$50M+ - Need a sounding board/advice

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haltab
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$50M+ - Need a sounding board/advice

Post by haltab »

I had a recent large exit from a company and walked away with around $70M after taxes. We've set up a charitable fund and seeded it with a large portion, set up an angel fund (play money that I don't factor into the total portfolio) and are considering a couple of real estate purchases. We've got about $55-60M that we've invested with two different money managers. Years before the windfall I had decided that if I was ever in this situation I would just park it in an index fund and let it ride. However, I was wined and dined and decided to see how these guys could do. My wife was also overly cautions and wanted a very conservative portfolio and was happy with a portfolio heavy in munis. She's since realized we'll never run out of money (our current spend rate is around $200k a year) and is ready to ditch the money managers.

We're in our mid 30s and don't really have an investment horizon. There may be occasional large purchases every 5-10 years and i'll probably donate appreciate stock to top up the charitable fund here and there but nothing outrageous relative to the balance. We still haven't decided if we're going to leave it to the kids or give most of it away but we've got time to think about that and modify the estate plan.

So I need help. My initial thoughts were to put 80-90% in VINIX and then the remaining 10-20% in a bond index or leave it in some of the munis I already own. In thinking about spending and cash flow I probably should plan for $500k in cash each year (currently don't have a salary) even though that exceeds our current spending habits but don't want any surprises.

What thoughts or advice do you have? I feel like I've read and studied enough over the years about this topic and plan on staying the course over the next 40-50 years and hopefully have good enough results that I can convince the next generation to do the same.

Thanks in advance.
123
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Re: $50M+ - Need a sounding board/advice

Post by 123 »

With that size portfolio I think you could still manage most of it yourself. I would be concerned about money managers that "Wine and Dine" you. You undoubtedly would benefit from professional tax and estate planning advice. But I would stay away from anyone who provides it all to you for an AUM fee.

It is possible for you to run out of money. Ask any of a number of former NFL players. They undoubtedly ran out even with the money managers "helping" them. When you primarily do it yourself you know you are unlikely to cheat yourself.
Last edited by 123 on Sat Aug 27, 2016 3:18 pm, edited 1 time in total.
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kjvmartin
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Re: $50M+ - Need a sounding board/advice

Post by kjvmartin »

What kind of "money managers" are you using? I'm always cautious about that title. Practical thinking - I think your best best would be to get a good attorney for a lot of tax/estate/planning issues and park the money in Vanguard/Fidelity/banks.

Opinion thinking - I'll never be anywhere close to a fraction of your wealth, but I'd be a conservative investor with it in your shoes as well as generous. I'm not sure you'll find a lot of people who can relate to your level of success, even among successful people here.

I'd definitely buy a pre-war Martin guitar or two!

kjv
livesoft
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Re: $50M+ - Need a sounding board/advice

Post by livesoft »

Instead of VINIX, why not use a Total Stock Market Index fund?

You know if you use Vanguard PAS that's what they are going to do. They will also recommend some muni bond funds and a Total International Stock Index fund.

BTW, I know someone with about the same size portfolio and they no longer use anybody to run the portfolio for them. They do have a tax person and of course have an estate plan in place which will use a reputable trust firm.

Their biggest worry is how to keep the kids motivated. Another worry they bought insurance for: Global emergency medi-vac services. It looks like Sir Richard Branson used his insurance recently.

They don't do "angel investing" anymore as it is just a money loser.
Last edited by livesoft on Sat Aug 27, 2016 3:27 pm, edited 1 time in total.
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The Wizard
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Re: $50M+ - Need a sounding board/advice

Post by The Wizard »

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Grt2bOutdoors
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Re: $50M+ - Need a sounding board/advice

Post by Grt2bOutdoors »

[quoted OT comment removed by moderator prudent]

How to keep the kids motivated? Simple, do not tell them what you are worth. Do not spoil them! Make them get a part time job in high school - working for spending money never harmed anyone, if anything it made them appreciate the value of their time. Volunteer your time to those less fortunate, sometimes that giving spirit rubs off on the youngin's and sometimes it doesn't. If you don't want to raise "trust-a-farians", then do not become enablers. No silver spoon. No Lambroghini, Mercedes, Bimmer at age 16 delivered with bow around it to the front door as a "first" ride. What is a trust-a-farian? People who's every financial whim is met by a trust funded by family, without having to expend one ounce of effort on their part to obtain the reward.
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haltab
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Re: $50M+ - Need a sounding board/advice

Post by haltab »

Thanks for the feedback so far.
kjvmartin wrote:What kind of "money managers" are you using?

kjv
I've got two large independent firms that I actually trust on a personal level and were the winners after talking to the usual suspects (Goldman, etc). Both were recommended from friends in similar situations.

