Is private wealth management worth it?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
pennywise88
Posts: 7
Joined: Thu Aug 06, 2015 9:50 am

Is private wealth management worth it?

Post by pennywise88 » Mon Sep 16, 2019 9:42 pm

So I'm about to sell my business to private equity which will put about 20M in my bank account after taxes. There are people telling me that I should talk to private wealth management folks at goldman sachs and the like. Has anyone had any experiences that might help me understand the pros and cons of doing so?

BuddyJet
Posts: 252
Joined: Mon Jun 24, 2019 8:56 pm

Re: Is private wealth management worth it?

Post by BuddyJet » Mon Sep 16, 2019 9:59 pm

After selling my business, I was with Bernstein for years but became concerned about fees and performance. I have moved to self managed with individual muni bonds and total stock etf.

At $20mm, my concern would be towards asset preservation with market returns rather than the potential higher return but much higher risk of “private equity”. Not to mention the complete lack of transparency. Also, a $20mm account is entry level at best for those firms.

If the sale docs allow, you might consider putting some of the stock in a donor advised fund to avoid the gains tax on those shares and allow directed donations in subsequent years.

While related but not asked, reserve cash for taxes but postpone as long as possible if you are in safe harbor.

PM if you would like to discuss further

michaeljmroger
Posts: 508
Joined: Fri Sep 21, 2018 10:54 am

Re: Is private wealth management worth it?

Post by michaeljmroger » Mon Sep 16, 2019 11:04 pm

It really comes down to your willingness and interest to manage your money by yourself vs delegating this task to someone else.

If you’re willing to learn, and you don’t mind the (minimal) work to do it yourself, you’re at the right place. Many people here can help you design a portfolio that will almost certainly outperform every single professional at Goldman Sachs and friends.

Now, if it sounds scary to manage $20M on your own (which is honestly understandable), or if it’s something you literally don’t care about (which I doubt since you’re here), I’d recommend either Northern Trust or Bessemer Trust. I’ve met a few months ago with Bessemer as I have a portfolio similar to yours, and I think they’re great. Their level of service seems unparalleled, and they’re obviously used to deal with large and complex accounts. I personally ended up passing on them as I couldn’t justify the extremely high fees (even if you have more than $20M with them), and because most of the services included in these high fees didn’t interest me.

My approach, after oscillating between private wealth management and a DIY approach, is simply to do both. The main reason is that I want to diversify my investing strategies (I know most people here will disagree with me though). Private wealth managers give you access to other investments that might be interesting (such as a private equity fund) and that complement nicely a typical Bogleheads-like low cost portfolio.

Either way, I strongly recommend you to take a few months to decide on a plan. Put your money somewhere safe in the meantime (such as VMRXX at Vanguard) and take your time.

Congrats on winning the game!

Topic Author
pennywise88
Posts: 7
Joined: Thu Aug 06, 2015 9:50 am

Re: Is private wealth management worth it?

Post by pennywise88 » Mon Sep 16, 2019 11:11 pm

michaeljmroger wrote:
Mon Sep 16, 2019 11:04 pm
It really comes down to your willingness and interest to manage your money by yourself vs delegating this task to someone else.

If you’re willing to learn, and you don’t mind the (minimal) work to do it yourself, you’re at the right place. Many people here can help you design a portfolio that will almost certainly outperform every single professional at Goldman Sachs and friends.

Now, if it sounds scary to manage $20M on your own (which is honestly understandable), or if it’s something you literally don’t care about (which I doubt since you’re here), I’d recommend either Northern Trust or Bessemer Trust. I’ve met a few months ago with Bessemer as I have a portfolio similar to yours, and I think they’re great. Their level of service seems unparalleled, and they’re obviously used to deal with large and complex accounts. I personally ended up passing on them as I couldn’t justify the extremely high fees (even if you have more than $20M with them), and because most of the services included in these high fees didn’t interest me.

My approach, after oscillating between private wealth management and a DIY approach, is simply to do both. The main reason is that I want to diversify my investing strategies (I know most people here will disagree with me though). Private wealth managers give you access to other investments that might be interesting (such as a private equity fund) and that complement nicely a typical Bogleheads-like low cost portfolio.

Either way, I strongly recommend you to take a few months to decide on a plan. Put your money somewhere safe in the meantime (such as VMRXX at Vanguard) and take your time.

Congrats on winning the game!
Thanks for sharing your thoughts. I think I do want to manage it myself but the larger number is intimidating. I guess I just stick to the same plan I’ve been on which is low cost vanguard index funds albeit I’m now more concerned about preserving wealth as opposed to trying to achieve big returns.

michaeljmroger
Posts: 508
Joined: Fri Sep 21, 2018 10:54 am

Re: Is private wealth management worth it?

Post by michaeljmroger » Mon Sep 16, 2019 11:20 pm

pennywise88 wrote:
Mon Sep 16, 2019 11:11 pm
Thanks for sharing your thoughts. I think I do want to manage it myself but the larger number is intimidating. I guess I just stick to the same plan I’ve been on which is low cost vanguard index funds albeit I’m now more concerned about preserving wealth as opposed to trying to achieve big returns.
Right, that was also my goal. I’m personally at 30% stocks and 70% bonds. Here’s what Rick Ferri says about this allocation: "Historically, a 30/70 allocation has earned the highest Sharpe ratio. This is the point on the efficient frontier that has earned the best risk-adjusted return."

Aside from deciding on your appropriate asset allocation, you have to take your tax bracket into account in order to decide on the best bonds to invest in. Also, do you live in a state like CA with high state taxes?

Last but not least, you have to provide some sort of investing horizon. Do you plan on withdrawing money regularly, or will the funds stay invested for a long time?

Topic Author
pennywise88
Posts: 7
Joined: Thu Aug 06, 2015 9:50 am

Re: Is private wealth management worth it?

