True Wealth - Richardson GMP

True Wealth
An expert guide for high-net-worth individuals (and their advisors)
by Thane Stenner
True Wealth Enterprises, 2000
408 pages
Sections
Take-aways
1. Considering
wealth
• Wealth is more than just money. Wealth is the capital - intellectual,
emotional, financial, or otherwise - which an individual uses to achieve a
given quality of life.
2.Managing
wealth
3.Passing on
wealth
4.Living wealth
Appendix:
Working with a
wealth advisor
• Wealth management is not about accumulating more money. Rather, it is
about securing a high quality of life.
• There is a significant difference between those who have the financial
means to secure their quality of life right now, and those who aren’t quite
there yet.
• Individuals reach that point once they accumulate $1-million in investible
assets.
• This book will not teach you how to make $1-million. Instead, it will focus
on what you should do once you already have $1-million.
• Wealth does not solve all problems - either financial or personal.
• If you’re wealthy, some of the most difficult, most complex financial and
life challenges may still be ahead of you.
Relevance
What you will learn
In this abstract, you will learn (a) why Ultra-High-Net-Worth and High-Net-Worth Individuals
(U/HNWIs) are different from those still accumulating wealth; (b) various strategies for protecting
and building your wealth; (c) topics to be aware of while navigating the “life challenges” that often
accompany wealth; (d) tips and hints for selecting a wealth advisor who is skilled and experienced
in handling the complex challenges facing the U/HNWI population.
Recommendation
Each cohort of the wealthy faces different challenges. Not every reader will find every chapter relevant, but the range of discussion ensures that all readers will get at least something out of the book.
Stenner’s casual, conversational tone ensures the writing doesn’t get bogged down in financial jargon.
The multitude of case studies and charts help make abstract concepts more real, showing how
abstract concepts work in the real world. Taken in its totality, True Wealth functions as an important
“handbook” for anyone who has already become wealthy, and is looking to protect as well as build
their wealth.
Abstract
“Wealth can bring
great freedom. But
along with that
freedom comes an
entire range of new
responsibilities, new
challenges, and yes,
new problems.”
The rich are different
The wealthy can be divided into three distinct cohorts: (a) High Net Worth Individuals have at least
$1-million in investible assets; (b) Ultra High Net Worth Individuals (UHNWIs) have $10-million
or more; (c) the Superwealthy are those with $100-million or more in investible assets. Contrary to
popular belief, most of these U/HNWIs have earned their wealth, largely by owning their own businesses. And for most of them, maintaining current wealth and income is a more important goal than
simply increasing their net worth.
“Numbers are an
important part
of what we do as
financial professionals. But at the
end of the day, our
business is about
people.”
It takes all types
Wealth isn’t just a number—it’s a state of mind, and once you accumulate enough of it, wealth changes the way you think. Most HNWIs can be organized into nine distinct wealth personality profiles,
based roughly on the way they think about wealth and wealth management.
Each cohort of the wealthy faces different challenges. For HNWIs, the three central challenges are:
(a) recognizing their status and accepting the new responsibilities of wealth; (b) having an overly
concentrated portfolio; (c) understanding wealth management means more than investing. UHNWIs
face two additional challenges: (a) ensuring they have a comprehensive financial plan; (b) matching
sophisticated investments with their unique needs. The Superwealthy face three challenges: (a) assessing and monitoring special investment situations; (b) formulating an effective intergenerational and/or
estate plan; (c) finding qualified professionals who can handle the demands of their wealth.
Caregivers (20% of the U/HNWI population) want to leave behind enough wealth to liberate their
families from having to work as hard as they did. Runaways (17%) don’t want to be involved in the
day-to-day details of wealth management. Libertarians (13%) dream about the day they don’t have to
work anymore, while the Recluse (12%) insists on a high degree of financial discretion and absolute
privacy. To the Boss (10%) wealth means power. Superstars (8%) find the glamour and prestige
of wealth appealing. Empire-builders (8%) view money as an end in itself. Players (6%) view the
accumulation of wealth as a challenge or game, while Academics (6%) find the minutiae and details
of wealth management particularly appealing.