As far as estate planning I've got most everything lined up but will probably modify over the years and the kids get older. We've got great attorneys and tax/accountants. We did make an initial game plan with one of the managers that was valuable discussing our goals and vision for the future. Our main goal over the next 20 years is to not ruin our kids. It sounds like that will actually be a pretty hard task.

As for the Angel Investing, I don't expect a return. It's primarily a way to keep busy until I really find the next passion. Ive set a hard cap of $1MM and if it all goes to zero then I'm okay with it.
Jack FFR1846
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Re: $50M+ - Need a sounding board/advice

Post by Jack FFR1846 »

A 3 fund portfolio works for $50,000, $50MM, $50B.

With the new index fund classes at Fidelity at $10MM minimum investment and ERs far below the old/best Fidelity ERs and way below anything Vanguard offers, it is worth taking a look at. You can build a 3 fund from these new "lowest cost" index funds.

https://www.bogleheads.org/wiki/Three-fund_portfolio

You can do this yourself. Of course these guys have wined and dined you. Even at 0.5% AUM on $50MM, they're looking at $250k plus whatever front end loads are and high ERs.
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retiredjg
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Re: $50M+ - Need a sounding board/advice

Post by retiredjg »

I think your problem is going to be getting out of what the money managers have you invested in. Capital gains taxes could be significant. If the cap gains are short term, your ordinary tax rate will apply. Do you know your tax rate or is it too soon to tell?

Are these funds you can transfer to another custodian and liquidate later (like during a crash when you don't have any capital gains?)

The investing part could be very easy - just use Total Stock and Total International and the tax-exempt bonds you already have (depending on what you have….).
PoppyA
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Re: $50M+ - Need a sounding board/advice

Post by PoppyA »

Trusting someone on a personal level IMHO means nada! They are making $ off you. They know it & you know it.

Follow the bogelhead plan as outlined in the wiki.

As far as the kids go...this becomes your #1 job. You have not said how old they are, but look for ways to teach then that is appropriate for their age. I recommend Richard Mayberry and his early warning report. He has a whole series for kids.
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Re: $50M+ - Need a sounding board/advice

Post by LateStarter1975 »

123 wrote:With that size portfolio I think you could still manage most of it yourself. I would be concerned about money managers that "Wine and Dine" you. You undoubtedly would benefit from professional tax and estate planning advice. But I would stay away from anyone who provides it all to you for an AUM fee.

It is possible for you to run out of money. Ask any of a number of former NFL players. They undoubtedly ran out even with the money managers "helping" them. When you primarily do it yourself you know you are unlikely to cheat yourself.
+1
Mike Tyson made around $500 million in his career, blew it all and filed bankruptcy. Yes, you can run out of your money. But you shouldn't as long as you manage it well. Congratulations and good luck!
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sambb
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Re: $50M+ - Need a sounding board/advice

Post by sambb »

Put it 95% of it in one find: tax managed balanced fund.
You will be just fine if you do this.
appropriate risk level, and has appropriate income
Call vanguard for an institutional rate
Once a year, take dividends in cash to replenish your spending
no matter what anyone says in the next 30 years, keep it parked there and you'll be fine
SpaceCowboy
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Re: $50M+ - Need a sounding board/advice

Post by SpaceCowboy »

You've got enough that you can basically do anything you want, especially if you keep spending at your current level.
You might want to read through Bernstein's Deep Risks. Asset protection from liability should be discussed with your attorneys or a specialist.
I'd keep the portfolio of muni bonds. You might want to actually set that up as your primary means of generating income for living expenses. Index the stocks globally and use that for both charitable and legacy purposes.
At some point your kids will figure out that you're wealthy. Just make it clear to them that a lot will be going to charity and if they want to be wealthy, they need to earn their place in the world.
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Kenkat
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Re: $50M+ - Need a sounding board/advice

Post by Kenkat »

If it were me and I really wish that it were me to be honest, what I would do is to divide the remaining funds into two parts.

Part one I would invest in an income portfolio, probably mostly municipal bonds but maybe also some other bonds like TIPS, corporates, etc. mixed in. The goal of this would be to throw off enough income to fund your current spending plus reinvest some to give you some inflation protection.

Part two I would invest pretty aggressively, maybe 80-90% equities. I am a fan of diversifying your portfolio, so I would include a total market index fund, a total international fund with some exposure to emerging markets or supplemented with a dedicated emerging markets fund, some REIT, and some small value. Round it out with some bonds - similar to above - and you'd be in good shape. You could also stick to a simpler 3-fund style portfolio with total stock, total international stock and bonds and be fine also.

