How wealth managers define rich

[USGrant1962]

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.

There are thousands of those folks. #400 on the Forbes 400 is at $2B, and that is just Americans. Wikipedia says there are over 2,200 billionaires in the world.

https://www.forbes.com/forbes-400/list/9/#version:realtime

https://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_billionaires

I would guess there are 10 times that many centimillionaires.

 

[mpeirce]

There are thousands of those folks. #400 on the Forbes 400 is at $2B, and that is just Americans. Wikipedia says there are over 2,200 billionaires in the world.

LBYM is pretty sweet at, say, $1B: 4% -> $40,000,000 each year.

I actually knew one of these guys fairly well before he came into his billions. We were on the same small software team a few decades ago. After that job he started a company you'd all know. Haven't talked with him since those early days.

 

[NW-Bound]

LBYM is pretty sweet at, say, $1B: 4% -> $40,000,000 each year...

That's about what it takes to have a mega yacht. Not into boat (I never even own a kayak), but out of curiosity I look up the cost to own and to maintain one. A 200-ft runs $50M to $100M+, depending on age. The operating cost is something like 10% of that a year. One needs a crew of 1 or 2 dozens, although one giga yacht has a crew of 70. Lots of mouth to feed.

It may be easier and cheaper to charter one. A 200-ft yacht will charter for $500K or more per week.

 

[OldShooter]

Normally I don't post into busy threads, but reading this one the first time I noticed something that IMO is important: confusion between the roles of true financial advisors vs the narrower roles of investment advisors.

Financial advice, even for less-than-really-rich folks like the ones that seem to frequent this board, is much broader than investment advice. For younger folks it can include looking at alternative tax-sheltered investment options, looking at life insurance needs in the event of death of one wage-earner, consultation on wills, health care powers, etc. For older folks, there might be insurance needs to cover estate taxes on iliiquid assets (some states tax at a much lower asset level than the feds), discussion of estate strategies for special-needs children, etc. Lots of stuff that is outside the scope of investment advice. There is no superman (superperson?) who can do all this, but a good FA can guide the client to CPAs, lawyers, etc. Almost all of us need this stuff, though larger net worth individuals may need it more.

Investment advice too, can go far beyond stock market and bond strategies. Private placements, for example, are often circulated to investment advisors. These deals never see the light of day publicly, but can be both risky and lucrative. (I have had both!) Some funds (like DFA) are available only through IAs.

And, yes, typically an FA will serve as an IA as well, but for higher-net worth individuals this is probably less common. An FA might hire a couple of IAs and have the job of watching them carefully.

When these two roles are conflated it can get confusing.

 

[Milton]

I do my own work, screen my own tenants, make updates own my time, control my vacancy rates and control my income stream ... cut the grass, make repairs, collect rents, and pay bills

I’m surprised that you have the time or inclination to post on this board. Anyway, sorry to learn that you’re not FIRE’d.

 

[Milton]

I look up the cost to own and to maintain one. A 200-ft runs $50M to $100M+, depending on age. The operating cost is something like 10% of that a year. One needs a crew of 1 or 2 dozens, although one giga yacht has a crew of 70. Lots of mouth to feed.

It may be easier and cheaper to charter one. A 200-ft yacht will charter for $500K or more per week.

You might enjoy reading the following book. It is a candid insight into the world of superyacht design, construction and ownership.

 

[audreyh1]

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.

Ouch!

 

[audreyh1]

That's about what it takes to have a mega yacht. Not into boat (I never even own a kayak), but out of curiosity I look up the cost to own and to maintain one. A 200-ft runs $50M to $100M+, depending on age. The operating cost is something like 10% of that a year. One needs a crew of 1 or 2 dozens, although one giga yacht has a crew of 70. Lots of mouth to feed.

It may be easier and cheaper to charter one. A 200-ft yacht will charter for $500K or more per week.

I'll charter a much smaller one, thank you very much!

 

[candrew]

Normally I don't post into busy threads, but reading this one the first time I noticed something that IMO is important: confusion between the roles of true financial advisors vs the narrower roles of investment advisors.

When these two roles are conflated it can get confusing.

Thanks for posting this. I would also add that many FA's declare themselves to be a "Wealth Manager" making the title a somewhat nebulous one.

 

[OldShooter]

Thanks for posting this. I would also add that many FA's declare themselves to be a "Wealth Manager" making the title a somewhat nebulous one.

Not nebulous for me. I equate "Wealth Manager" with "Huckster." That may not always be fair, but I think it is accurate in the vast majority of cases.

 

[Mdlerth]

Only half a mill per week? Sign me up... not

That's about what it takes to have a mega yacht. Not into boat (I never even own a kayak), but out of curiosity I look up the cost to own and to maintain one. A 200-ft runs $50M to $100M+, depending on age. The operating cost is something like 10% of that a year. One needs a crew of 1 or 2 dozens, although one giga yacht has a crew of 70. Lots of mouth to feed.

It may be easier and cheaper to charter one. A 200-ft yacht will charter for $500K or more per week.

I can only speculate, but I'd bet even billionaires spend most days somewhere other than on their yachts. At that level of wealth, there's so little that's out of your price range you probably think of many other things to do besides go to sea. So why not get some paltry millionaire to help subsidize the ship?

 

[NW-Bound]

Billionaires own yachts because it's a status symbol, and they also have so much money they do not know how else to blow off some.

Jim Clark - founder of Silicon Graphics, Netscape, Healtheon - built the world largest sailboat, and according to his biography, thought of doing another boat right after finishing the maiden voyage.

The same thing happens with billionaires' many mansions. They buy them, then rarely visit, let alone enjoy staying there. Just a form of "blow that dough", on a giga scale.