These profiles are rarely a “neat fit”—most U/HNWIs have a primary and a secondary profile.
Nevertheless, determining what personality best describes you can be a big help when it comes to
understanding what you need to do to secure your wealth.
“Over the years,
I’ve made a number
of observations
concerning how
U/HNWIs regard
their wealth, and
what steps they’re
likely to take to
secure it.”
Five rules of wealth
Wealth management can be a complex subject. When it comes to making wealth management
decisions, it helps to keep five basic rules in mind. U/HNWIs need to:
• Be personally responsible for their wealth. This means accepting a minimum level of engagement
with wealth issues and participation in wealth management decisions.
• Consider wealth in a different way. That is, seeing or viewing wealth from the perspective of the
practical difference it makes in life.
• Secure wealth first, build wealth second. Once you’re wealthy, keeping what you have is more
important than acquiring more.
• Investigate new wealth management options. Because the financial challenges you face are
different from the ones you faced before.
• Work with a financial professional. U/HNWIs need a highly skilled “personal CFO” who is wellversed in a variety of financial areas, someone who can co-ordinate effective wealth strategies
among multiple specialists.
“New money
families often face
a tough transition
into their wealth.”
New money; old money
Those who become wealthy suddenly face significant challenges when it comes to managing that
wealth on an ongoing basis.
• Business owners need to investigate divestiture options, and explore appropriate diversification
strategies well in advance of the sale of their business.
• Executives need to control their own financial behaviour about their new wealth. They need to learn
what they can about their options, and understand what to do after exercising those options.
• Heirs need to learn more about wealth and ask parents about their intentions.
• Athletes and entertainers need to secure wealth during their prime “earning” years. They also need
to resist some of the easy temptations wealth offers.
• Divorcees need to separate the emotional consequences of divorce from their financial decisionmaking, and prepare for a complete overhaul of their finances.
No matter how you became “suddenly wealthy,” four simple steps can help you manage the new
challenges you face:
• Take a time out. Establish a period of time when you defer important financial decisions.
• Construct a “wish list.” Determine what kinds of changes you’d like to make in your life.
• Re-visit goals. Then, determine which of those goals you can actually afford.
• Segregate wealth into two piles. Safe money (money needed to fund your lifestyle) and play
money (money you can use to purchase whatever you want).
• Work with a professional. A qualified advisor can help you turn new money into old money.
“If you don’t know
anything about the
person, how can
you construct the
right portfolio?”
Money in motion
The financial challenges facing U/HNWIs are connected to their life circumstances. For that reason,
any examination of wealth management must involve an examination of an individual’s life goals.
Here are five real-life case studies that demonstrate the real-life complexities and challenges faced by
U/HNWIs.
1. Securing wealth for retirement
“Perry” was a former professional hockey player with a net worth of over $5-million. Perry’s financial goals were similar to other retirees, but his net worth demanded a more sophisticated approach
when it came to his retirement portfolio. We divided his portfolio into two portions: (a) incomegenerating assets; and (b) growth assets. The first component was assigned to two managed-yield
mutual funds. The second to a portfolio of I-class and F-class mutual funds. A small portion of the
portfolio was dedicated to individual growth stocks. While the challenge facing Perry certainly
wasn’t unique, the solutions offered were more specialized—a typical scenario with U/HNWIs.
2. Allocating wealth after a business sale
“David” was a farmer who had inherited his family’s business and property. After selling his business for over $30-million, he was unsure of what to do with the proceeds. We divided his portfolio
into “core” (long-term conservative holdings) and “satellite” (opportunistic investments) positions.
Most of the former was placed with a respected value manager; $1.5-million of the latter portion
was placed in a “fund of funds” hedge fund that offered diversification and low correlation to
overall markets. $500,000 was kept in cash for special situations. Finally, we consulted with a tax
specialist and an estate planner, in order to ensure all areas of David’s finances were addressed.