You should never run out of money unless something really bad happens.
pinhead
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Re: $50M+ - Need a sounding board/advice

Post by pinhead »

If you are not interested in growing the money, put them all in a CD at 3%.

You can do wonders with just 1% of $50m.
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haltab
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Re: $50M+ - Need a sounding board/advice

Post by haltab »

retiredjg wrote:I think your problem is going to be getting out of what the money managers have you invested in.
It will take time to transition out of the managers. Taxes, hold periods, timing etc are all being factored into the move.
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haltab
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Re: $50M+ - Need a sounding board/advice

Post by haltab »

Jack FFR1846 wrote:A 3 fund portfolio works for $50,000, $50MM, $50B.

With the new index fund classes at Fidelity at $10MM minimum investment and ERs far below the old/best Fidelity ERs and way below anything Vanguard offers, it is worth taking a look at. You can build a 3 fund from these new "lowest cost" index funds.

https://www.bogleheads.org/wiki/Three-fund_portfolio

You can do this yourself. Of course these guys have wined and dined you. Even at 0.5% AUM on $50MM, they're looking at $250k plus whatever front end loads are and high ERs.

Do you think the ERs will stay low with Fidelity or is this a chance for them to buy up market share and then increase fees?
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celia
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Re: $50M+ - Need a sounding board/advice

Post by celia »

Have you read anything about Warren Buffet's family? He lived an average life style and didn't tell his kids how much they were worth. The kids had to get part time jobs like other kids. They had no idea about the family wealth until they were adults and already married (I think).

When all his kids were adults he gave them big chunks of money to start their own foundations. They all learned about charities and made different choices of what to focus their foundation on. Warren jr became a farmer and now works on figuring out how to change crops for sustainability in third world countries.

My info above many be a little off as I am just doing this from memory. But the idea that they all work to better the world in different ways is worth considering.
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Snowjob
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Re: $50M+ - Need a sounding board/advice

Post by Snowjob »

50 million.

I'd probably do something like this --

20 Million in Vanguards Total World Stock index (VT is the etf version) to maintain global equity exposure and never have any capital gains.
20 Million in Municipal Bonds - Split it up between 3-4 reputable advisers & have them select the bonds - Quality not Yield focused - Again no tax
10 Million in Treasuries & Alternatives - The alternative piece being some sort of farmland investments - Low correlation and risk factor diversity here.
mac808
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Re: $50M+ - Need a sounding board/advice

Post by mac808 »

I'm not too far behind you and manage everything myself. I have the bulk (80%+) in a lazy portfolio at Fidelity. With the remainder I have small allocations in seed investing, peer to peer lending, private equity, gold coins, etc. Areas that interest me. I used to have a bunch of rental houses but the joy of landlording was short lived. It's not rocket science. I trust myself not to panic sell in a downturn. Over time I've become convinced that advisers can add value simply by counseling the panicked through hard times. Other than that, there isn't much value added. If you have >$10m allocation to muni bonds then a great private bond desk can assemble a portfolio for you somewhat cheaper than a fund's ER but not by much.

I don't have kids yet but I grew up (as a middle class interloper) among UHNW families. Not all kids are the same but I'll generalize what I saw. Kids intuitively learn by watching what people do, not by what they say. Your kids need to see you working hard. They need to believe that they are always your #1 priority. They need to see you sacrificing (time, money, whatever) for them. They need to develop ambition and pride. If you can check those boxes then there's a good chance that they will turn out great. The rules about spending money on them, making them get jobs, not leaving them an inheritance, pretending you are poor/middle class, or not buying them nice cars are mostly just myths perpetuated by outside observers. I don't care to stay in tech past 40 due to the age discrimination headwinds but I have a separate and unrelated second career in mind solely to check this good-parenting box (and to be honest, I need something to do to keep me productive so I don't go stir crazy - you may be similar). You might find an older mentor you respect who has been there, done that and has great kids to give you some advice on this. Good luck.
Last edited by mac808 on Sat Aug 27, 2016 5:29 pm, edited 1 time in total.
bo105954027
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Re: $50M+ - Need a sounding board/advice

Post by bo105954027 »

OP, you have 10M less than me in my daydream.
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finite_difference
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Re: $50M+ - Need a sounding board/advice

Post by finite_difference »

haltab wrote:I had a recent large exit from a company and walked away with around $70M after taxes. We've set up a charitable fund and seeded it with a large portion, set up an angel fund (play money that I don't factor into the total portfolio) and are considering a couple of real estate purchases. We've got about $55-60M that we've invested with two different money managers. Years before the windfall I had decided that if I was ever in this situation I would just park it in an index fund and let it ride. However, I was wined and dined and decided to see how these guys could do. My wife was also overly cautions and wanted a very conservative portfolio and was happy with a portfolio heavy in munis. She's since realized we'll never run out of money (our current spend rate is around $200k a year) and is ready to ditch the money managers.

