How wealth managers define rich

[RunningBum]

I was puzzled by this sentence in the article: "A much wealthier family with homes and assets in multiple countries and currencies might require more cash flow management, customized financing for mortgages, yachts or planes, and the ability to borrow against art or investment portfolios." If someone has liquid assets worth well over $25 million, why are they borrowing to make entirely discretionary purchases?

For some the assets may not be all that liquid. I elaborated in post #2 in this thread.

 

[Dash man]

I was puzzled by this sentence in the article: "A much wealthier family with homes and assets in multiple countries and currencies might require more cash flow management, customized financing for mortgages, yachts or planes, and the ability to borrow against art or investment portfolios." If someone has liquid assets worth well over $25 million, why are they borrowing to make entirely discretionary purchases?

They might want to read the following book, in which the author relates receiving a large windfall, hiring managers to look after it, and eventually having to declare bankruptcy due to the professionals' incompetence.



No one worries about your money more than you do!

Billy Joel had this happen to him if I recall.

 

[Totoro]

It's hard to fathom a person who made that kind of money running a business needing to hire a wealth manager.

If you've run a business you know where your strengths are, the rest you give to an expert.

Specific issues are tax, legal, investment sourcing, estate planning, moving money around, anti-money laundering paperwork, ... another might give the bond portion to a wealth manager if you want to focus on the equity part.

All of the 10m+ individuals I've met have help. The kind of help varies by a lot.

 

[Totoro]

For some the assets may not be all that liquid. I elaborated in post #2 in this thread.

There's also tax optimization. Not all debt is bad.

Basically, put as many costs as you can in your companies, and keep as much wealth as you can off-shore.

Same principle behind Apple borrowing billions of dollars to pay dividend while they have just have it already in dead cash available.

 

[target2019]

It's hard to fathom a person who made that kind of money running a business needing to hire a wealth manager.

I suspect the customer base for firms like this would include a lot of heirs and celebrities. Those folks can come into gigantic fortunes without necessarily being financially savvy themselves.

I worked with a medical professional who had a lot. He and a partner invested in buildings over the years. Since retirement, I'd guess he has well over $10M in assets.

His son started an FA business a few years ago, and father is the prime client now.

I know that the relationships between a wealthy person and other business people is extensive. It may not mean he needed the relationship with bank manager, but it probably had benefit for the bank and his own businesses.

 

[flintnational]

I assume real estate agents selling multi-million dollar houses and Ferrari salesmen, like Wealth Managers, would also define "wealthy" as those that can afford their products.

At $10M+ I would consult with a CPA and an estate attorney. I would continue to manage the stock, bond, and cash allocations.

 

[athena53]

They might want to read the following book, in which the author relates receiving a large windfall, hiring managers to look after it, and eventually having to declare bankruptcy due to the professionals' incompetence.

<snip>

No one worries about your money more than you do!

This has happened to a lot of celebrities. Oprah Winfrey's sage advice to the newly-wealthy is to make sure every check that goes out has your signature on it. Not sure how you adapt it to electronic payments, but makes a of sense. I'd also add, "don't invest in anything you don't understand". If it's so arcane someone can't explain it to me in plain English and tell me the upsides and downsides, I'm not buying in.

 

[timemoveson]

I assume real estate agents selling multi-million dollar houses and Ferrari salesmen, like Wealth Managers, would also define "wealthy" as those that can afford their products.

At $10M+ I would consult with a CPA and an estate attorney. I would continue to manage the stock, bond, and cash allocations.

That's my approach at the $10M level. Strong accounting and tax team who also does necessary bookkeeping for our private corporate entities, and a very trusted and long-term lawyer.

I do everything else, and manage closely with them as needed.

 

[Winemaker]

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 think I would still invest for myself, however, I would hire out cutting grass, weeding the garden, plucking and feeding me grapes, uncorking my wine bottles and waving the big feather fans. Got to have your priorities straight, ya know.

 

[Winemaker]

If you've run a business you know where your strengths are, the rest you give to an expert.

Specific issues are tax, legal, investment sourcing, estate planning, moving money around, anti-money laundering paperwork, ... another might give the bond portion to a wealth manager if you want to focus on the equity part.

All of the 10m+ individuals I've met have help. The kind of help varies by a lot.

