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Why Protection is Paramount


Many families remember when life was far more humble for them, and they fear that unless they protect their wealth, those days could return. By far, their deepest financial worry is suffering a personal financial crisis—and thereby losing the life electives and choices their wealth has availed them.

“I want to tell you what matters most about my situation,” said a wealthy gentleman we met at a charity dinner. “Protection, protection, protection.”

In his seventies, this man had built up a sizable estate in the hundreds of millions of dollars, consisting of real estate, stocks, and a heavy position in municipal bonds. As a child of the Great Depression, he understood the value of every one of those dollars.He wanted his wealth to be shielded from losses so that it would endure for generations to come. After a few meetings, he approached us about taking on the responsibility of managing his real estate and helping with his municipal bonds and stock portfolio.

As we talked more with him, our concern for him was this: Who in his family could appreciate all that went into making his wealth? In whose hands could he place such a fortune for safe- keeping once he was gone?

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7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

His niece worked for a hedge fund manager, but she was very young—and to manage that much money, he was looking for more experience. His son and daughter did not show a real interest in the family finances. Who could take charge of the business, the real estate, and the sizable stock/bond portfolios? And who could take over for him as the guardian of the family wealth to assure the lifestyle he desired for his family for generations to come?

Many ultra-high net worth families share concerns similar to his. Where there is ultra-affluence, there is much responsibility. What will be done to preserve the family fortune? How will the successors be groomed and prepared to handle so much money? Who will have the wherewithal to manage the wealth so that it doesn’t slip away? How will the money be distributed equitably (which does not necessarily mean equally)?

On the financial side, concerns about retaining control of a privately owned family business, managing real estate, or even surviving the next Black Swan event are typical for ultra-high net worth families.

The media offers plenty of reasons for concern: questions about China; the unrest in the Middle East; the shenanigans in Washington, DC; the VIX (an indicator of market volatility) recently hitting an all-time high; Carl Icahn’s prediction in 2015 of a “looming catastrophe”; and the effects on bonds from the federal reserve’s coming actions. The question is, how will your ultra-high net worth family navigate the new world we live in? What financial and nonfinancial protections will you implement—and what else might tighten up the hatches?


Twenty-eight years ago, on Black Monday, October 19, 1987, the Dow Jones Industrial Average plunged 23 percent. To this day, this remains the largest one-day loss in U.S. stock market history.

We were already managing client portfolios on that fateful Monday, and the crash left a significant impression on us, one that we still carry with us today. Too many investors lost millions of dollars. They vowed not to make the same mistakes again—but in our practice, we still see some of the same mistakes being made.

No one knows when the next financial disaster will happen. If you think back to previous catastrophes, you probably recall the experts saying that this had never happened before, that we were in uncharted waters, and that conditions were different then from what they had ever been before or ever would be again. We don’t buy that line of reasoning. Make no mistake: the surprises will come again, although they will look different.

The Great Depression, the oil crisis of 1973, the rapid inflation of the late 1970s—all of those were portrayed as “never- before” surprises. The twenty-first century brought more financial setbacks. In 2000 came the dot-com bubble burst; in 2008, we dealt with the stock market and housing collapse; and in 2013, the value of gold dropped 28 percent.

All those unpleasant surprises caught many investment professionals totally off guard, and we are willing to bet that the next surprise will have them reeling again. Since no one can predict when the next crisis will occur, your goal should be to protect yourself from such risk.

In reading this book, you will gain strategies you can implement—with your advisors, your portfolios, your estate, and your family itself—that will help to mitigate the next disaster. Among many other matters, we will discuss risk management and asset allocation, which act as an airbag for such recurring yet always-a-surprise events.

The goal is to keep the damage to an acceptable minimum. Like you, we have reached a point in our lives where we don’t want to be anxious about the things that preoccupied us ten, twenty, or thirty years ago. We have earned enough that we have a sizable cushion, and that’s allowed us to put many of our financial worries behind us.

Think back to the crash of 1987 or the Great Recession of 2008, when trillions of dollars evaporated from portfolios and real estate values. How did it hit you? How did it affect your family and friends? Are you financially prepared for the next crisis?

Even families with substantial net worths can suffer personal financial crises. Consider the case of the seventy-four-year-old German tycoon Adolf Merckle, who was once ranked among the top one hundred richest men in the world, with a net worth estimated by Forbes above $9 billion.

Known as a savvy investor, Merckle made a significant bet in the stock market in 2008—he bet that the value of Volkswagen was going down. He shorted the stock, meaning his intent was to sell it at a high price, expecting the value to dip, and then to repurchase it at the lower price. This bet reportedly cost him hundreds of millions of dollars. According to his friends, Merckle was by no means ruined.