We're in our mid 30s and don't really have an investment horizon. There may be occasional large purchases every 5-10 years and i'll probably donate appreciate stock to top up the charitable fund here and there but nothing outrageous relative to the balance. We still haven't decided if we're going to leave it to the kids or give most of it away but we've got time to think about that and modify the estate plan.

So I need help. My initial thoughts were to put 80-90% in VINIX and then the remaining 10-20% in a bond index or leave it in some of the munis I already own. In thinking about spending and cash flow I probably should plan for $500k in cash each year (currently don't have a salary) even though that exceeds our current spending habits but don't want any surprises.

What thoughts or advice do you have? I feel like I've read and studied enough over the years about this topic and plan on staying the course over the next 40-50 years and hopefully have good enough results that I can convince the next generation to do the same.

Thanks in advance.
I think with your Boglehead learning you will be OK. Just don't stick your head in the sand and let the money managers, attorneys, and accountants take control. A good attorney and CPA is definitely worth having. By all means pay them well, just don't get ripped off. I don't think having some of that money under paid management is necessarily a bad thing but I think your initial thinking to simply use index funds and manage it yourself would be a very wise course of action. They wined and dined you for a reason. If you do go that route make sure they are a fiduciary, and consider using Vanguard's adviser service, which charges only 0.3%. Don't put all your eggs in one basket either: maybe let the slicksters manage $10,000,000, and let Vanguard manage $10,000,000, and compare after 5 years.

It sounds like you have a lot of great ideas on how to stay productive, so that's great.
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Christine_NM
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Re: $50M+ - Need a sounding board/advice

Post by Christine_NM »

haltab wrote: Do you think the ERs will stay low with Fidelity or is this a chance for them to buy up market share and then increase fees?
Dunno, but with Vanguard I do not even have to ask this question.

For you it is not either/or. Try Fidelity, Vanguard and Schwab and get rid of any you don't like.

edited to add that I do not think trying 3 mass brokerages is a good idea. Agree with those who recommend some sort of wealth management firm that is accustomed to this size portfolio. If it costs more in fees, so be it. Just get some value out of what you pay.
Last edited by Christine_NM on Sun Aug 28, 2016 2:28 pm, edited 1 time in total.
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Watty
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Re: $50M+ - Need a sounding board/advice

Post by Watty »

haltab wrote:Thanks for the feedback so far.
kjvmartin wrote:What kind of "money managers" are you using?

kjv
I've got two large independent firms that I actually trust on a personal level and were the winners after talking to the usual suspects (Goldman, etc). Both were recommended from friends in similar situations.
The two big questions about them are;

1) Do they have a fiduciary responsibility to you?

2) Are they fee only, and do you know the details of all their compensation? ("fee based" is not the same as "fee only".)

If the answers to both of those are clearly "yes" then you should really listen to what they are saying and learn for the next few years since you are still adjusting to having that much money. You can let them know that you are real focused on low cost index funds and they should have a compelling reason to suggest other investments. Use them as mentors to learn more about investing and your situation.

If the answer to either of those questions is "no" then you likely have a problem even if you like the people. You would need to address that right away since they may try to put you into high cost investments that are very hard to get out of. If they start talking about annuities or life insurance for investing then that is a red flag that there is a potential problem because those are almost suggested because they earn the salesperson a large commission. Once in a blue moon they can make sense but you would still need to be very cautious and get a second, or third, opinion before buying one.

After a few years your portfolio will be more stable and hopefully pretty much on automatic pilot then you can reevaluate if you need financial advisers for the long term.
Harpoon1
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Re: $50M+ - Need a sounding board/advice

Post by Harpoon1 »

haltab wrote:
Jack FFR1846 wrote:A 3 fund portfolio works for $50,000, $50MM, $50B.

With the new index fund classes at Fidelity at $10MM minimum investment and ERs far below the old/best Fidelity ERs and way below anything Vanguard offers, it is worth taking a look at. You can build a 3 fund from these new "lowest cost" index funds.

https://www.bogleheads.org/wiki/Three-fund_portfolio

You can do this yourself. Of course these guys have wined and dined you. Even at 0.5% AUM on $50MM, they're looking at $250k plus whatever front end loads are and high ERs.

Do you think the ERs will stay low with Fidelity or is this a chance for them to buy up market share and then increase fees?