3. Executive options
“Diana” was an executive for a large pharmaceutical company; options were a large part of her
compensation package. As the company’s fortunes improved, so did the value of Diana’s options—
to about $15-million. We worked with Diana to establish an appropriate exercise schedule for
her options, which eliminated guesswork and reduced the temptation to co-ordinate exercise with
market events. We also constructed a plan to deal with the proceeds of her options. This provided
Diana with clarity and eliminated much of the stress that came with her sudden wealth.
4. Setting up a foundation
The “Hendersons” were an old money family that had invested most of their wealth in real estate.
Charitable giving was a significant goal of their estate plan. After a lengthy discussion, it became
clear that a charitable foundation was the most effective strategy for accomplishing that goal.
A foundation would allow the couple to target local causes, and include other family members in
the charitable effort. Most importantly, it would allow them to make ongoing gifts while keeping
the bulk of their capital in reserve for other needs.
5. Business divestiture
“Tom” was the majority owner of a large manufacturing business who had started thinking about
retirement. A preliminary evaluation of his business suggested a sale price of about $25-million—
less than what Tom was hoping for. With the help of our firm’s sales and divestitures team, Tom
developed a strategy for increasing the value of his firm over the next 2-3 years. After implementing most of the team’s recommendations, Tom increased the value of his business to $85 - $100million. Over the next three months, the sales and divestitures team was able to identify a number
of potential buyers; Tom eventually opted for a deal worth over $115-million, with $100-million of
that in the stock of the acquiring company. Our next task was to secure Tom’s wealth. We arranged
a prepaid equity collar that would provide complete downside protection on $67-million of his
payment, and up to 200% upside participation. We also implemented a prepaid forward transaction, which resulted in an advance payment of $47-million in cash, which was then used to build
a diversified equity portfolio. The remainder was invested in a laddered bond portfolio to provide
Tom with income.
“Without a strong
sense of what you
believe in, it’s easy
to become sidetracked, distracted,
or even duped into
putting your wealth
where it doesn’t
belong.”
My investment principles
Without a strong sense of what you believe in, it’s easy to become sidetracked, distracted, or even
duped into putting your wealth where it doesn’t belong. The following principles guide all the recommendations I make to clients:
• Be a contrarian investor. Follow an independent mindset and tune out the actions of the crowd.
• Believe in equities. Equities have the ability to protect you against inflation and taxes.
• Manage risk first. The primary goal of all investment strategies for U/HNWIs should be to minimize potential threats to one’s standard of living.
• Construct a diversified portfolio. Diversification offers financial security to U/HNWIs.
• Pay attention to history. U/HNWIs who ignore market history are condemned to repeat the mistakes
of the past.
• Be a tax-smart investor. A consideration of after-tax returns is the only real way to ensure long-term
wealth.
• Manage wealth for the benefit of yourself, but also family and community. Because from those
who have much, much is expected.
• Take a structured approach. First, take an inventory of assets and goals. Next, outline options for
achieving those goals. Then, put the portfolio together, and conduct ongoing reviews.
The danger of concentration risk
Why should U/HNWIs diversify? It’s simple: they have too much to lose by concentrating their
wealth. While there are many examples of how concentrated portfolios can result in tremendous
wealth, does it really make sense to continue gambling with your wealth? Or do you want to seize the
opportunity to take some of it off the table, and guarantee a high quality of life?
While Warren Buffett provides a good argument for portfolio concentration, there are several extenuating circumstances that make his case exceptional, and unlikely to be duplicated among the majority
of U/HNWIs. Understand that a diversified portfolio does not mean a watered down portfolio, or a
portfolio where investments overlap to produce mediocre returns.
“Of all the risks
U/HNWIs face, the
most dangerous is
concentration risk.”
How to minimize concentration risk
There are two general methods for dealing with concentration risk: diversification (which seeks to
avoid the problem of concentration) and hedging (which seeks to remedy its consequences).
Diversification is a strategy that depends largely on the needs of the individual investor. The best
way to construct a diversified portfolio is to base allocation decisions on risk tolerance rather than
investment goals or age. One way to diversify an overly concentrated, low-cost-basis position is with
a stepping-out strategy.
Put and call options can be effective tools for hedging concentrated positions in publicly-listed
stock. An option collar may be an effective tool for those U/HNWIs who want to limit downside risk
without selling their positions, although the price of this protection is giving up some upside potential.
