I need "high net worth" investing advice please

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
nosher1
Posts: 4
Joined: Mon Feb 20, 2012 11:41 pm

I need "high net worth" investing advice please

Post by nosher1 »

Hello,

I have approximately $6 million in cash from the recent sale of my business. Trying to figure out what to do with this cash is extremely stressful and dizzying. I have spoken with the major "high net worth" wealth management firms such as Bernstein Global Wealth, JP Morgan Chase, Goldman Sachs, BNY Mellon, and a few others. They all seem to be offering the same "full service" type of investing platform (totally hands-off on my part), and they all want to charge me a management fee of about 1% per year to give me a professionally managed, fully diversified portfolio. In my case, that 1% fee would come out to about $60,000 per year. I am skeptical that any of them would perform well enough to make up for the large fee. But, I do not like the stress of making investment decisions and past investments I have made on my own have generally not done well. I have looked at super low cost options such as Fidelity and Vanguard, and they make me very nervous because I am totally on my own to worry about asset allocation, re-balancing and other issues. My question is, is there an ideal solution for me that will give me a well balanced, very low fee portfolio but at the same time I can be hands-off and fairly stress free?

Thanks!
Norman
User avatar
Pennstateclj1
Posts: 501
Joined: Sun Apr 03, 2011 2:53 pm
Location: State College, PA

Re: I need "high net worth" investing advice please

Post by Pennstateclj1 »

Welcome to the forum nosher1!

I think most of those firms classify themselves as "high net worth" advisors because they want to line their own pockets with high net worths clients money. If you feel like you don't want to learn to do it yourself, there are asset management firms that charge .25% annually for assets under management and use low-cost index funds and ETF's that will keep most of your money in your pocket; not in wrap fees and front loads and back loads. One firm that comes to mind is Portfolio Solutions (I have no affiliation to this firm or any of the ones you mentioned.) There are others too. However, if you want to learn to do it yourself, a few books could give you a broad knowledge basis and the confidence to go it alone. I'd recommend The Boglehead's Guide to Investing by Larimore, and All About Asset Allocation by Ferri.

For what it's worth, both of those authors (and more) are frequenters of this site, so if you post your scenario here, I'm sure you could get a FREE (the best kind) of evaluation from many great minds so if you did end up meeting with any of your aforementioned advisors you would know if they were worth their salt or just out to take you for a ride.

If you choose to post your situation, please put it in this format. http://www.bogleheads.org/forum/viewtopic.php?t=6212
jbdiver
Posts: 131
Joined: Wed Feb 24, 2010 11:58 am

Re: I need "high net worth" investing advice please

Post by jbdiver »

Call the folks at Portfolio Solutions. That's what I did after selling my business. You can't do much better than this company, but you could do much worse. Now, two years later, I have a much better handle on investing and could conceivably do it myself at some point. Feel free to message me if you have any questions.
Boglemama
Posts: 300
Joined: Thu Apr 28, 2011 7:27 am

Re: I need "high net worth" investing advice please

Post by Boglemama »

What are your financial goals with the cash? I'd imagine that you can get some great advice on this forum. I'd also imagine that, while it's an overwhelming right now because it's such a large amount of money and you are going through a huge life transition, anyone who built a business and sold it for 6 million would be more than capable of managing their own assets.
KyleAAA
Posts: 9498
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: I need "high net worth" investing advice please

Post by KyleAAA »

If doing it yourself stresses you out, I would recommend not trying to do it yourself. You'll only stress yourself out! Like the posters above have said, 1% is steep if all they're doing is managing your money. If they are providing tax services, estate planning advice, legal advice, etc it may or may not be worth it. You can definitely find something more like 0.25% if all you want is somebody to manage your portfolio. Portfolio Solutions is a reputable choice.
riskonoff
Posts: 225
Joined: Tue Aug 23, 2011 8:22 am

Re: I need "high net worth" investing advice please

Post by riskonoff »

Here is a link to an article I just read.

http://www.businessinsider.com/how-to-k ... ake-2012-2

I have had several friends that were worth over $10 mln and now are worth $2 to $3 mln. Their source of income dried up, they were not diversified, they were levered in real estate, and they were not liquid when the market hit the fan in 2008/09. Plus they bought very expensive homes.

I would first talk to an accountant to see what you have after taxes etc...Then take your time and find the right Advisor. Perhaps negotiate the fee but make sure they are a 'fee' only passive Advisor. Perhaps invest just 30 to 40% of your money in the equity market and the balance in high quality short term to intermdiate term bonds.

Finally, don't change your life style. Don't buy a McMansion etc...perhaps travel a little bit more. The $6 mln can go quickly, I have seen it first hand. Good Luck.
Maverick
Posts: 166
Joined: Sun May 20, 2007 12:54 pm
Location: FL

Re: I need "high net worth" investing advice please

Post by Maverick »

First, there may be a value added for you to sit down with someone who can help you understand your situation and guide you through it (not everyone wants to or can be a DIYer). With the sale of your business, there may be tax issues that need to be addressed. Additionally, depending on your other assets and what happens with the estate tax, you may want to make sure you get good guidance there. That being said, with a portfolio of the size you are talking about, there is no reason you should be paying 1%, even with all the guidance. Most firms offer a sliding scale that wll decrease the fee based on the assets. If you decide you want professional guidance, I would suggest interviewing a few people - both at "name" firms and at independent practices. Figure out what they do, how they do it, etc. Also, find out what type of experience they have, licensure, certification, and so on. It is okay to delegate (IMO), but you should only do so after you have taken very deliberate steps to find someone who will be a good steward.