Post by pennywise88 » Mon Sep 16, 2019 11:28 pm

michaeljmroger wrote:
Mon Sep 16, 2019 11:20 pm
pennywise88 wrote:
Mon Sep 16, 2019 11:11 pm
Thanks for sharing your thoughts. I think I do want to manage it myself but the larger number is intimidating. I guess I just stick to the same plan I’ve been on which is low cost vanguard index funds albeit I’m now more concerned about preserving wealth as opposed to trying to achieve big returns.
Right, that was also my goal. I’m personally at 30% stocks and 70% bonds. Here’s what Rick Ferri says about this allocation: "Historically, a 30/70 allocation has earned the highest Sharpe ratio. This is the point on the efficient frontier that has earned the best risk-adjusted return."

Aside from deciding on your appropriate asset allocation, you have to take your tax bracket into account in order to decide on the best bonds to invest in. Also, do you live in a state like CA with high state taxes?

Last but not least, you have to provide some sort of investing horizon. Do you plan on withdrawing money regularly, or will the funds stay invested for a long time?
I live in TX so I don’t have state income tax. I’m 40 so they can stay in there for some time. Don’t plan to spend all that much, just normal living expenses.

stuper1
Posts: 182
Joined: Tue Apr 03, 2018 9:30 am

Re: Is private wealth management worth it?

Post by stuper1 » Mon Sep 16, 2019 11:34 pm

Suggest you read through this thread for some ideas on DIY protection of wealth through thick and thin:

viewtopic.php?f=10&t=290472

michaeljmroger
Posts: 508
Joined: Fri Sep 21, 2018 10:54 am

Re: Is private wealth management worth it?

Post by michaeljmroger » Mon Sep 16, 2019 11:49 pm

pennywise88 wrote:
Mon Sep 16, 2019 11:28 pm
I live in TX so I don’t have state income tax. I’m 40 so they can stay in there for some time. Don’t plan to spend all that much, just normal living expenses.
Here’s a portfolio that’d presumably work well for you:
  • 15% VTCLX
  • 5% VTMSX
  • 10% VTMGX
  • 50% VWIUX
  • 20% VTAPX

User avatar
unclescrooge
Posts: 3950
Joined: Thu Jun 07, 2012 7:00 pm

Re: Is private wealth management worth it?

Post by unclescrooge » Tue Sep 17, 2019 12:24 am

pennywise88 wrote:
Mon Sep 16, 2019 9:42 pm
So I'm about to sell my business to private equity which will put about 20M in my bank account after taxes. There are people telling me that I should talk to private wealth management folks at goldman sachs and the like. Has anyone had any experiences that might help me understand the pros and cons of doing so?
With $20 million seed capital, I think starting a private wealth management firm will really work for you. :mrgreen:

After all, you need something to do, and who else will take better care of your money?

Just spend a year working for another firm to learn the ropes and then go off and start your company. During this one year period, I suggest you don't mention you have $20 million.

michaeljmroger
Posts: 508
Joined: Fri Sep 21, 2018 10:54 am

Re: Is private wealth management worth it?

Post by michaeljmroger » Tue Sep 17, 2019 9:29 am

Alternatively, if you care more about simplicity than tax optimization, you could go with a two-fund portfolio:
  • 30% VTWIX
  • 70% VIIGX
These funds are technically institutional shares, but anyone can actually use them if they meet the minimum required ($5M).

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: Is private wealth management worth it?

Post by nedsaid » Tue Sep 17, 2019 9:36 am

pennywise88 wrote:
Mon Sep 16, 2019 9:42 pm
So I'm about to sell my business to private equity which will put about 20M in my bank account after taxes. There are people telling me that I should talk to private wealth management folks at goldman sachs and the like. Has anyone had any experiences that might help me understand the pros and cons of doing so?
You should consider the good folks at Vanguard. I would inquire about Vanguard Personal Advisor Service and see what they can offer you. Vanguard would be higher on my list than Goldman Sachs.
A fool and his money are good for business.

User avatar
TomatoTomahto
Posts: 9525
Joined: Mon Apr 11, 2011 1:48 pm

Re: Is private wealth management worth it?

Post by TomatoTomahto » Tue Sep 17, 2019 9:42 am

What I would do in your shoes is what I do in my shoes. Pick an amount that you think will be sufficient, come hell or high water, or at least the reasonable levels of hell or high water that one can anticipate (e.g., no need to "plan" for a nuclear event). In our case, that was $3M. Your number will probably be higher, but I don't recommend it being lower unless you're considerably older than us (late 60s on average). Put this money into whatever fixed income funds are appropriate for the tax status of the account.

The remainder goes into indexed US equity funds and indexed World Equity funds. When new money comes in, that's where it goes. Reinvest dividends.

Take cash from whatever asset has done well in the recent past. Don't bother re-balancing. The whole point of a large windfall is not having to obsessively sharpen your pencil to calculate your AA. No point in anyone else having to sharpen their pencils either if they're charging you for their time at the pencil sharpener.

Get a hobby. Volunteer. Enjoy yourself. If you have heirs, gift to at least the annual gift exclusion amount, using a trust if that's advisable.
Okay, I get it; I won't be political or controversial. The Earth is flat.

msk
Posts: 1384
Joined: Mon Aug 15, 2016 10:40 am

Re: Is private wealth management worth it?

Post by msk » Tue Sep 17, 2019 9:51 am

With $20 million I would just put it all into Vanguard Worldwide, VT, and make sure I never withdraw more than 5% of the portfolio balance in any year. If the market just stays steady, that ought to deliver enough to live on, $1 million a year. Market collapses by 70%, still good for $300k a year. History for the past 100+ years indicates that the 5% ought to keep up with inflation indefinitely. Maybe too simple? That's what I have and follow, although I give away 3.5% of the portfolio balance each year. But I am 75.

My sister wanted something more "sophisticated" for her savings for a rainy day. So I put 50% in VT and 50% in Berkshire Hathaway as her cheap wealth manager. She gives away 2.5% of the capital gains each year to charities but she has enough elsewhere not to need anything for herself.