Why wouldn't you split it equally between at least 2 or 3 institutions? How hard could it be to keep track of "separate but equal" indentical, simple index portfolios?

Diversification is the only free lunch!
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steve roy
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Re: $50M+ - Need a sounding board/advice

Post by steve roy »

If I were in your situation (and I should be so fortunate) I would be ... 70% in intermediate munis, 30% in equity index funds (or etfs) consisting of 1/3 Total Stock Market, 1/3 Small Cap Value, and 1/3 International Small Cap international.

Then I would rebalance the thing once every 3-5 years, taking out what I needed to live along the way.
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Re: $50M+ - Need a sounding board/advice

Post by randomguy »

steve roy wrote:If I were in your situation (and I should be so fortunate) I would be ... 70% in intermediate munis, 30% in equity index funds (or etfs) consisting of 1/3 Total Stock Market, 1/3 Small Cap Value, and 1/3 International Small Cap international.

Then I would rebalance the thing once every 3-5 years, taking out what I needed to live along the way.
I don't think I could sleep knowing I am throwing away 100's of millions of dollars over the next 50+ years. At 50 million I am 80/20 for me if I am feeling conservative. 95/5 on the days when I am feeling aggressive. I have both the need (i.e. there are a lot places in the world where another 50 million will make a difference) and ability (if things don't work out having 10 million is still more than enough to generate 200k/yr of income).


Investing is by far the easiest part of a windfall. You could just do a 3 fund portfolio, you could invest in all sorts of crap. It really doesn't matter when you are talking <1% SWR. Just don't burn money by investing 50 million in some company trying to be a billionaire:)

The rest of the stuff is hard. How and where to inflate your lifestyle (and not inflating it is just being stubborn), estate planning, and the like are much harder to deal wiht
evestor
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Re: $50M+ - Need a sounding board/advice

Post by evestor »

My $0.02:
* Establish a baseline portfolio / set of portfolios...bond / equity auto-blah blah mix. Index funds, munis, etc. In a company I was once involved in where everyone made crazy money for a period of time, it was well known that folks that did well always had $10M in munis directly held as a backstop, no matter what else happens or what other decisions they made, and they never touched it / thought about it again. Today that same idea is probably implemented as the muni / bond mix plus index funds (index funds weren't yet a big thing everyone did then). Put a lot in to those few baselines. Have a great "no matter what" backstop.
* Treat money managers like you described angel money. If you like what you hear, give them a million. Consider it gone, or at least going to perform sub-index. This way when one or two beat, you are pleasantly surprised (rather than disappointed 80%+ of the time).
* When evaluating money mgrs, consider how it overlaps against your baseline (from bullet one). That is my starting point when talking to any such mgr. I evaluate what I'm paying for vs. the baseline I get ~for free. You'd be stunned how many fall away simply because they are trying to sell me something that is 5% different than an index fund but for 1.3% more in the way of fees. Pass.
* Keep working. :)

Congrats on your success!
itstoomuch
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Re: $50M+ - Need a sounding board/advice

Post by itstoomuch »

No advice on why, where or how, from me. :annoyed

Story/ :oops:
Older bro works at Big Banks for decades. Survived the political infighting and black swans.
Anyway, the Bank, spends a lot of $$$ on risk management not because it now has to, by Regulation and by oversight, but because when Bank ignored internal risk management, the whole financial fabric of the world almost came apart.

YMMV.
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Re: $50M+ - Need a sounding board/advice

Post by goodenyou »

I would put $20M in a Vanguard 3 Fund Portfolio, $20M in a Fidelity 3 Fund Portfolio, and ladder $10M in CDARS. I would do some serious asset protection. Get advice. Yes, "Your Retirement Nest Egg is Big Enough". I play these (theoretical) games when I play the Lotto. :D
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
TonyDAntonio
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Re: $50M+ - Need a sounding board/advice

Post by TonyDAntonio »

And you can probably get away with investing like Buffet has set up for his wife: 90% S&P 500 fund and 10% in a short term treasury bond fund.
The Total Stock Mkt fund, as livesoft mentioned, works well too. Heck, a lot of things work well with 50M. Congrats and stay healthy.
celia wrote:Have you read anything about Warren Buffet's family? He lived an average life style and didn't tell his kids how much they were worth. The kids had to get part time jobs like other kids. They had no idea about the family wealth until they were adults and already married (I think).

When all his kids were adults he gave them big chunks of money to start their own foundations. They all learned about charities and made different choices of what to focus their foundation on. Warren jr became a farmer and now works on figuring out how to change crops for sustainability in third world countries.

