Freedom from Wealth: The Experience and Strategies to Help Protect and Grow Private Wealth
256
Freedom from Wealth: The Experience and Strategies to Help Protect and Grow Private Wealth
256eBook
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Overview
Proven strategies for meeting the unique—and increasingly complex—challenges of private wealth management
Whether you’re a money manager or managing your own wealth, Freedom from Wealth provides the tools you need to improve the management of a family fortune in today's increasingly globalized financial landscape.
The authors reveal new, global, measurable standards to ensure that wealth is managed in accordance with industry best practices. They call for families to adopt the standards and name a Standards Director who can oversee their implementation, arguing that these standards help prevent the fraud and financial chicanery that produced the Madoff scandal and other recent wealth-management improprieties.
Charles A. Lowenhaupt is the founder, chairman, president, and CEO of Lowenhaupt Global Advisors and a managing member of Lowenhaupt & Chasnoff, LLC, the first U.S. law firm to concentrate in tax law, which was established by his grandfather in 1908.
Donald B. Trone is the CEO of Strategic Ethos and former Director of the U.S. Coast Guard Academy Institute for Leadership. In 2003, he was appointed by the U.S. Secretary of Labor to represent the investment counseling industry on the ERISA Advisory Council.
Product Details
| ISBN-13: | 9780071777629 |
|---|---|
| Publisher: | McGraw Hill LLC |
| Publication date: | 09/23/2011 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 256 |
| File size: | 5 MB |
About the Author
Charles A. Lowenhaupt is the chairman and CEO of Lowenhaupt Global Advisors and a managing member of the first U.S. law firm to concentrate in tax law, Lowenhaupt & Chasnoff, LLC, which was established in 1908. He lives in St. Louis, Missouri.
Donald B. Trone is the CEO (Chief Ethos Officer) of 3ethos and former director of the U.S. Coast Guard Academy Institute for Leadership. In 2003, he was appointed by the U.S. Secretary of Labor to represent the investment counseling industry. He lives in Mystic, Connecticut.
Read an Excerpt
FREEDOM from WEALTH
THE EXPERIENCE AND STRATEGIES TO HELP PROTECT AND GROW PRIVATE WEALTH
By CHARLES A. LOWENHAUPT, DONALD B. TRONE
The McGraw-Hill Companies, Inc.
Copyright © 2012Charles A. Lowenhaupt and Donald B. TroneAll rights reserved.
ISBN: 978-0-07-177763-6
Excerpt
CHAPTER 1What Is the Wealth For?
Wealth is the slave of a wise man. The master of a fool.
—SENECA (5 B.C.-A.D. 65)
When it comes to significant family wealth, the starting question is always, what is the wealth for? That is an easy question to ask and a very difficult question to answer.
It is much easier to say what the wealth is not for, including the following:
* I don't want it used for taxes.
* I don't want it squandered.
* I don't want my spouse to take it in a divorce.
* I don't believe in charity, so it is not for charity.
* I don't want my children to have it too young.
* I don't want the lawyers using it all up in fees.
Any of these statements may be reasonable. None answers the question what the wealth is for.
Wealth is always to support the wealth holder with reasonable necessities of life—food, clothing, housing, and some luxuries. And for most people, wealth is for the education of children and possibly grandchildren. But there are amounts of wealth beyond those reasonably needed for living. If wealth is for something other than extravagant consumption, the question always remains, what is the wealth for? Surprisingly, it is a question that rarely gets asked, nor is it revisited in the few cases it is initially asked.
I have spoken at wealth conferences around the world. Whether in Mumbai, London, or New York, members of the audience come up to me afterward and say that the question has never been posed to them before. Is it a valid question in the first place, I ask? It is, they answer. But it is a dangerous question for a service provider to ask because if accomplishing the wealth's purposes does not require products being sold, there can be no sale and no profit from the prospect.
The story of a 95-year-old man who came to see me many years ago illustrates this point. This gentleman was a Holocaust survivor, unmarried, and without children. He was planning his estate and I asked him about his assets. He had all of his wealth, more than $1 million (then a great amount) in treasury bills in custody at the Federal Reserve. I asked him whether he should consider asset allocation, inflation, efficient frontiers, and so on. He answered, "This money is to take care of me during my lifetime. It serves its purpose best in cash equivalents, and at my age I have no concern about inflation." He knew what the wealth was for and had absolutely no need for financial services advisors much less any of their products.
An accidental wealth holder who came into my office several years ago had invested in a friend's business 30 years earlier and came to own stock worth $800 million. He explained that he came to see me because he wanted to save taxes. "That is fine," I said. "We can do that and have been doing it for 95 years. But you are telling me what you do not want your wealth used for—taxes. What do you want your wealth used for?" He asked me what I meant, and I said, "What are the purposes you want to accomplish with your wealth?" His reply was one that I had not heard before: "Well, what are my choices?" I laughed at first and then told him the question was actually an excellent one. What are the choices?