You need a good tax accountant/adviser, not a wealth manager. You have already made more $ than the person who will give you the managing.

ohai
Posts: 1121
Joined: Wed Dec 27, 2017 2:10 pm

Re: Is private wealth management worth it?

Post by ohai » Tue Sep 17, 2019 10:06 am

It might be worth getting professional advice if you are concerned about tax optimization, estate planning, divorce, or other legal stuff like that. I'd still have a preliminary talk with a few places in case you are undecided.

Gill
Posts: 5763
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Is private wealth management worth it?

Post by Gill » Tue Sep 17, 2019 10:08 am

michaeljmroger wrote:
Mon Sep 16, 2019 11:04 pm
I’d recommend either Northern Trust or Bessemer Trust.
Well acquainted with both - former senior officer of one.
:thumbsdown :thumbsdown
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

deltaneutral83
Posts: 1334
Joined: Tue Mar 07, 2017 4:25 pm

Re: Is private wealth management worth it?

Post by deltaneutral83 » Tue Sep 17, 2019 10:10 am

I would imagine a top of the line CPA and estate planning attorney is much more of a priority than a money guy for BH who knows the basics and knows a lot about business as OP obviously does. Haven't heard the age or annual expenses of the OP, but this 20 will be 50 in 15-18 years if AA was at least 50/50 while working with the CPA.

michaeljmroger
Posts: 508
Joined: Fri Sep 21, 2018 10:54 am

Re: Is private wealth management worth it?

Post by michaeljmroger » Tue Sep 17, 2019 10:20 am

Gill wrote:
Tue Sep 17, 2019 10:08 am
michaeljmroger wrote:
Mon Sep 16, 2019 11:04 pm
I’d recommend either Northern Trust or Bessemer Trust.
Well acquainted with both - former senior officer of one.
:thumbsdown :thumbsdown
Gill
Mind elaborating? Some trustworthy members of this board had nothing but great things to say about them so I'm surprised about your reaction.

Glockenspiel
Posts: 951
Joined: Thu Feb 08, 2018 1:20 pm

Re: Is private wealth management worth it?

Post by Glockenspiel » Tue Sep 17, 2019 10:35 am

There's no difference in managing $20 million versus $200,000. Put in low expense, index funds and bonds, and mostly forget about it.

Gill
Posts: 5763
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Is private wealth management worth it?

Post by Gill » Tue Sep 17, 2019 10:45 am

michaeljmroger wrote:
Tue Sep 17, 2019 10:20 am
Gill wrote:
Tue Sep 17, 2019 10:08 am
michaeljmroger wrote:
Mon Sep 16, 2019 11:04 pm
I’d recommend either Northern Trust or Bessemer Trust.
Well acquainted with both - former senior officer of one.
:thumbsdown :thumbsdown
Gill
Mind elaborating? Some trustworthy members of this board had nothing but great things to say about them so I'm surprised about your reaction.
Nothing other than to say your account doesn't receive the attention you think it does. Save your money.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

User avatar
TomatoTomahto
Posts: 9525
Joined: Mon Apr 11, 2011 1:48 pm

Re: Is private wealth management worth it?

Post by TomatoTomahto » Tue Sep 17, 2019 11:36 am

Glockenspiel wrote:
Tue Sep 17, 2019 10:35 am
There's no difference in managing $20 million versus $200,000. Put in low expense, index funds and bonds, and mostly forget about it.
I agree, mostly, but I think there’s a point at which a portfolio is large enough to be easier to manage than a smaller one.
Okay, I get it; I won't be political or controversial. The Earth is flat.

kenoryan
Posts: 215
Joined: Tue Sep 12, 2017 7:11 pm

Re: Is private wealth management worth it?

Post by kenoryan » Tue Sep 17, 2019 11:38 am

20m is just 10 times 2m. Your AA should determine the amount of money placed in each asset class. I don't see a need to hire a wealth manager that will add to expense and risk. Go with 60/40 asset allocation and live happily for ever.

psteinx
Posts: 3417
Joined: Tue Mar 13, 2007 2:24 pm

Re: Is private wealth management worth it?

Post by psteinx » Tue Sep 17, 2019 12:43 pm

What changes at ~$20M vs. ~$2M:

1) More options available. But those options are not necessarily great

2) The reward for squeezing 10 bp here, 5 bp there, is more meaningful. Those bp (basis points) can come in various forms - better allocation, lower taxes, lower expense ratios, etc.

3) Taxes become more of a factor, and more complex. Lots of stuff phases out in various ways, at various levels. A lot of "standard" advice you'd read on BH or elsewhere is less applicable or inapplicable, at least insofar as tax implications go.

4) Inheritance taxes may be an issue

5) Assuming you're living frugally (i.e. living a $2M portfolio lifestyle with a $20M portfolio), then think hard about what to do with the excess. Hopefully charity factors in, and hopefully you approach charity thoughtfully. When I was a relatively fresh college graduate, most of my charitable giving was relatively low-thought - "that one seems good". As my portfolio value rose dramatically, and both ongoing giving and the possibility of end-of-life giving involved much greater values, I put much more thought into this area.

6) Beware of hedonic adaptation. Beware of changes in relationships with others, especially if they know of your financial changes.

7) Consider 5 and 6 together to some extent. If you ARE charitably inclined, it may make sense to step up donations now, even if you're not entirely confident of the best charities, because at least it gets you in the habit. Then, you can improve your giving over time.

8) College education costs will very likely be full freight. Granted, this is probably not a huge burden with a $20M portfolio. But if you have, say, 3 kids, and they all want to go upper-end private, then you should be thinking in terms of perhaps $800K+ now, or double that a decade or two down the line.

9) Also if you have kids, think hard about how you want your financial situation to impact your kids in many facets - lifestyle, peers, how much you tell your kids, etc.

Circling back to just the portfolio stuff:

A) I'd be skeptical that wealth managers can increase portfolio returns enough to offset returns

B) But there may be a lot of value in some initial consultations, AND/OR a deep dive by you into assorted reading, on topics such as tax, diversification, and the like. If you're seriously considering private equity (perhaps at the behest of a wealth manager), do some research on the topic.