Those unable to use listed options may be able to enter into private transactions with brokerages or
securities firms to hedge a large position. Executives or insiders who are “locked in” to a concentrated
position may be able to use an equity monetization strategy to minimize concentration risk.
“There’s a fundamental lack
of knowledge
about options
and their implications on one’s net
worth. That has to
change.”
So many options . . .
Options have the power not only to change your financial situation, but also the way you think about
yourself and your wealth. In fact, there are several psychological pitfalls options holders find themselves in:
•
•
•
•
•
•
not understanding the tax and investment implications of options
considering options as a get-rich-quick scheme
getting greedy and not diversifying from concentrated stock positions
allowing market volatility to affect your decision to exercise
pre-spending the proceeds from options, or spending them on basic living expenses or luxury goods
letting options wealth go to your head
Mathematically, the longer the options are held, the more potential profit. In the real world, however,
a regimented options exercise schedule is probably the best strategy for most options holders.
“For many people,
selling a long-held
business is the most
significant financial
event of their lives.”
Selling your business
One of the most significant challenges for those selling a business is how to manage the proceeds of a
sale on an ongoing basis. Some of those challenges are emotional, others financial.
Selling a business can be an intensely emotional experience; business owners should prepare themselves for those emotions and avoid letting their emotions interfere with sound business judgment.
This is particularly true if family members are involved with the business—owners should take care
to clearly communicate their intentions to family members well before the eventual sale.
Financially, business owners must address a number of issues before a business is ready to be sold.
Finding the right buyer is perhaps the most important of these; there are many avenues for finding a
buyer, but the most effective is to engage the services of a qualified business broker. When it comes to
financing, there are many options, some of these are more advantageous to the buyer than the seller.
The case for and against mutual funds
There are many myths and misperceptions surrounding mutual funds. Example: many investors
believe the loads and other fees associated with mutual funds make them more expensive than other
investment alternatives. In truth, there is a wide variation between the costs of mutual funds, and
investors can select funds that offer reduced fees. Another myth: active mutual fund managers rarely
outperform the index. The truth is, passive investments offer little opportunity to minimize risk.
“There is nothing
inherently right or
wrong about any
investment. They
all have their place
in certain portfolios under certain
circumstances.”
“Do you know anyone who is looking
to pay more tax?
I don’t.”
“The problem for
many U/HNWIs
isn’t the complete
lack of an estate
plan. It’s the lack of
a complete plan.”
This is ultimately a more important issue than the issue of performance. Some investors believe
U/HNWIs are better served by separate accounts. While separate accounts have their benefits, when it
comes to performance and cost, there is little difference between funds and separate accounts.
A number of developments in the mutual fund industry should cause U/HNWIs to reconsider the
benefits of funds. These include class-structured funds (which offer significantly lower fees), corporate class funds (which allow you to move between tax-deferred portfolios without triggering a taxable event), managed-yield funds (an ideal place for short-term assets), and exchange traded funds
(an extremely flexible method for gaining exposure to select markets or market sectors).
Alternative investments
The percentage of assets invested in “alternative investments” is growing quickly. Such investments
offer excellent growth potential, but the primary purpose should be to provide portfolio diversification. The exact portion of the U/HNWI portfolio allocated to alternative investments will vary with
risk tolerance; 10-15% is a good target for most investors.
There are two basic types of alternative investments: (a) portfolio enhancers and (b) portfolio diversifiers. Private equity is the primary portfolio enhancing asset, the main benefit of which is the ability
to enhance performance. This enhanced performance comes at the cost of added concentration, lower
liquidity, and the difficulty in selecting top-performing managers. There are two primary types of
portfolio diversifiers: hedge funds and managed futures funds. Each can be an effective way of adding
performance that’s non-correlated to traditional assets such as stocks and bonds to the portfolio.
