) as far as protecting some of the net worth against lawsuits.

No way would I be tempted to invest directly in real estate.

+1. Added liability - who the heck needs that?

-ERD50

 

[Winemaker]

No way would I be tempted to invest directly in real estate.

There is a very big difference between a mom and pop operation with 7 doors, than an apartment complex with 700 doors. I do my own work, screen my own tenants, make updates own my time, control my vacancy rates and control my income stream.
A couple of my acquaintances I know are owners of the 500-700 door complexes, strip malls, and medical office complexes. They do not cut the grass, make repairs, collect rents, and pay bills like I do. They hire their own office staff, use their own landscaping companies, and property management companies.
Just like they run their race horse business.

 

[audreyh1]

There is a very big difference between a mom and pop operation with 7 doors, than an apartment complex with 700 doors. I do my own work, screen my own tenants, make updates own my time, control my vacancy rates and control my income stream.
A couple of my acquaintances I know are owners of the 500-700 door complexes, strip malls, and medical office complexes. They do not cut the grass, make repairs, collect rents, and pay bills like I do. They hire their own office staff, use their own landscaping companies, and property management companies.
Just like they run their race horse business.

Not my cup of tea. I’m retired!

I rarely have to hire anyone, and then only on a very short-term basis.

 

[ERD50]

There is a very big difference between a mom and pop operation with 7 doors, than an apartment complex with 700 doors. ...

And with 9 figure net worth, I wouldn't want either one. What's the point?

Heck, even at 7 figures, I don't want either one! They seem like a much riskier investment than a 50/50 AA. It would take some considerable work to understand how that investment is doing. Why bother?

-ERD50

 

[Winemaker]

And with 9 figure net worth, I wouldn't want either one. What's the point?

Heck, even at 7 figures, I don't want either one! They seem like a much riskier investment than a 50/50 AA. It would take some considerable work to understand how that investment is doing. Why bother?

-ERD50

I guess at a certain point it all becomes a game. Why does Warren Buffett, Gates, Bezos, et al, keep going? Some people are just motivated to keep driving past the finish line. In any event, I don't mind going to spend some time at their resorts, or an evening at their club seats at the horse track.

 

[ERD50]

I guess at a certain point it all becomes a game. Why does Warren Buffett, Gates, Bezos, et al, keep going? Some people are just motivated to keep driving past the finish line. In any event, I don't mind going to spend some time at their resorts, or an evening at their club seats at the horse track.

Sure, but I wasn't trying to speak for Buffett, Gates, Bezos, et al. They can do what they want. But at that level, I don't want to have real estate investments (other than through a fund).

-ERD50

 

[ncbill]

With an 8 figure net worth I would be careful about being so involved in the day-to-day of running a real estate business - it may be enjoyable but what was described (DIY maintenance, screening tenants, etc.) = huge personal liability exposure.

 

[NW-Bound]

Maybe if I had just a little more I could buy a real boat. One I could dodge my wealth manager on.

https://i.imgur.com/MheWXH1.gifv

Wow! An "economy-class" yacht against a real big one.

I remember years ago, waiting in a dentist office and reading a yacht magazine, and there was a story about a guy having his yacht custom-built at a shipyard in Italy. He flew his plane from the US to check on the progress every so often. His plane: a 727.

I do not remember the name, but it did not ring any bell then with me. I guess he was just one of the numerous high centimillionaires or low-level billionaires. There are a lot more of them than talked about in the media. Not all want to have publicity.

 

[Winemaker]

Sure, but I wasn't trying to speak for Buffett, Gates, Bezos, et al. They can do what they want. But at that level, I don't want to have real estate investments (other than through a fund).

-ERD50

Well, the question came up about the rich and what they do about their personal wealth. I am not in their realm, but in some of their social circles. I merely posted my observations and my experiences with them. Not trying to justify or condemn, but I know where they are coming from on a much smaller scale. Don't shoot the messenger!

 

[free2020]

On the other end of the spectrum, there's a 75-year old book on investing with a title that's a quote from a wealthy lady being shown a section of the yacht basin with the brokers' yachts. Her response: "But where are the customers' yachts?"

Smart lady.

That is a classic book on investing. Fred Schwed is undoubtedly the author of the 20th century for distilling the essence of investing into the fewest words possible. And of course, hilarious. Despite reading the book multiple times, can’t help laughing incessantly

 

[thepalmersinking]

I know 2 peeps that got a $10MM windfall. They hired professionals and were broke in 10years. Trying to outsmart the tax man and making dumb investments while listening to others doesn’t always work.