In fact, the choices are not so many if we are talking about substantial wealth that is to be multigenerational. Broadly speaking, there are only two choices, though there may be gradations between them.
First, wealth can be for freedom and functionality. The idea is that the functional person with freedom can be whatever he or she wants to be. Second, wealth can be for control, so that a person's children and grandchildren can live without concern or involvement with his or her wealth.
When I set out those choices—freedom and functionality, or control—the accidental wealth holder said he could tell which I endorsed. The benefits of freedom and functionality were clear in the very words I used. But the accidental wealth holder believed that control was a negative concept. I replied that I endorsed neither and was in fact neutral. If instead of "control" I had said "protection," my perspective may seem less biased. An analogy helps clarify the point. A Benedictine monk, living in a very controlled monastery, with access to neither money nor control over the way affairs are handled, has complete intellectual freedom. He is liberated of any concern about paying mortgages, investing monastic funds, or even where and what he will have for dinner.
So either choice can provide self-actualization if handled correctly. However, risk is implicit in both. To make wealth deliver freedom and functionality without protection requires that the children or grandchildren be allowed to lose the money. In essence, they have to be free to fail. When a parent teaches a child to ride a bike, the parent must be prepared for the risk that the child will fall. I told the accidental wealth holder that he had to be prepared for his children or grandchildren to lose the money, to return to shirtsleeves, if he was to choose the course of freedom and functionality.
The risk of choosing control or protection lies in the danger that one's children may have believed the wealth was for freedom and functionality and would be hurt to learn it was not. The purpose of the wealth—protection—must be shared early with the entire family. I told the accidental wealth holder about a family my father and I had worked with many years earlier. The patriarch had decided he would protect his heirs forever; his purpose for his wealth was control. We called the entire family, three sons in their midtwen-ties, together and told them that. Each moved on with his life—one became a doctor, one became a lawyer, and one became the "family wealth steward," that is, the person who took care of the family's finances and also a major philanthropist. Today, they are all over 40 and happily engaged in life and not bothered by the fact that their assets are all in trust and under control. In this case, letting the children know that the patriarch would design "protection" through control allowed each to move on with life.
In fact, whether the wealth is for freedom and functionality or simply control, it can give future generations the capacity to live life to its fullest. Indeed, whatever wealth is for, each wealth holder should be free to lead a fully self- actualized life—to be all he or she can be. There can be no reasonable debate about that. As the accidental wealth holder saw in my example, the patriarch who explained that the wealth would be controlled gave his sons the liberation from feelings of resentment or anticipation that they needed to get on with their lives.
It is critical, then, to start by deciding and articulating what the wealth is for. The answer can change, but until an answer is clear, any wealth management program will be a multitude of trees and not a forest. Once the answer is obvious, a management program can be designed to accomplish the purposes. Wealth holders and their advisors can utilize tactics, strategies, and opportunities and set goals. Crises, taxes, investment losses, and other hurtful events are merely impediments to accomplishing the purposes of the wealth and are not in and of themselves damaging.
How does one go about trying to answer the question, what is my wealth for? One must start by relying on wisdom and implementing sound process. Wisdom comes from experiencing life, from reading and studying the humanities (Shakespeare is quite helpful—think King Lear or Merchant of Venice). Wisdom can also come by relying on a trusted advisor who asks questions objectively and talks through the conseq
(Continues...)
Excerpted from FREEDOM from WEALTH by CHARLES A. LOWENHAUPT. Copyright © 2012 by Charles A. Lowenhaupt and Donald B. Trone. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
OverviewThe Principles of Wealth Management
Part 1 Reflections on Wealth Management
1 What Is the Wealth For?
2 Freedom from Wealth
3 Individuality and Wealth
4 The Importance of Comfort
5 The Importance of Strategy: Overview
6 The Importance of Strategy: Philanthropy
7 The Importance of Strategy: Investment Policies
8 The Importance of Strategy: Capitalization
9 The Importance of Strategy: Governance
10 The Importance of Strategy: Family Legacy and Values
11 The Importance of Strategy: Next Generation Education
12 The Role of Wealth Management Standards
13 The Transition from Reflections to Implementation
Part 2 Principles of Wealth Management for Private Wealth Holders and Related Parties
14 The Standards Director
15 The Ethos Decision-Making Framework
16 Step 1: Analyze
17 Step 2: Strategize
18 Step 3: Formalize
19 Step 4: Implement
20 Step 5: Monitor
21 Assessment Procedures
Appendix Sample Private Wealth Policy Statement (PWPS)
Index
Footnotes
Chapter 7
*
Chapter 9
*