C) More generally, be skeptical of any flashy looking backtest of how well someone's recommended allocation has performed against some typical benchmark (say, a 60/40 equity/bond allocation, with a slice of international in the equity side). Purveyors of complex (and often costly) strategies discard those that backtest poorly and focus on the opposite. Just because there are 10 strategies pitched to you now that beat a benchmark by 1-2% over the last 20 years, doesn't mean you would have ended up in one of those 10, if you'd been doing a similar analysis back in 1999. Those 10 might represent 10 out of a possible 100 or 1000 or more, and the other 90%+ might have underperformed the market.

D) I like Tomato's recommendation of putting some amount of, effectively, reserves, into something relatively safe (bonds, say), and putting most/all of the rest into riskier, but hopefully higher returning assets (generally, equities). I/we do something similar. (Tomato recommends index funds specifically, and they're reasonable, but there are other reasonable possibilities, too.) Keep in mind that IF a 1929-1932 type situation recurs, much of the rest of the country/world will be suffering, too, and even a low single digit millions total of reserves would likely allow you to live a perhaps slightly more austere, but still comfortable lifestyle.

E) Muni bonds may be reasonable for your bond holdings, and you're fortunate to live in a state without state income taxes, so you don't have to think much about the composition of any muni holdings you have - you can just go with an inexpensive national fund.

psteinx
Posts: 3417
Joined: Tue Mar 13, 2007 2:24 pm

Re: Is private wealth management worth it?

Post by psteinx » Tue Sep 17, 2019 12:57 pm

All that said, I've never really worked with a white glove type wealth manager, and am at least somewhat interested in any positive experiences folks may have had with them.

I *think* they're probably not worthwhile for a smart, competent individual willing to do their homework and occasionally consult with specific experts on hourly or similar terms, but I'm open to the possibility that there's something about the package that a white glove type firm might offer.

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: Is private wealth management worth it?

Post by nedsaid » Tue Sep 17, 2019 1:16 pm

I think the original poster needs advice, to me the question is where to get it. Vanguard Personal Advisory Service would be on my list, folks here have had nice things to say about Rick Ferri, you could look into the Garrett planning services. Probably cheapest to get advice by the hour, not sure you need a portfolio management service, but VPAS would be your best bet there. I would certainly hire a good CPA and also an attorney for trusts and estate planning. In that situation, I would be looking at Donor Advised Fund for charitable contributions.

If you want to stick with the basics, investing with simple index funds, Vanguard would be your best bet. I am getting to the point where I would not recommend factor based strategies unless the original poster has interest, there is some nuance to factor investing and it can get hard to explain everything. Probably best here to stick with the basics. I would be not inclined to recommend here the semi-liquid or illiquid investments like private equity, non-traded REITs, interval funds, and the like. I would be cautious about the liquid Alternatives. My best guess is that if you went to a Wealth Management firm that they would get you into a lot of complicated and less liquid stuff. You want liquidity.

If you did go to such a Wealth Management firm, you would need to be well informed about the recommended investments and aware of the risks you are taking. The more illiquid investments have merit but you need to know what you are doing and need patience. We have reviewed probably three Buckingham portfolios here, I personally like what they do, but if you don't believe in factors, they aren't for you. Plus you have the issues of ongoing Assets Under Management fees, which over time really add up. I suspect Goldman Sachs would put you into things like Private Equity, if you are a big enough fish for them. The other issue is that most of the work is setting up the portfolio, after that you pay the Assets Under Management fees to rebalance your portfolio, it seems like a lot of money to pay for that. My guess is that Goldman Sachs or another such firm would shift stuff around to make it look like they are doing something, Morgan Stanley is particularly notorious for this.

To sum up, I would hire a good CPA and a good Trust/Estate Attorney. I would probably pay an advisor on an hourly basis, someone who could do comprehensive financial planning as well as portfolio advice. I would probably pass on an Assets Under Management agreement to run your portfolio, when you get older, this might be worth consideration for the reasons of cognitive decline. I would be inclined to keep my investments liquid and simpler.
A fool and his money are good for business.

User avatar
dratkinson
Posts: 4717
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Is private wealth management worth it?

Post by dratkinson » Tue Sep 17, 2019 1:39 pm

Congratulations on the sale of your business.


Suggested reading. (Get books from public library.)

Managing a windfall.
--Wiki topic "Managing a windfall": https://www.bogleheads.org/wiki/Managing_a_windfall

Investing.
--The Bogleheads’ Guide to Investing.
--The Only Guide to a Winning Bond Strategy You'll Ever Need, Larry Swedroe.

Retirement planning.
--The Boglehead's Guide to Retirement Planning.
--How to Make Your Money Last, Jane Bryant Quinn.


Plan for the worst, hope for the best. You'll want to look at your investments with a longer perspective since this may be all of your retirement nest egg if you don't get another job. So this money may need to last ~60 years.



The short answer. If you can live on <$500K/yr, it should be relatively easy to manage your investments to pay for your retirement.



The long answer.

Data points to incorporate into managing your investments.

--Perpetual SWR (safe withdrawal rate). If you could hold your living expenses/SWR to 2.5%/yr ($500K = 2.5% x $20M), then your original investment should never be depleted. Why? Your investment distributions + annual NAV growth should replenish the 2.5%/yr withdrawn.

--Lower tax rate applies on LTCG (long-term capital gains) when you sell shares owned >1yr. If needed, you'd sell LT equity shares to refill your cash equivalents.

--You'd live on your cash equivalents. Some retirees report keeping 5yrs of living expenses in cash equivalents to avoid being forced to sell equities in a down market.

--The major portion of the annual distributions from VTSAX (total stock market index fund), VTIAX (total international index fund), and VFWAX (FTSE all-world ex-US index fund) is QDI (qualified dividend income) and is taxed like LTCGs. You can expect 1.8-2%/yr in distributions from equities.