Being a tax-wise investor
Tax planning is one of the most cost-effective ways of securing and building wealth. U/HNWIs
need to learn about tax regulations and tax planning strategies, develop a general knowledge of their
individual tax situation, and understand the tax bracketing system in their jurisdiction. U/HNWIs also
need to understand how investment practices will affect the taxation of their wealth. By developing a
general understanding of the ways capital gains, dividends, and income is taxed in their jurisdiction,
U/HNWIs can select investments (and managers) that maximize tax efficiency. Finally, U/HNWIs
need to work with qualified professionals who are aware of tax planning issues. These professionals
should work for firms who are committed to helping clients overcome the tax challenges of wealth.
Estate planning for the high-net-worth individual
While most U/HNWIs have taken at least basic steps towards organizing their estates, many haven’t
yet formulated a full estate plan. That plan should be guided by simple principles:
•
•
•
•
U/HNWIs have unique financial needs. Their estate plans must be equally unique;
The primary goal of any estate plan is to satisfy the intentions of the U/HNWI;
Estate planning is an ongoing process requiring monitoring and periodic reviews;
U/HNWIs need to communicate their intentions for their estate plan with family and friends well
before that plan is finalized.
No matter how complicated the estate, every well-constructed estate plan shares five basic goals:
• retention of control: to make your intentions possible
• minimization of tax: less tax means more money for your heirs
• liquidity: to satisfy the immediate needs of your heirs, and to prevent assets from being sold to pay
taxes and fees
• business succession plan: a must for all U/HNWIs with a business
• bulletproofing: to ensure your intentions can survive legal challenge
Every U/HNWI estate requires qualified legal advice. U/HNWIs should also think carefully about
their choice of executor. As the manager of your estate, this person has a number of important duties.
The same goes for appointing a power of attorney.
Dealing with estate taxes
Estate taxes pose a significant threat to U/HNWIs. How you manage this threat depends largely on the
specific tax legislation where you live. Estates in America, for example, are taxed on the total value of
“Like it or not,
estate planning
means planning
for estate taxes.”
“With the careful
use of trusts, it’s
possible to achieve
a number of
important estate
planning goals.”
the assets held in the estate, while estates in Canada are generally taxed on any gains accrued to assets
held within that estate. If you own assets in two or more jurisdictions, the rules are more complicated.
Make sure to check with a qualified professional before finalizing your estate.
There are a number of ways to minimize estate taxes; not all of them may be suitable for your exact
situation. Transfers or gifts can reduce the size of an estate, and therefore taxes. However, many
jurisdictions place limits on what you can give away in any year. Income attribution rules also prescribe how income from gifts will be taxed. Life insurance is an extremely versatile tax-planning tool.
Joint ownership can be an effective method of reducing probate taxes, but not all assets can be jointly
owned, and joint ownership doesn’t make sense for all U/HNWIs. An estate freeze is a sophisticated
estate planning strategy that is ideal for U/HNWIs with business assets, but requires careful structuring and proper execution. Using a holding company can be another way to defer taxes owing on an
estate, but recent changes to tax legislation have made them less attractive than before.
All about trusts
Trusts are one of the most flexible, most efficient estate planning tools available to U/HNWIs. The
basic trust structure involves three parties (a) the settlor, who grants assets to the trust, (b) the trustee,
who manages those assets, and (c) the beneficiaries, who receive income and/or ultimate benefit from
the assets within the trust. The role of the trustee is the most important one in any trust arrangement.
Trusts offer a number of substantial benefits to U/HNWIs. These are: (a) control over assets; (b)
tax advantages; (c) protection for assets; (d) privacy. There are also a number of drawbacks to trusts.
These are: (a) cost in time and money of establishing a trust; (b) ongoing management and administration expenses; (c) irrevocability; (d) the high tax bracket some trust income is subject to; (e) the
deemed disposition of trust assets.
There are two general forms of trusts: (a) inter-vivos trusts are established during the settlor’s life;
(b) testamentary trusts are established through a provision in the settlor’s will. Each have their own
distinct advantages and disadvantages.
“U/HNWIs have an
obligation to care
for and nurture
wealth not only for
themselves, but for
their families and
for their communities.”