 

[Huston55]

I can only speculate, but I'd bet even billionaires spend most days somewhere other than on their yachts. At that level of wealth, there's so little that's out of your price range you probably think of many other things to do besides go to sea. So why not get some paltry millionaire to help subsidize the ship?

That seems to be what happens here; we see mega yachts anchored for a week or two a couple times per year. This is from last year; note the helicopter taking off from it...off to the wine country!

 

[Winemaker]

I’m surprised that you have the time or inclination to post on this board. Anyway, sorry to learn that you’re not FIRE’d.

With long term tenants, and well maintained units, I spend less than 2 hours a week. Yes, you can be pretty sorry.

 

[Winemaker]

Billionaires own yachts because it's a status symbol, and they also have so much money they do not know how else to blow off some.

Jim Clark - founder of Silicon Graphics, Netscape, Healtheon - built the world largest sailboat, and according to his biography, thought of doing another boat right after finishing the maiden voyage.

The same thing happens with billionaires' many mansions. They buy them, then rarely visit, let alone enjoy staying there. Just a form of "blow that dough", on a giga scale.

I talked to an acquaintance yesterday, his 52' river yacht has been in drydock since April, when a log caught the bottom and ripped his dual prop guide loose. After a $20,000 tow and lift, no one around here will fix it. He said he'll have to fly in a crew to make repairs. It's a 1998, and has just 600 hours on the two Cummins diesels.

 

[Freedom56]

Nothing wrong with owning rental properties. My father-in-law is 83 and has 47 doors to manage. He enjoys a very comfortable life with his rental income stream. He has a driver take him around to his properties when he doesn't feel like driving. He still screens his tenants. He hires people to do any maintenance or repairs. It's a far better option than sitting in the corner in a chair at a senior home staring at a TV. My best friends father is 86 and has 41 doors to manage. There is something to be said about keeping your mind active as you age. A lot of wealth has been created owning rental properties. It's not for everybody, but certainly an option to stocks.

 

[Winemaker]

Nothing wrong with owning rental properties. My father-in-law is 83 and has 47 doors to manage. He enjoys a very comfortable life with his rental income stream. He has a driver take him around to his properties when he doesn't feel like driving. He still screens his tenants. He hires people to do any maintenance or repairs. It's a far better option than sitting in the corner in a chair at a senior home staring at a TV. My best friends father is 86 and has 41 doors to manage. There is something to be said about keeping your mind active as you age. A lot of wealth has been created owning rental properties. It's not for everybody, but certainly an option to stocks.

In order to reap the tax benefits of rental real estate, one must be an active participant, according to IRS rules. Also, with a $600,000 non paper investment, it is prudent to make weekly checks, and talk to tenants if they're out and about. I was only scammed three or four times since 1999, but it was back when I was w*rking 26/28 days, 12 hours/day. We have been truly blessed, I have one tenant who has been with me since 4/2001 and another since 8/2001.

Today was an exception, I changed out a storm door, took about 2.5 hours to remove old one and replace with new Anderson model. The unit beside it needed one last month, so I changed this door so they would match. Brushed up on my carpentry skills, improved the curb appeal, and made a happier tenant.

Glad your FIL is still active at 83, I hope to be like that in 23 years.

 

[Freedom56]

In order to reap the tax benefits of rental real estate, one must be an active participant, according to IRS rules. Also, with a $600,000 non paper investment, it is prudent to make weekly checks, and talk to tenants if they're out and about. I was only scammed three or four times since 1999, but it was back when I was w*rking 26/28 days, 12 hours/day. We have been truly blessed, I have one tenant who has been with me since 4/2001 and another since 8/2001.

Today was an exception, I changed out a storm door, took about 2.5 hours to remove old one and replace with new Anderson model. The unit beside it needed one last month, so I changed this door so they would match. Brushed up on my carpentry skills, improved the curb appeal, and made a happier tenant.

Glad your FIL is still active at 83, I hope to be like that in 23 years.

My FIL is very social so he likes talking to people and meets with his tenants on a regular basis. He only raises rents when he changes tenants, so they tend to stay for decades. I even know most of his tenents. He prefers long stable tenant to chasing them away with rent increases. It works for him. He lives in Switzerland so he is not subject to IRS rules regarding rental properties. Rents are high there. His average is about 2800 CHF or $2855 USD per door. But to stay home with my MIL and stay in good health, we arranged to have a full time governess, cook, driver, handyman, cleaning lady, and part-time nurse for weekly checkups. My wife has made sure that they are in good hands. Putting them in a senior home would kill them.

After 27 years with my wife and dealing with my FILs properties, I have become a pretty good handyman myself. My wife is pretty good too.

 

[Winemaker]

I agree about the social aspect of things, I was a mid management guy with 25 supervisors and 110 hourly workers under my wing. I thoroughly enjoyed the interaction with them, through daily safety, work expectations and production goals. It was different animal when I retired, now I'm more involved with charities, church, wine and beer clubs, winery, gardening, my rentals traveling and fitness. Although there is green $ in the bank, controlling and doing things at my own pace, my own time, with my loving wife of 35 years, makes me rich.

 

[Freedom56]

My wine and beer making days ended after marriage. My wife didn't care for the fine aroma of primary fermentation even though it lasted about a week. The beer keg also had to go from the fridge to make room for food. Agree with you that a happy marriage, hobbies, travel, and keeping fit makes one feel rich. The green in the bank adds some level of security.

 

[akidagain2018]

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?

What he said... Personal Asst, and general Sherpa would be priority #1. I want a Sherpa now.