--Zero fed tax rate applies to dividends* from municipal bond funds. In a high tax bracket and taxable account, the forum recommends VWIUX (Vanguard intermediate-term national municipal bond fund) for federal tax-free dividends. (* Taxes still apply to capital gains, whether generated internally from fund operation, or externally from your direct selling.)

--In total return investing---NAV appreciation + distributions (dividends + capital gains)---the major portion of bond fund total return comes from dividends. It should be relatively easy to find bonds paying 2.5%/yr. (Within reason, I prefer more dividends to less, so ignore the forum's advice to choose bonds for safety.)

--VBTLX (Vanguard total bond market index fund) is the preferred bond fund of the 3-fund portfolio. Use it as a bond baseline. If you can find a reasonable safe fixed income investment that pays more, then use it.



Disclosure. In my lower tax bracket, I have 3yrs of living expenses in VWIUX as the last tier of my formal EF (emergency funds) as a CD substitute (no early withdrawal penalty, easy to buy/sell). But the major portion of my retirement bonds is in VWLUX (Vanguard's long-term national muni bond fund).

Why do I suggest VWLUX? In my lower tax bracket, VWLUX gives me more after-tax return than VBTLX (bond baseline). In your assumed higher tax bracket, it's TEY (taxable-equivalent yield) should be >2.5%. Assuming you can live on 2.5% SWR, then VWLUX's dividends should carry their share of the load to support your cost of living, so you would not need to sell bonds.

Compute muni TEY as: Muni TEY = muni SEC yield / (1 - your fed tax bracket).

Compare a muni's TEY, to taxable bond's SEC yield, and savings/CD's APY. Choose the higher to give you more after-tax income.

Recent bond volatility has caused the 52wk price spread on both VWIUX and VWLUX to approach $1. But since I'm not selling, I don't care, except to TLH (tax-loss harvest) to pick up some low-hanging fruit.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

User avatar
alpine_boglehead
Posts: 364
Joined: Fri Feb 17, 2017 9:51 am
Location: Austria

Re: Is private wealth management worth it?

Post by alpine_boglehead » Tue Sep 17, 2019 1:39 pm

If you haven't read it, take a look at the managing a windfall wiki page.

There's a saying I've read sometimes here - if you have enough knowledge to choose a good financial advisor, you don't need one anymore. It's true if you think about it - either you have to trust them blindly, or if you want to be able to evaluate what an advisor is doing, you need the same knowledge (or even more).

Beware of all kinds of weird "wealth management" schemes - some banks around here keep pitching "wealth managed ETF portfolios" where they put you into a boglehead-like portfolio, and are adding a 1% AUM fee for that.

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: Is private wealth management worth it?

Post by nedsaid » Tue Sep 17, 2019 2:07 pm

For disclosure, I did recently sign up for a Portfolio Advisory Service that will cost me 0.90% per year all in. This includes everything including the underlying expense ratios in the funds, portfolio management, and planning services. Two reasons I did this: I wanted to test drive their portfolio management service with about 30% of my retirement funds and I wanted the comprehensive financial and retirement planning that is offered with the service. It didn't cost me very much more than what I was already doing there. Plus this was very competitive with what firms like Buckingham or Merriman would charge.

Not advising this for anyone else, doing this for my own reasons. It will give me more experience in dealing with advisory services and at some point I will report back. Giving these things a test drive here and see if I like it.

Nothing wrong with trying things out.
A fool and his money are good for business.

Glockenspiel
Posts: 951
Joined: Thu Feb 08, 2018 1:20 pm

Re: Is private wealth management worth it?

Post by Glockenspiel » Tue Sep 17, 2019 2:37 pm

TomatoTomahto wrote:
Tue Sep 17, 2019 11:36 am
Glockenspiel wrote:
Tue Sep 17, 2019 10:35 am
There's no difference in managing $20 million versus $200,000. Put in low expense, index funds and bonds, and mostly forget about it.
I agree, mostly, but I think there’s a point at which a portfolio is large enough to be easier to manage than a smaller one.
And I agree with you, actually. Also, I'm not advocating against seeking out professional help to manage tax liability, charitable donations, and trust for heirs. Just saying a large portfolio shouldn't be any harder to manage from an investment standpoint, than a smaller one.

bsteiner
Posts: 4392
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Is private wealth management worth it?

Post by bsteiner » Tue Sep 17, 2019 2:47 pm

nedsaid wrote:
Tue Sep 17, 2019 9:36 am
...
You should consider the good folks at Vanguard. I would inquire about Vanguard Personal Advisor Service and see what they can offer you. ...
Their fees are a sliding scale. They charge 0.3% on the first $5 million, 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://personal.vanguard.com/web/c1/fi ... al-advisor.

User avatar
Wiggums
Posts: 1900
Joined: Thu Jan 31, 2019 8:02 am

Re: Is private wealth management worth it?

Post by Wiggums » Tue Sep 17, 2019 2:51 pm

I agree that the OP might require the services of a CPA, Lawyer, etc. in terms of investing, I think it’s best to keep it simple. I had a boss that chases all these special investment strategies. At the end of the day, he ends up paying high fees, has a complex portfolio and ends up with a mess when he wants to move the money.

Just my two cents.

StealthRabbit
Posts: 430
Joined: Sat Jun 13, 2009 1:25 am

Re: Is private wealth management worth it?

Post by StealthRabbit » Tue Sep 17, 2019 5:26 pm

@ $20m and age 40, you will have a lot of future options, and you desire a degree of 'self management', so...

I would honestly look for some 'mentors' with like value set / growth / investment mindset, and some contacts with Wealth Management experience (not investment guidance). There are a lot of VERY sharp CFA's who have served their time with HNW individuals / foundations / endowments who could offer you a lot of interesting perspectives. They can be had cheap / free for the asking (many of them have FIREd), and took with them a wealth of knowledge. I feel a 'generic' Wealth Manager from a banking firm would not do you justice or serve your future objectives (they have very narrow perspectives, ALWAYS with a company incentive and their personal deliverables (more Assets under THEIR management.)