When I bought my first rental property, I used an attorney that was the father of my daughter's friends. He was also the attorney for a local businessman that had several car dealerships, shopping malls, apartment buildings, and small manufacturing businesses all over the county. He screwed my closing up so bad, and cost me a lot of money, so I fired him.

The businessman died 3 years ago, and some of his businesses, including his house, look like the Munsters live there with the 20' weeds and seedlings growing out of the gutters.

 

[JoeWras]

Billy Joel had this happen to him if I recall.

I remember watching a VH-1 interview (back when they actually cared about music) with some famous musician. It wasn't Billy Joel. It was someone from that era.

They said, "Before you sign your contract, hire a lawyer. Then hire another one to check on the first lawyer. Once you make your money, hire a money manager, and then hire another one to watch that manager."

Basically, life gets very complicated by people in the arts who get royalties. There are a lot of predators out there. This musician (I wish I remember who it was) was making a point that you need second opinions on this stuff to avoid seriously bad mistakes.

 

[Mdlerth]

Hey, Salome, we haven't got all day!

I think I would still invest for myself, however, I would hire out cutting grass, weeding the garden, plucking and feeding me grapes, uncorking my wine bottles and waving the big feather fans. Got to have your priorities straight, ya know.

What are you, camping out? Those grapes aren't gonna peel themselves!

 

[Spanky]

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?

Probably not. If you have managed your portfolio to grow to that level, why would you want to delicate it to someone else unless the effort of management consumes too much of your time or you feel that they have more expertise that would produce a "better" outcome than you could.

 

[MikeD]

This was an article about leeches, wasn't it?

Surely, you are implying something, but what it is eludes me. Will you elaborate, please?

Thanks,
Mike D.

 

[explanade]

With 9-figures in assets, you're probably thinking about multi generational transfer and probably giving significant sums to charity or something other than inheritance.

So maybe it's not necessarily just managing investments.

You may also be inclined to invest more in real estate, especially income-generating properties.

That just creates more work of course.

 

[MikeD]

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?

Four Percent, Baby!

I have enough money to be secure and I equate feeling secure and thus not having to worry about anything, with being happy.

I no longer dreamily think about having tons of money but when I hear about a billionaire, I often remark to my wife that his SWR is $40 Million per annum. That impresses me.

Mike D.

 

[mpeirce]

You may also be inclined to invest more in real estate, especially income-generating properties.

Why is that?

 

[explanade]

Not sure but I see that high net-worth people accumulate real estate.

Maybe they like something tangible instead of delving into equities, even though buying low-expenses index funds is pretty low-maintenance.

 

[Amethyst]

These are the people whom that Atlantic article, about the 9.9%, claims we admire and envy, while looking down on everyone else.

This was an article about leeches, wasn't it?

 

[Huston55]

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?

At 9 figures, we’d get more tax & estate planning advice than we do now. If those recommendations bled over into investment advice, I think I’d take that advice (fee for service). But, I’m not sure why I would give someone a chunk of funds to manage & charge me a % of AUM; maybe I have to be much, much richer to understand the advantages of that.

 

[Winemaker]

Why is that?

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.

 

[Scuba]

I was puzzled by this sentence in the article: "A much wealthier family with homes and assets in multiple countries and currencies might require more cash flow management, customized financing for mortgages, yachts or planes, and the ability to borrow against art or investment portfolios." If someone has liquid assets worth well over $25 million, why are they borrowing to make entirely discretionary purchases?

They might want to read the following book, in which the author relates receiving a large windfall, hiring managers to look after it, and eventually having to declare bankruptcy due to the professionals' incompetence.

No one worries about your money more than you do!

Wealthy people borrow if it’s cheaper to use OPM (other people’s money). Why not borrow if you can borrow at say 4% while your portfolio grows 8-10%? Especially if you have the ability to pay off the debt at any time.

 

[MrLoco]

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.

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?

 

[VanWinkle]

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?

Simple investing does not require more than two or three low cost Index funds no matter how much money is being invested. Tax treatment and legacy requirements are the most important things to get professional guidance. A CPA and a good trust attorney can handle the rest. Sometimes rich people get greedy and lose it all(see professional sports stars).

 

[Freedom56]

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 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?