Ultra-High Net Worth Families Would Be Well Served To Plan For Predictable and Recurring Major Market Shocks

While today’s market volatility is certainly newsworthy, it is by no means new. We have seen this story play out many times before, and we will see it again. Yes, the so-called unpredictable shocks have different titles, but rest assured they are predictable and recurring. See if you recognize the following events which wiped out decades’ worth of wealth in a matter of days, or in some cases even hours:

  • The oil crisis of 1973
  • “Black Monday” in 1987
  • The Dot-Com bust in 2000
  • The housing bubble collapse in 2008
  • The gold plunge in 2013
  • The Market Correction of the beginning of 2016

If you have experienced all or some of the above, how did you feel at the time? What did you experience? How were your family and friends affected? What lessons did you learn, and do you feel you are implementing all the changes necessary to protect yourself from such repeating yet unpredictable disasters?

Your February 2016 investment statements are a tell-tale sign of the truth. You may realize that your advisors’ so called protection strategies did not work as planned, or that they strayed from the agreed upon changes! It may be time to ensure action is taken.

The Common Denominator

While each of these financial disasters erupted at various times and involved different dynamics, there is one common denominator that unifies them all: most experts at the time were caught completely off guard, and claimed that “this has never happened before”, “we are in uncharted waters” and so on. Frankly, that line of reasoning was not true then, and it is not true now. These shocks WILL happen again and again; although they will look different. And when that happens, most experts will, true to form, be sideswiped and left reeling, along with their investors.

A Different Kind of Anxiety for Ultra-High Net Worth Families

Ultra-high net worth families are especially concerned and rightfully so, because the wealth they have built is the result of decades, if not generations of extremely hard work. It is not just their wealth that is on the line: it is their legacy.

Furthermore, ultra-high net worth investors do not have to speculate on how quickly affluence can evaporate; because examples abound. Take the case of former German tycoon Adolf Merckle, who at one time was among the world’s richest 100 people with an estimated net worth of $9 billion. However, his ill-fated decision to short Volkswagon stock in 2008, in addition to a liquidity problem that was exacerbated by the credit crunch, left Merckle feeling he let his family down. He took his own life by jumping in front of a train.

Obviously, not all tales of financial ruin end so dreadfully. However, they are happening all the time, and each is tragic and devastating in its own right. Take former MLB pitcher Curt Schilling who earned more than $100 million in his career, and yet revealed that a series of bad investments plunged him $60 million in debt. Then there is Mike Tyson, who earned half a billion dollars in purse winnings and from endorsements, but filed for bankruptcy. And fans of Academy Award-winning actress Kim Basinger may recall that she went from banking $10 million per film to filing for bankruptcy – and all within the span of just a few years.

Planning For and Mitigating the Next Disaster When — not if — it Strikes

As we highlight in our newly published book “The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million” it is impossible to predict when – notice we do not say if – the next disaster will strike. However, ultra-high net worth families would be well served to take the initiative and implement the proven strategies mentioned in our book to minimize loss exposure. We specifically point out risk management and asset allocation techniques, amongst other strategies, which can act as an airbag to prevent a challenge from turning into a catastrophe.

Make no mistake about it: market shocks will continue to rear their ugly heads. Wise are those ultra-high net worth investors who accept the fact that no one has a crystal ball, and even those who may look smart in predicting a collapse most likely merely got lucky. The truth about their inability to see the future will undoubtedly be uncovered over time. The only way to be prepared is to plan in advance for such market shocks. Anything else will likely fail you.

Charting a New Course

We have witnessed incredible results when families integrate and combine their investment, legal, tax, M&A, soft family matters and other resources. It starts with conversations with your top advisors. If you feel you need a fresh face and fresh insight, do not hesitate to reach out to us.

This approach of working across disciplines empowers ultra-high net worth families to create a powerful, long-term financial wealth strategy that bridges financial and lifestyle goals, and enables them to build and fortify a portfolio that withstands surprises.

Learn More

More information on our approach and recommend strategies are explored in detail in our book “The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million”. For ultra-high net worth families, it is essential knowledge and timely insights for charting a smart course through even the stormiest financial seas.

About Pillar Wealth Management, LLC

Haitham “Hutch” Ashoo and Christopher Snyder are privileged to have worked with ultra-high net worth families, some of whom attained wealth reaching $400 million, helping them achieve a positive change in their lives and finances. They co-founded Pillar Wealth Management, LLC, an independent, fee based, private wealth management firm. As their clients’ go-to advisors, they are brought in to help with investment management, strategic planning, asset allocation, risk control, and tracking of their clients’ progress towards life-goals. Their services are provided to a limited number of clients. They only accept a new client when they have determined that there is mutual admiration and respect and only if they can add substantial value to the client’s financial life. Learn more at http://pillarwm.com. You can reach us at PWM@PillarWM.com

No comments yet.

Leave a Reply