Your needs / desires / interests in the next 50+ yrs will certainly change. Plan on that!

Tax planning and AA / positioning will be your immediate need. With a very crisp view of your value set and future potential investment direction.

We stuck all our appreciated assets in a DAF (perpetual gifting) before age 40 and started over on our own needs / desires.
Your scenerio is very different, as will your future direction be.

Mentors (old timers) were very interesting and helpful for me to gain perspective on several sectors of business and investments, and curtailed many rabbit trails and losses. I had ZERO guidance from family.

Best wishes on wading through this next chapter.
Congratulations on the completed chapters.

Topic Author
pennywise88
Posts: 7
Joined: Thu Aug 06, 2015 9:50 am

Re: Is private wealth management worth it?

Post by pennywise88 » Tue Sep 17, 2019 9:33 pm

Thanks for all the advice and opinions. It's really helpful to read other perspectives. I've set up a time to talk with someone in Vanguard this week. It'll be interesting what they say. I'll be putting the proceeds into the default money market right off the bat to at least get 2% on my cash while I try to figure out what direction to go. I have read about the "all weather portfolio" which seems interesting. Of course, the 2 or 3 fund Vanguard is something I've done for a while now although I'm more inclined to try to protect my wealth now as opposed to trying to grow it. I did talk to a guy who was referred by my CPA who specializes in muni bond ladders (actually buying the bonds). That sounded like a real safe way to protect my money. I also have a call with the wealth managers at Goldman Sachs later this week as well. I don't think I'll go with them but I'm curious to hear the pitch nontheless. I'm not inclined to invest in private equity or other riskier products. I'm way too conservative and just want simple and safe at this point.

User avatar
dratkinson
Posts: 4717
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Is private wealth management worth it?

Post by dratkinson » Wed Sep 18, 2019 2:30 am

Individual muni bonds.

Before going the individual muni bond route, read Swedroe's bond book and search for his forum topics describing the individual muni "characteristics to avoid" used by his firm BAM---Birmingham Asset Management, to reject bonds selected for its clients.

Recall some of the characteristics to avoid were...
--Issued by Death Spiral states (Internet search term).
--Loads.
--High fees.
--Leverage.
--AMT exposure (current tax code has a 10yr sunset).
I'm sure I forgetting something.

See if this search finds any of the topics:
Search: http://www.google.com/search?q=individu ... rg%2Fforum

The last tax code change also make some muni bonds taxable, so search forum for those discussions. Add those muni characteristics to your list of "characteristics to avoid" when selecting individual muni bonds.

Bottom line. It takes knowledge and work to select/manage individual muni bonds.



Disclosure. I decided my life would be simpler using muni funds because I wasn't interested in learning enough to manage individual munis---let the fund managers worry about it. I'm happy just rebalancing distributions.

I did use Swedroe's list of "characteristics to avoid" to do my due diligence to select a (non-Vanguard) single-state muni fund. But that selection process was "one and done", as I don't need more than one single-state muni fund.

So my annual bond management activities are to use VWIUX, VWLUX, and my single-state muni fund as long as its prospectus says it remains acceptable (has no characteristics to avoid). And pair national/single-state munis 50/50 to reduce my single-state default risk (forum's advice).


Being from Texas, you don't need to worry about single-state munis, neither funds nor individual bonds.

If you find it comforting to not need to worry about selecting individual single-state muni bonds, then I refer you to the beginning of this reply. Why? Because considering the use of individual muni bonds is... selecting single-state muni bonds on a national level. :)




Edit.
Last edited by dratkinson on Wed Sep 18, 2019 1:57 pm, edited 1 time in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

desiderium
Posts: 852
Joined: Sat Jan 04, 2014 11:08 am

Re: Is private wealth management worth it?

Post by desiderium » Wed Sep 18, 2019 5:22 am

nedsaid wrote:
Tue Sep 17, 2019 1:16 pm
I think the original poster needs advice, to me the question is where to get it. Vanguard Personal Advisory Service would be on my list, folks here have had nice things to say about Rick Ferri, you could look into the Garrett planning services. Probably cheapest to get advice by the hour, not sure you need a portfolio management service, but VPAS would be your best bet there. I would certainly hire a good CPA and also an attorney for trusts and estate planning. In that situation, I would be looking at Donor Advised Fund for charitable contributions.
For comprehensive advice by the hour, I think Allan Roth fits the OP's stated outlook pretty well. I have not used him but have considered it and good things are said here. Edit to add: In addition to the good suggestions above

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: Is private wealth management worth it?

Post by nedsaid » Wed Sep 18, 2019 12:09 pm

desiderium wrote:
Wed Sep 18, 2019 5:22 am
nedsaid wrote:
Tue Sep 17, 2019 1:16 pm
I think the original poster needs advice, to me the question is where to get it. Vanguard Personal Advisory Service would be on my list, folks here have had nice things to say about Rick Ferri, you could look into the Garrett planning services. Probably cheapest to get advice by the hour, not sure you need a portfolio management service, but VPAS would be your best bet there. I would certainly hire a good CPA and also an attorney for trusts and estate planning. In that situation, I would be looking at Donor Advised Fund for charitable contributions.
For comprehensive advice by the hour, I think Allan Roth fits the OP's stated outlook pretty well. I have not used him but have considered it and good things are said here. Edit to add: In addition to the good suggestions above
Allan Roth and Bill Bernstein would also be great. The question here is if they are taking on new clients.
A fool and his money are good for business.

Malinois000
Posts: 151
Joined: Sun Feb 26, 2017 6:08 pm

Re: Is private wealth management worth it?

Post by Malinois000 » Thu Sep 19, 2019 6:36 pm

$20 Million is a lot of money. If I were you, I would begin interviewing companies and/or advisors for at least a fee only type of fiduciary plan for you to consider. Get a sense of what they could offer but I wouldn't just invest all that money into a three fund plan.