My info above many be a little off as I am just doing this from memory. But the idea that they all work to better the world in different ways is worth considering.
LarryAllen
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Re: $50M+ - Need a sounding board/advice

Post by LarryAllen »

Diversify and hire professionals. Estate planning attorney, CPA, financial planner.

At least hire hourly fee based people to help you and please diversify. That is way too much money to do the 3 fund deal. You should be in all types of real estate, some alternatives, etc....

I would say you are posting in the wrong place honestly.

Congrats on your success!
goldendad
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Re: $50M+ - Need a sounding board/advice

Post by goldendad »

I would go with the 3 fund portfolio plus a good tax attorney - see Warren Buffett's bet with the hedge fund industry.
APB
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Re: $50M+ - Need a sounding board/advice

Post by APB »

Congrats! :sharebeer
I would go with the 3 fund portfolio plus a good tax attorney - see Warren Buffett's bet with the hedge fund industry.
+1

Your initial thought on 10% - 20% bonds is what I would do. If you are only spending 0.4% of your assets every year, you can easily afford a 50% downswing in your portfolio.
My posts represent my own opinion and do not constitute financial advice. I am simply a hobbyist. :)
skjoldur
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Re: $50M+ - Need a sounding board/advice

Post by skjoldur »

Learn how to spend more. I'm sure you can figure it out.
edge
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Re: $50M+ - Need a sounding board/advice

Post by edge »

Same advice I normally give. Find local firms for lawyer/cpa/estate planning. Dig into what they are doing and how they will charge. Do not pay AUM. Understand firm succession planning for these positions so you don't get into situations where you are out of luck because someone died. I have 4 people who I work with in this capacity. Much less expensive than an AUM arrangement would have been.
TonyDAntonio
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Re: $50M+ - Need a sounding board/advice

Post by TonyDAntonio »

What is the threshold to go from '3 fund deal' to financial planner? 2 million? 5 million? 10? 50? 1?

LarryAllen wrote:Diversify and hire professionals. Estate planning attorney, CPA, financial planner.

At least hire hourly fee based people to help you and please diversify. That is way too much money to do the 3 fund deal. You should be in all types of real estate, some alternatives, etc....

I would say you are posting in the wrong place honestly.

Congrats on your success!
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haltab
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Re: $50M+ - Need a sounding board/advice

Post by haltab »

randomguy wrote: I don't think I could sleep knowing I am throwing away 100's of millions of dollars over the next 50+ years. At 50 million I am 80/20 for me if I am feeling conservative. 95/5 on the days when I am feeling aggressive. I have both the need (i.e. there are a lot places in the world where another 50 million will make a difference) and ability (if things don't work out having 10 million is still more than enough to generate 200k/yr of income).
This has been my line of thinking. I can't imagine a scenario where the US market would be down 50% or more for a decade but if it was I would still have a safety net and it wouldn't affect our standard of living. The goal isn't 5,10, or 20 years but for the long term.

What are the holes in this line of thinking? I usually assume I'm missing something and want to make sure I'm seeing both sides of the coin.

skjoldur wrote:Learn how to spend more. I'm sure you can figure it out.
This ended up being harder than I thought it would.
selters
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Re: $50M+ - Need a sounding board/advice

Post by selters »

LarryAllen wrote: That is way too much money to do the 3 fund deal. You should be in all types of real estate, some alternatives, etc....
Why?
Quark
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Re: $50M+ - Need a sounding board/advice

Post by Quark »

At a withdrawal rate under 1%, you're not going to run out of money. One or two broad equity index funds and an appropriate bond portfolio should work well. Pick whatever mix you like. Given a conservative wife, keep enough in munis to cover foreseeable expenses for you lifetimes. You'll both be happier if she isn't worried.

Make sure you keep expenses low. Money managers are not likely to be consistent with this principle.

Tax planning, estate planning, asset protection and the like should be top priorities.
CashBalance
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Re: $50M+ - Need a sounding board/advice

Post by CashBalance »

My portfolio is not yet comparable to yours but I manage it myself; 5 million or 50 million, makes no difference. I would (and do), however, pay a fee for services rendered when I need advice. Pay experienced people for advice but don't pay people to hold your money. What did those "money managers" do to earn YOUR money. You took the risk as an entrepreneur and earned it. You're taking all risk investing it. What risk do they take for "managing it"?

Look up Allan Roth. He's a fee only advisor who is well respected by many Bogleheads. Although his website says he's not taking on new clients, I have a feeling he might consider working with you.