He did, however, have a liquidity problem. He tried to secure a 400-million-euro loan, but borrowing money in the midst of the 2008 crisis was tough, even for a billionaire. With the money supply shut down and feeling he had failed his family, Merckle committed suicide by jumping in front of a train.

This is an extreme example, and hopefully, you’ll never experience anything like it. Nonetheless, tragic examples abound. Whether your net worth is $25 million, $50 million, $100 million, $500 million, or even a billion dollars, no one is immune to financial upsets. Merckle’s situation wasn’t unique; many other ultra-high net worth families and individuals have faced financial collapse.

◆ Baseball pitcher Curt Schilling earned more than $100 million and had two World Series championships. Later, he told ESPN that he had lost money investing—and that he, in fact, was $60 million in debt.

◆ Mike Tyson, who earned about half a billion dollars during his career, went bankrupt.

◆ In her day, the Academy Award-winning actress Kim Basinger earned more than $10 million a movie. She too ended up in bankruptcy.

◆ Musicians Marvin Gaye, Willie Nelson, MC Hammer, Meat Loaf, and 50 Cent all either experienced bankruptcy or had brushes with it.

◆ Even Michael Jackson, the King of Pop himself, who reportedly signed a $1 billion contract and sold over 760 million records, was on the brink of bankruptcy in 2007 when he could not pay back a $25 million loan on his Neverland Ranch. When he died in 2009, he supposedly owed more than $300 million.

We are writing this book to help you and other ultra-high net worth families avoid catastrophes like these. The key to protect- ing you and your family is to own a portfolio that withstands surprises, regardless of the investment landscape.

Many of those disasters might have been avoided, we believe, with a focus on protection and prevention—before the crisis. Sometimes minor course changes can have significant effects without even rocking the boat!


Think of this book as the launch point for a new course that will protect your family’s wealth and legacy. As you read, jot down any thoughts, insights, or strategies that might improve your particular situation. By the end of the book, you can evaluate what the best adjustments for your circumstances might be.

At that point, it’s time for a conversation with your top advisors. We have witnessed the incredible results that can be had when families integrate and combine all their investment, legal, tax, M&A, soft family matters, and other resources. Working across disciplines allows you to create a powerful, long-term family wealth strategy that bridges financial and lifestyle goals. This comprehensive plan will help protect and preserve your family’s wealth and legacy. 

Investing is war, and you must not go to war without a sophisticated strategy. When you buy a stock or bond, the seller is thinking it will drop in value, and when you sell a stock or bond, the buyer is betting it will rise in value—but no matter which side you are on, you need a strategy.

Otherwise, you will be like a boat in the middle of the ocean without a rudder—at the mercy of the waves, current, and wind, out of control and drifting. In the chapters that follow, we’ll discuss strategies to develop a cohesive plan among all your advisors that will help you chart a safe course through even the stormiest seas.


When you attain ultra-high net worth status, your perspective changes. First, comes a sense of accomplishment: “I’m done. I’ve got it made! I have more than enough to live the way I want for the rest of my life—so I’ll spend what I want and invest the rest safely.”

Then the sense of obligation quickly sets in: “How will our family hold on to this money? If I invest it safely, will it last?” You are smart enough to know you cannot know it all, no matter how sophisticated you are about financial issues.

Besides, you have other things that demand your time and attention. You understand the importance of surrounding yourself with top minds and talent, advisors who can provide good direction in areas where you need expertise.

We’ve found that accumulating more wealth is often not as important to ultra-wealthy families as family dynamics and unity are, as well as principles, values, and philanthropy. Ultimately, the question is this: What are you achieving with the one life that you have?

Every human being wants to feel a purpose for existing. How can you find joy and satisfaction? And how can you change the world for the better? Affluent families wish to put their fortune to good work.

Ultra-high net worth families, by nature, tend to become philanthropic as their wealth grows. If you have more than $100 million, you know you will have enough for the rest of your life, and your attention turns to benefiting others. You feel a true obligation to make the most of your fortune for the betterment of all.

Many ultra-high net worth families desire to make a difference, giving what they can afford and actively volunteering. At the point where you have accrued hundreds of millions or billions of dollars, virtually everything is an elective, but there’s only so much you can spend. Bill Gates, Warren Buffett, and families in that realm commit a substantial portion of their wealth to foundations.

The money goes to causes that are near and dear to their hearts. Ultra-high net worth families often recall a time when worries surrounded them. By no means do they want to risk going back to those days. One billionaire still recalls his life struggling on the farm, and he would never want to live that way again.

Many families remember when life was far more humble for them, and they fear that unless they protect their wealth, those days could return. By far, their deepest financial worry is suffering a personal financial crisis—and thereby losing the life electives and choices their wealth has availed them.