User avatar
TomatoTomahto
Posts: 9525
Joined: Mon Apr 11, 2011 1:48 pm

Re: Is private wealth management worth it?

Post by TomatoTomahto » Thu Sep 19, 2019 8:15 pm

Malinois000 wrote:
Thu Sep 19, 2019 6:36 pm
$20 Million is a lot of money. If I were you, I would begin interviewing companies and/or advisors for at least a fee only type of fiduciary plan for you to consider. Get a sense of what they could offer but I wouldn't just invest all that money into a three fund plan.emphasis added
Why wouldn’t you invest all that money in a 3 fund plan? Granted, based on tax deferred available space, it might be a 4 fund plan to take care of the fixed income portion.

$20M is, I agree, a lot of money. But, I don’t think it needs to change one’s basic investment approach from a smaller portfolio. If it were a younger me (as I imagine OP is younger than me), I’d put $5-6M in fixed income and some combination of US/international/world equities with the rest. Spend the saved time talking to an estate planner.
Okay, I get it; I won't be political or controversial. The Earth is flat.

Silk McCue
Posts: 3395
Joined: Thu Feb 25, 2016 7:11 pm

Re: Is private wealth management worth it?

Post by Silk McCue » Thu Sep 19, 2019 8:39 pm

Investing is simple. Taxes aren’t. I would engage Allan Roth fee only advisor. Extremely well respected. His goal is for you to “fire” him after the initial engagement. You can submit a personal profile and he will review and initially discuss with you before formal engagement.

Cheers

PhilosophyAndrew
Posts: 642
Joined: Sat Aug 13, 2016 10:06 am

Re: Is private wealth management worth it?

Post by PhilosophyAndrew » Thu Sep 19, 2019 8:47 pm

msk wrote:
Tue Sep 17, 2019 9:51 am
With $20 million I would just put it all into Vanguard Worldwide, VT, and make sure I never withdraw more than 5% of the portfolio balance in any year. If the market just stays steady, that ought to deliver enough to live on, $1 million a year. Market collapses by 70%, still good for $300k a year. History for the past 100+ years indicates that the 5% ought to keep up with inflation indefinitely. Maybe too simple? That's what I have and follow, although I give away 3.5% of the portfolio balance each year. But I am 75.

My sister wanted something more "sophisticated" for her savings for a rainy day. So I put 50% in VT and 50% in Berkshire Hathaway as her cheap wealth manager. She gives away 2.5% of the capital gains each year to charities but she has enough elsewhere not to need anything for herself.

You need a good tax accountant/adviser, not a wealth manager. You have already made more $ than the person who will give you the managing.
Well-said.

+1

bltn
Posts: 576
Joined: Mon Feb 20, 2017 9:32 pm

Re: Is private wealth management worth it?

Post by bltn » Thu Sep 19, 2019 8:52 pm

I think Vanguard is a good choice initially. You will always need a good cpa and a good estate attorney, but once you ve used Vanguard s PAS for a while, you may decide you can do it on your own. Following TT s advice above, I would keep a fair amount in fixed income to weather a severe storm, possibly 8-10 years. Maybe longer. The rest of the portfolio could be indexed and tilted as you would like. I would definitely listen to Gill about corporate wealth management.

After being exposed to private partnerships, tax shelters, and sideline business opportunities during the first dozen years of my career, I finally started investing in equity index funds with a modest balance in bonds and maintained a large contingency fund. Not exciting, like the sales pitches I got, but amazing at how well that did. Of course I had to learn the hard way with some costly mistakes.

One point that should be emphasized more. I would reveal to no one but my accountant the size of my portfolio. Life will be easier as a face in the crowd.

bltn
Posts: 576
Joined: Mon Feb 20, 2017 9:32 pm

Re: Is private wealth management worth it?

Post by bltn » Thu Sep 19, 2019 9:00 pm

TomatoTomahto wrote:
Thu Sep 19, 2019 8:15 pm
Malinois000 wrote:
Thu Sep 19, 2019 6:36 pm
$20 Million is a lot of money. If I were you, I would begin interviewing companies and/or advisors for at least a fee only type of fiduciary plan for you to consider. Get a sense of what they could offer but I wouldn't just invest all that money into a three fund plan.emphasis added
Why wouldn’t you invest all that money in a 3 fund plan? Granted, based on tax deferred available space, it might be a 4 fund plan to take care of the fixed income portion.

$20M is, I agree, a lot of money. But, I don’t think it needs to change one’s basic investment approach from a smaller portfolio. If it were a younger me (as I imagine OP is younger than me), I’d put $5-6M in fixed income and some combination of US/international/world equities with the rest. Spend the saved time talking to an estate planner.
I agree. Get a high level cpa for tax advice and an estate lawyer for additional advice and use a simple 3-4 fund approach to investment management.

IHateCasinos
Posts: 50
Joined: Fri Jan 22, 2016 4:58 pm
Location: Portland, OR

Re: Is private wealth management worth it?

Post by IHateCasinos » Thu Sep 19, 2019 9:12 pm

You should consider separately:
The asset preservation - ie depositing the proceeds into a Trust of whatever sort (eg Directed), and
the investment manager of the funds in that trust. Eg yourself/GS/BAM/Vanguard PAS
Definately separate the 2 firms if you can. They do not have to be the same firm. And watch their fees. in number and %.

Its a lovely, but elephant-sized "problem". So eat the elephant in small bites.

M

parentsretirement
Posts: 15
Joined: Sat Dec 21, 2013 1:29 pm

Re: Is private wealth management worth it?