One other thing. As I mentioned above, my portfolio is not as large as yours but have done well for myself. As I started making more money, I started spending more of it because I could. What's an extra $250K here or there, kind of thing. That's a surefire way to burn through hard-earned money. Over the years, I've weaned my way off that kind of thinking but I need to stay vigilant. One of the reasons wealthy people are wealthy is because they don't waste their money once they've earned it.

The way you are talking about spending your money or paying these "managers" is a flippant. When you say you'll throw a million at early stage start ups so you have something to do but don't care if you lose it, is a sure way to lose it. It'll likely lead to throwing 2 million at them and then that will be gone as well. I can't imagine you ran your business this way.

And, yes, it's easy to burn through millions. Other posters gave you examples of celebrities who lost it all. You may not resonate with those examples, however, because you'll assume that you're smarter than people like Mike Tyson and you wouldn't be so stupid. I have a colleague who sold his business for 15 million dollars and blew it in a year. And, guess what? He was a hedge fund manager with an IQ of about 180 so he know a thing or two about how money works.
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Ged
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Re: $50M+ - Need a sounding board/advice

Post by Ged »

sambb wrote:Put it 95% of it in one find: tax managed balanced fund.
Exactly. Something like a Vanguard target date fund. With that amount of money there is no need for a three fund portfolio and the complications thereof.

Keep it at as simple as possible for your circumstances.

And get rid of the bloodsuckers er money managers as soon as possible.

The people you need are tax specialists and estate attorneys. People whose specialty is protecting your assets, not risking them.

If you want to play Angel investor with a small fraction of your wealth because you enjoy it, fine. Just consider it an expense though - not an investment.
Theseus
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Re: $50M+ - Need a sounding board/advice

Post by Theseus »

You have really good input from others. So I will provide a little different view.

My portfolio is not at your level, but based on my current and projected needs, I have way more than I will need in my life time. But I have a major desire to help a specific cause that is close to my heart. So I have invested most of my money in an S&P 500 index that will be considered as "Aggressive" by most people on this forum or financial advisors.

I figured that the best case scenario is that I can use the proceeds to drive a small impact for that cause. Rather than giving money to any charity I am doing this just myself - which is giving me a purpose and stretching my $ further and also giving me something worthwhile to do.

The worst case scenario is that I will be financially secure but won't be able to financially contribute to that cause other than my time.

On the kids issue - I am not the best example. My kids never got allowance until two months ago and they are not very well trained in money matters. They are not spoiled at all and are very good kids. But I wish I had started to teach them about money much earlier. But at leas they don't know how much (or how little) money we have. Which I think is a good thing until they are in their late 20s and have their own career.
bsteiner
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Re: $50M+ - Need a sounding board/advice

Post by bsteiner »

In some ways it's easier to plan for $50 million than for $5 million.

You'll be OK with any reasonable asset allocation. You can invest $50 million the same as $5 million simply by buying 10 times as much of each investment. Others have already suggested asset allocations and some funds.

You can set up a foundation. At this level, the costs of running a foundation (which except for the small excise tax don't vary based on the size of the foundation) will probably be less than the fees for a donor advised fund (which vary based on the size of the fund). That will give you a greater degree of control. (You might also create a donor advised fund if you want to make contributions in excess of the limits for deductions for contributions to a foundation, or if you want to make foreign or anonymous grants.)

In the estate planning arena, while $50 million is more than what most people have, it's not at all unusual these days.

The initial steps in your estate planning can be relatively simple. You could give $11.9 million to a trust for your children and future issue. The trust could be a grantor trust for income tax purposes. As you pay the income tax on the trust's income and gains, you're effectively shifting additional wealth out of your estate, free of transfer taxes. You could then leave the rest of your estate to your spouse, either outright or in a marital trust, and upon the surviving spouse's death to your children in separate trusts for their benefit.

There are more advanced estate planning techniques that you could do if you're interested, though many people don't go beyond the initial steps. Given your age, your paying the income tax on the trust's income and gains will shift substantial wealth out of your estate.
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nedsaid
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Re: $50M+ - Need a sounding board/advice

Post by nedsaid »

haltab wrote:I had a recent large exit from a company and walked away with around $70M after taxes. We've set up a charitable fund and seeded it with a large portion, set up an angel fund (play money that I don't factor into the total portfolio) and are considering a couple of real estate purchases. We've got about $55-60M that we've invested with two different money managers. Years before the windfall I had decided that if I was ever in this situation I would just park it in an index fund and let it ride.

However, I was wined and dined and decided to see how these guys could do.

Nedsaid: The appeal to ego is very hard to resist. We all want that special treatment.

My wife was also overly cautions and wanted a very conservative portfolio and was happy with a portfolio heavy in munis. She's since realized we'll never run out of money (our current spend rate is around $200k a year) and is ready to ditch the money managers.