The smart way to give
U/HNWIs need to ask the following questions before making a charitable donation:
•
•
•
•
•
what can I reasonably afford to give?
what kind of cause(s) do I want to support?
how involved do I want to be with my chosen charity?
do I want my gift to be made public?
how can I ensure my gift is safe from potential legal challenges?
There are many ways to structure a charitable donation. Outright gifts provide immediate tax relief
and immediate benefit to the charity, but are often less tax efficient than other forms of giving. Life
insurance is an extremely flexible form of charitable giving. Charitable gift funds can be an excellent
option for U/HNWIs looking for a hassle-free form of giving. Gift annuities offer a way for U/HNWIs
to receive tax-advantaged benefit from their assets while giving to charity.
Establishing your own foundation
There are many reasons for establishing a charitable foundation. Foundations offer control over who
gets what, and a good deal of control over how assets are managed. A foundation can ensure gift-giving remains anonymous; alternatively, it can be a good way for U/HNWIs to raise profile. A foundation makes donating to small, community-based organizations easier. A foundation can also extend
giving well beyond a single lifetime, and foster a culture of family giving. Finally, foundations allow
for tax-free compounding of assets.
In order to maintain its status as a charitable entity, foundations must adhere to strict rules of conduct
and disperse a minimum percentage of assets every year. Due to the costs to set up and maintain a
foundation, they are best suited to donations of $1-million or more.
“With wealth comes
change. Sometimes
this change will
be positive. Other
times, it will be
negative.”
“Most of us are
reasonably confident of our spouse’s
ability to carry on
financially after
we’re gone. We are
often much less sure
of our child’s or
grandchild’s ability
to do the same.”
“Securing access
to quality health
care remains a top
concern among the
wealthy.”
U/HNWIs looking to establish a foundation need to consider a number of things, including the intended purpose of the foundation, the role the family will play in managing the foundation, how long the
foundation is intended to survive, and the target distribution rate for the foundation. U/HNWIs will
also want to consider the procedure for making bequests, and the investment policy of the foundation.
Your changing life
Wealth brings change; dealing with that change is one of the central challenges facing all U/HNWIs.
U/HNWIs need to understand how their life has changed, and accept their position as wealthy
individuals. They also need to be prepared for changes in their relationships with family and friends.
Maintaining privacy will be a challenge for many U/HNWIs; they should prepare for an erosion of
privacy and be cautious about sharing financial information with anyone other than their spouses and
wealth advisors. Many U/HNWIs will feel pressure to give. Unwanted solicitations for financial assistance from family, friends, and charitable organizations can make existing relationships for U/HNWIs
awkward—and potentially destroy them. Finally, U/HNWIs can find it difficult to identify with or
receive empathy from non-U/HNWIs.
Affluenza, and how to cure it
While it’s unclear whether a large inheritance automatically predisposes a child to laziness and a lack
of ambition (a syndrome called “affluenza”), many U/HNWIs are concerned about the issue. To that
end, U/HNWI parents need to consider when children should receive wealth. In most cases, large
inheritances should be left in trust until the child reaches the age of 30 or 35, although an incremental
inheritance can be a good solution.
To prevent affluenza, parents should teach their children to be self-reliant while encouraging financial
education and learning. Perhaps most importantly, parents should teach humility about wealth, but not
guilt. On a financial level, parents should allow their children to work, and be cautious about providing allowances or financial aid. Parents should also structure their estate properly, using incentive
trusts, tangible gifts, and a “family bank” to help prevent affluenza.
Your health
The next few decades will likely place a severe strain on world health care systems. It will most likely
be increasingly difficult for governments of the world to care for their elderly populations. That’s why
U/HNWIs need to take steps now to ensure they have adequate wealth to fund any health care needs.
The first step in any health plan is to investigate your health coverage. Don’t assume your coverage
is comprehensive. Business owners need to determine whether group coverage, individual coverage
or other options make the most sense. As you grow older, insurability will become a more pressing
concern. It may be wise to secure insurability by purchasing appropriate health coverage before you
actually need it. For those U/HNWIs unwilling to wait in long lines at home, travelling to a foreign
country (“health tourism”) may be an option. Your investigation should also include a consideration of
disability and long-term care insurance. There are four general levels of long-term health care:
(a) in-home care; (b) custodial care; (c) skilled care; and (d) intermediate care. Finding how much
each kind costs is an important part of health care planning.