Post by parentsretirement » Fri Sep 20, 2019 1:03 am

Wiggums wrote:
Tue Sep 17, 2019 2:51 pm
I agree that the OP might require the services of a CPA, Lawyer, etc. in terms of investing, I think it’s best to keep it simple.
deltaneutral83 wrote:
Tue Sep 17, 2019 10:10 am
I would imagine a top of the line CPA and estate planning attorney is much more of a priority than a money guy for BH who knows the basics and knows a lot about business as OP obviously does.
nedsaid wrote:
Tue Sep 17, 2019 1:16 pm
To sum up, I would hire a good CPA and a good Trust/Estate Attorney.
bltn wrote:
Thu Sep 19, 2019 9:00 pm
I agree. Get a high level cpa for tax advice and an estate lawyer for additional advice and use a simple 3-4 fund approach to investment management.
+1 to starting with CPA & Estate Lawyer. These will become trusted advisers and will be on your side. At $20mil+, good estate and tax planning will save you millions. Wealth management companies won't provide direct tax/estate advice and the good ones will want to interface with your team of advisers. This can go a long way in terms of comfort.
michaeljmroger wrote:
Mon Sep 16, 2019 11:04 pm
Now, if it sounds scary to manage $20M on your own (which is honestly understandable), or if it’s something you literally don’t care about (which I doubt since you’re here), I’d recommend either Northern Trust or Bessemer Trust.
+1 to this as well. DIY is doable. But if there's some discomfort, you can always start with a wealth management company and go back to DIY in a few years once you feel comfortable. A good wealth management company will provide value in terms of trust services, financial planning, investment management, and banking and liquidity services. And they won't make you feel trapped or invest you in obscure portfolios.

Bacchus01
Posts: 3182
Joined: Mon Dec 24, 2012 9:35 pm

Re: Is private wealth management worth it?

Post by Bacchus01 » Fri Sep 20, 2019 7:26 am

deltaneutral83 wrote:
Tue Sep 17, 2019 10:10 am
I would imagine a top of the line CPA and estate planning attorney is much more of a priority than a money guy for BH who knows the basics and knows a lot about business as OP obviously does. Haven't heard the age or annual expenses of the OP, but this 20 will be 50 in 15-18 years if AA was at least 50/50 while working with the CPA.
I agree with tax and estate advice. Everyone else is just taking fees.

How to invest? Move the decimal one position to the left. How would you invest that? Now move all of them back one to the right. Less daunting.

User avatar
nedsaid
Posts: 12748
Joined: Fri Nov 23, 2012 12:33 pm

Re: Is private wealth management worth it?

Post by nedsaid » Fri Sep 20, 2019 8:59 am

Malinois000 wrote:
Thu Sep 19, 2019 6:36 pm
$20 Million is a lot of money. If I were you, I would begin interviewing companies and/or advisors for at least a fee only type of fiduciary plan for you to consider. Get a sense of what they could offer but I wouldn't just invest all that money into a three fund plan.
The biggest complication with very large sums of money is taxes. In a taxable account, if you are in a high tax bracket, consider municipal bonds. Also consider the effect of state taxes. But this need not be super complex.

Another complication is that with a bigger portfolio, you have opportunities not available to smaller investors. Such opportunities have risks of their own and these investments don't always work out. These investments can be complex and illiquid, some of them are outright questionable.

The biggest thing is that with more money, you will get more attention from investment firms and that is not always a good thing. You might find yourself talked into investments you otherwise would not have made. We all have egos and we all like special attention and service and that might be the biggest obstacle to overcome.

What I am trying to say is that wealth management can bring its own set of problems.
A fool and his money are good for business.

Dave55
Posts: 565
Joined: Tue Sep 03, 2013 2:51 pm

Re: Is private wealth management worth it?

Post by Dave55 » Fri Sep 20, 2019 9:21 am

pennywise88 wrote:
Mon Sep 16, 2019 9:42 pm
So I'm about to sell my business to private equity which will put about 20M in my bank account after taxes. There are people telling me that I should talk to private wealth management folks at goldman sachs and the like. Has anyone had any experiences that might help me understand the pros and cons of doing so?
Sure, go talk to private wealth management like GS. But I would also suggest you talk to other wealth managers that are independent and provide the same full service that the big private wealth companies do, and do it for less than 1%. You may want book an hour or 2 (he charges by the hour) with Rick Ferri who has decades of experience as an independent investment analyst and advisor. Rick would be my choice to help me navigate the waters if I were looking for options as you are.
https://rickferri.com


Dave
Last edited by Dave55 on Fri Sep 20, 2019 9:49 am, edited 1 time in total.

Jack FFR1846
Posts: 10437
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Is private wealth management worth it?

Post by Jack FFR1846 » Fri Sep 20, 2019 9:42 am

I am very leery of wealth management companies. In my business complex of 3 buildings, one is full of wealth management firms. The days have been nice lately. Would you like a picture of one of these manager's McLaren 570 GT?
Bogle: Smart Beta is stupid

afan
Posts: 4393
Joined: Sun Jul 25, 2010 4:01 pm

Re: Is private wealth management worth it?

Post by afan » Thu Oct 03, 2019 2:04 pm

It may be worthwhile to get overall financial advice. Roth would be a good source for that. Ferri, as far as I know, only advises on investing, not on the other decisions that one would make having recently come into money.
If the OP does not want to DIY the investing, then Vanguard PAS could be good. They will put you in diversified, liquid, nonspeculative assets with low fees. This is what you want. The fact that you could pursue investments that are none of these things does not mean you should. If you ask for advice from people who sell these products they will encourage you to buy them.
Ask Roth whether you need anything like that. Few if any people do.

A while ago Gill expressed disappointment that Vanguard as a successor trustee would not do something he viewed as routine for a corporate trustee. Curious whether he found another firm that had a broader range of services. Also, is there are extent to which the Vanguard prices are low because the service is much more limited than the traditional trust companies? Are there any happy medium firms with far lower prices than the Northern's and Bessemer's of the world, but with a full range of services, unlike Vanguard?

As for attention to accounts, would a boglehead want a lot of attention to the investments? Park the money in a handful of index funds, check once a year whether to rebalance, otherwise leave it alone. Use the wealth manager or corporate trustee as a financial advisor who is not going to get extra money by selling a bunch of high priced investments- either because they would not recommend them or because the OP would not buy.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Post Reply