Nedsaid: It sounds like you have a good sense of perspective. If you don't have super expensive tastes, you won't run out of money.

We're in our mid 30s and don't really have an investment horizon. There may be occasional large purchases every 5-10 years and i'll probably donate appreciate stock to top up the charitable fund here and there but nothing outrageous relative to the balance. We still haven't decided if we're going to leave it to the kids or give most of it away but we've got time to think about that and modify the estate plan.

Nedsaid: I have never had that kind of money. But I would look to what others have done, I think of Bill Gates and Warren Buffett who will give most of their fortunes away with only a relatively small portion going to heirs. I think there is a lot of wisdom to that.

There is a particular famous family that I can think of where the kids and the grandkids were essentially trust fund babies. About all I will say is that I am not impressed with the results. Wild and bratty. I think you want your kids to turn out better than that.


So I need help. My initial thoughts were to put 80-90% in VINIX and then the remaining 10-20% in a bond index or leave it in some of the munis I already own. In thinking about spending and cash flow I probably should plan for $500k in cash each year (currently don't have a salary) even though that exceeds our current spending habits but don't want any surprises.

Nedsaid: I think what I would do is use the Vanguard Advisory Service for now. They can get you all set up. There are unique problems with having so much money and I think you would benefit from advice. My thinking is that you can get that advice by the hour. Taxes are a place where you will need good advice.

What thoughts or advice do you have? I feel like I've read and studied enough over the years about this topic and plan on staying the course over the next 40-50 years and hopefully have good enough results that I can convince the next generation to do the same.

Nedsaid: I think you are on the right track. If I were you, I would hire the best financial planner I could find and pay him by the hour. I would also look for a great lawyer and a great C.P.A. Make sure you have proper insurance. I would also quietly look for successful people that you can turn to for advice maybe at Rotary or some similar type of organization. You need people who can see things that maybe you can't or will bring things up that you haven't thought of. But I don't think you need to pay huge amounts of money to get the advice you need. Just quietly build your own network. Your spouse is your number one source of counsel and advice!

The other thing, and I think you've got this, is to live quietly and not draw attention that you have wealth. In my state where I live, ostentatious displays of wealth are frowned upon and many wealthy people live nice but people don't realize what they are worth. This will solve a multitude of potential problems before they even start.


Thanks in advance.
A fool and his money are good for business.
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SeeMoe
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Re: $50M+ - Need a sounding board/advice

Post by SeeMoe »

$60,000,000.00 dollars and counting, and you are asking about " free" advice? I can't imagine anyone with those big buck$ who wouldn't have a top notch money manager(s) firm taking care of business for me!
My free advice though is this,...........3 fund folio and Forgetaboutit.

SeeMoe.. :twisted:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
Dimitri
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Re: $50M+ - Need a sounding board/advice

Post by Dimitri »

Brown Brothers Harriman - https://www.bbh.com/en-us

You have the kind of money that will benefit from professional advice. You can thank me later.
Let's never come here again because it would never be as much fun.
randomguy
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Re: $50M+ - Need a sounding board/advice

Post by randomguy »

SeeMoe wrote:$60,000,000.00 dollars and counting, and you are asking about " free" advice? I can't imagine anyone with those big buck$ who wouldn't have a top notch money manager(s) firm taking care of business for me!
My free advice though is this,...........3 fund folio and Forgetaboutit.

SeeMoe.. :twisted:
And what do you think those "top" notch money managers will do that will result in you having more spendable cash? You hear about the unique problems that having 60 million causes but really they all boil down to estate taxes and charity shake downs (from friends or real charities). Those really aren't investment issues.
Quark
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Re: $50M+ - Need a sounding board/advice

Post by Quark »

randomguy wrote:
SeeMoe wrote:$60,000,000.00 dollars and counting, and you are asking about " free" advice? I can't imagine anyone with those big buck$ who wouldn't have a top notch money manager(s) firm taking care of business for me!
My free advice though is this,...........3 fund folio and Forgetaboutit.

SeeMoe.. :twisted:
And what do you think those "top" notch money managers will do that will result in you having more spendable cash? You hear about the unique problems that having 60 million causes but really they all boil down to estate taxes and charity shake downs (from friends or real charities). Those really aren't investment issues.
Agreed. The most plausible claims I've heard about "top notch money managers" have dealt with picking up a few basis points from tax loss harvesting, etc. tailored muni portfolios.
AllenSmith
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Re: $50M+ - Need a sounding board/advice

Post by AllenSmith »

What type of company did you sell? Can you tell some of that story?
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