“A divorce typically
covers an entire
spectrum of financial challenges.”
Finally, U/HNWIs may face the possibility of being responsible for supporting their infirm parents.
Such obligations require special planning. Communication is the first step in that planning. Talk to
your parents about their wishes, and investigate your options. A living trust, additional health coverage, or long-term care insurance are all possibilities.
Dealing with divorce
While all divorces are emotional and messy, ex-spouses can make it less so by settling differences
through negotiation, mediation, or arbitration. Such a process is usually cheaper, less antagonistic, and
more private than a court-sanctioned settlement.
There are several things U/HNWIs can do to make divorce less financially and emotionally draining.
Prenuptial agreements offer limited protection for U/HNWIs entering a marriage with a large discrepancy in assets. While the exact terms of a prenuptial agreement are up to the individuals, in general,
it’s a good idea for the agreement to cover assets and income. Prenuptial agreements may
offer a way for parents to ensure wealth goes to an adult child, rather than an estranged spouse.
Securing a means of income is the primary financial goal of most divorce settlements. There are
many ways of structuring such income; check with a financial professional to find out what payment
structure works best for you. Specialized trust or partnership arrangements can help keep a business
outside of divorce proceedings. Divorces that involve options can be exceptionally complicated. In
general, courts will determine the reason why the options were granted before making any decision
about their disposition.
The ongoing support of children is another priority of any divorce settlement. The structure of such
payments can often cause animosity between parents, and is better left in the hands of a trusted mediator or arbitrator. Funding a child’s education is another important goal of divorce settlements.
For U/HNWIs, a trust is probably the best solution to such challenges.
“The reason why
U/HNWIs need
to work with a
professional is
because they have
too much to lose.”
After the divorce, the priority for divorcees should be reconstructing one’s estate plan. Securing
appropriate insurance is a big part of that effort. Multiple or “blended” families face a variety of
unique financial challenges. The best solution to such challenges is to have a frank and open discussion before tying the knot. Those couples who decide to adopt should be aware of the financial
liabilities they’re accepting.
Appendix I: working with a wealth advisor
There are many reasons why U/HNWIs need to work with a wealth advisor. The most important of
these: there is simply too much to lose by not working with one. U/HNWIs typically look for a variety
of things in their financial professional. Among the most important is the personal relationship and
the ability to provide a wide array of investment opportunities. The firm counts too: ideally, that firm
should have extensive experience in dealing with U/HNWIs, and should offer access to elite-level
opportunities and solutions.
U/HNWIs need to work with a professional experienced in handling sizable portfolios, someone who
understands that the business of managing wealth is ultimately more about lifestyle than performance,
someone who’s enthusiastic about managing wealth and helping you overcome wealth challenges.
While an evaluation of performance is an important part of the selection process, U/HNWIs need to
understand how performance figures (both good and bad) can be misleading. While there may well
be times when you may have to “fire” your professional and seek new help, such a decision should be
considered carefully, and based upon sound reasons. Short-term performance isn’t one of them.
About the author
Thane Stenner is the founder of Stenner Investment Partners, an independent Private Family Office group within Richardson GMP Limited,
based in Vancouver, British Columbia, Canada. He is Director of Wealth
Management.
Thane has over 20 years of experience in successfully advising ultra-highnet-worth families, entrepreneurs, as well as corporate and philanthropic
entities. He is recognized nationally as a thought-leader in the ultra-highnet-worth advising field and has been a highly successful investor for over
30 years. Prior to joining Richardson GMP Limited, Thane previously held
roles as First Vice President with CIBC World Markets, and Director of
Merrill Lynch International Private Client Group.
Throughout his career, Thane has been active in his community through professional associations,
and various boards and charitable organizations including the Greater Vancouver YMCA,
the UBC Business Families Centre’s Professional Advisory Committee (PAC), and the BC
Children’s Hospital Foundation. Thane is an active philanthropist supporting organizations such
as imagine1day, Homes of Hope and others.