If you are like many other super-affluent families, you too may be harboring a deep fear of loss. The days when you or your parents lived paycheck to paycheck may be all too fresh in your mind, and you don’t ever wish to go back to a time when choices were so limited. You want your family’s good fortune to endure for your children, your children’s children, and beyond.

Super-affluent families like yours seek long-term growth with limited volatility and relative safety. You desire a predictable cash flow—whether from dividends, rents, royalties, or capital gains— that will continue to sustain your lifestyle while keeping taxes, fees, and losses at a minimum. You want to understand what you own, how your investments are performing, and what you should consider tweaking for the future, and you want that information at your fingertips.

With that in mind, families like yours often focus on preserving their wealth rather than accumulating more of it. They want to protect what they have gained and make sure it is utilized for the good of the family. Family dynamics play an important role in their decisions. Dysfunction hurts any family, but it can financially devastate an ultra-high net worth family for generations. We’ll be talking about this more in the next chapter.

Just as upsets in the larger financial world will make waves in your personal finances, major life events can also create choppy seas. When divorce strikes in the family, for example, wealth may lose its anchor and drift away.

That is why, with so much at stake, solid prenuptial agreements are essential; human nature can wreak havoc if left unmanaged. Even happier events—like a marriage or the birth of a grandchild—can also trigger financial repercussions, especially in relation to wealth-transfer planning.

A common concern for ultra-high net worth individuals who have “cashed out,” meaning they have received a lump sum with which they could be well set for the rest of their lives, is often: “How can I take care of the generations to come?” These individuals inevitably come to recognize that they must actively develop within their families the custodians of their wealth: they must build up and train family members who will carry on the legacy.

Outsiders may offer a wealth of knowledge, but a devoted family member can bring to the table a deep understanding of the goals and dreams the family embraces. A family that clearly cares about itself can build enduring wealth, but it takes dedication and effort.

Unfortunately, the wealth-creating generation’s shrewdness, creativity, and determination, which were responsible for amassing the wealth, may dwindle in the next generation—and as a result, the family fortune may diminish as well.

The younger generation may not fully appreciate the hard effort and expertise that went into building the family’s prosperity. That lack of appreciation could lead to recklessness with the estate, as well as in their personal lives.

However, by no means does this always happen. We have seen the younger generations adopt a conservative stance, becoming risk averse in their recognition that the estate could soon vanish if they manage it recklessly. The challenge is to nurture both the money and the mindset to optimize the family’s long-term wealth.

Wealth-transfer strategies are often shaped by parents’ feelings about their children. They may worry that a large inheritance could influence the integrity of their children. They want the next generation to be not only well heeled but also to be the kind of people the patriarch and matriarch imagined their descendants would be.

If the family members have gained wisdom as well as wealth, they know they must do what it takes to train and groom the younger generations to be good stewards. Achieving this goal is more than a matter of sending the kids to etiquette school or encouraging them to develop good and compassionate hearts.

The older generation must be prepared to be mentors to those who will inherit the family wealth. The next generation needs opportunities to acquire the knowledge and experience necessary to reach the right decisions, financial and otherwise, on behalf of the family. 

Creating a wealth-transfer plan is another way to impart certain values to your beneficiaries through your assets. We’ll be discussing this in greater depth in chapter 12. Estate planning demonstrates to the next generation that you care how your wealth is used.

If education is important to you, for example, you might designate funds for the college or postgraduate education of your grandchildren. Or you might create a charitable trust that will do long-term philanthropic good in the world.

Whatever you decide, you are communicating that you take your legacy seriously—and you expect your beneficiaries to do the same.

Ultra-high net worth families have opportunities that families of lesser wealth do not. Your wealth opens doors into investments with the top money managers: hedge funds, private equity, private real assets.

Having access to these elite investments, however, doesn’t mean they are a right fit for your family, and that is why you need to be working with the right managers and advisors. Poor choices can lead to disaster.

A family office (a concept we explore further in chapter 4) can be a good way to handle the complex financial and emotional- quotient challenges that ultra-wealthy families face. In a family office, professionals from several disciplines are brought together to share expertise in the family’s best interest. A broad range of services can be offered, including financial and investment management and tax and estate planning.

Ultra-affluent families require dynamic and complex services especially designed for their particular circumstances.

Their financial advisors must offer clarity and transparency, with the least amount of conflicts of interest, creating a network that is tailor-made for their specific financial scenarios. This comprehensive expertise is a vital component in protecting their wealth, one that can benefit many generations to come.

Having an ultra-high net worth gives you countless opportunities. You not only have the means to allow for the life you want for you and your family, but you also have the means to contribute to the larger community—but only if you keep it!

Don’t wait to trim your sails and batten your hatches until the tsunami is threatening to capsize your boat. Use the chapters that follow to take action now to protect your future. Believe us, you will sleep better at night if you do.