Good luck.
TimDex
Posts: 962
Joined: Mon Feb 19, 2007 4:27 pm

Re: I need "high net worth" investing advice please

Post by TimDex »

This subject comes up periodically. Basically the advice you need is the same....as for someone with a lot less money.

Bottom line, I would advise using Vanguard's financial advice. Depositing that amount of money "definitely" gets you a financial plan and a talk with a financial adviser. The advice will end up being generic -- which is exactly what you need.

I noticed this when facebook just went public...immediately there was a news story on how a goldman sachs adviser had snagged all these facebook execs to manage their newfound wealth. This was in contrast to a story I read years ago on how google educated its employees on index investing before going public. (The article was entitled "The best investment advice you'll never get" but the link I had to it has expired with linkrot and I can't find it on the web -- it was in a san francisco magazine). The gist was that financial advisers with the big brokerage firms do not have your interests at heart -- they have their own bottom line and your account is the way to it.

I inherited some substantial wealth --(kudos to you for earning your own) -- and my portfolio consists of three equity funds and three bond funds. I wanted it as simple as possible because I want it easily managed after I'm gone.

The one caveat would be coordinating with your CPA to do so in the best tax efficient manner. I find that the best place to "invest money" is in a good CPA and a good estate lawyer. Save money on the investing side, and invest in the cheapest (and best) way possible with index funds.

tim
"All man's miseries derive from not being able to sit quietly in a room alone. " -- Pascal
reggiesimpson
Posts: 1697
Joined: Mon Dec 19, 2011 11:47 am

Re: I need "high net worth" investing advice please

Post by reggiesimpson »

I went through the same/similar situation just recently. Its extremely stressful so i know where you are at. BUT as promoting advisers is an apparent no no on this forum just PM me and i will give you the details. And before it crosses anyones "lips" no i am not a financial adviser. Never was never will be plus i dont wanna be!
Anon1234
Posts: 798
Joined: Sat Feb 26, 2011 9:32 pm

Re: I need "high net worth" investing advice please

Post by Anon1234 »

Your mostly taxable holdings are suited by a simple 3 or 4 fund portfolio. Make an investment plan using vanguard, fido, or trp, then pay an hourly CFP Garrett network person $600-1000 to review it. When it's time to rebalance go back for a $300 second look. If s/he confirms your plan you will gain confidence. If s/he has good suggestions you got something for your money. Low cost, low risk, no commitments (except to your AA).
marcnci
Posts: 3
Joined: Wed Jan 25, 2012 6:20 pm

Recommended Books, Posts, and Readings...

Post by marcnci »

Hi Norman,

My recommendation, would be for you to start reading from this list of books to give you some perspective and confidence first before talking to anymore advisors.

http://www.bogleheads.org/wiki/Books:_R ... nd_Reviews and start with this book in particular:

The Bogleheads' Guide To Retirement Planning - Taylor Larimore, Mel Lindauer, Rick Ferri, & Laura Dogu, editors
http://www.amazon.com/Bogleheads-Guide- ... adswiki-20

It helped me tremendously, and am sure it will empower you with the situation you are currently going through.

You mentioned Vanguard and wrote: "I have looked at super low cost options such as Fidelity and Vanguard, and they make me very nervous because I am totally on my own to worry about asset allocation, re-balancing and other issues."

If you look at a Vanguard fund like: Vanguard Target Retirement Income Fund (VTINX) https://personal.vanguard.com/us/funds/ ... IntExt=INT

It takes care of your asset allocation for you, re-balancing, and will give you time to educate yourself. It has an asset allocation in line with the Three Fund Portfolio + TIPS:


Portfolio composition
Allocation to underlying funds as of 01/31/2012
Ranking
by
Percentage Fund Percentage
1 Vanguard Total Bond Market II Index Fund Investor Shares† 45.1%
2 Vanguard Total Stock Market Index Fund Investor Shares 20.8%
3 Vanguard Inflation-Protected Securities Fund Investor Shares 20.0%
4 Vanguard Total International Stock Index Fund Investor Shares 9.1%
5 Vanguard Prime Money Market Fund Investor Shares 5.0%
Total — 100.0%

Acquired fund fees and expenses
as of 01/26/2012 0.17% This is 65% lower than the average expense ratio of funds with similar holdings.*


If you put all $6M at 2.7% (for example), it would give you about $162,000/year or $40,500 in quarterly distributions and is just one of many funds to consider in the meantime (as you come up with your own personal investment goals), since you asked: "My question is, is there an ideal solution for me that will give me a well balanced, very low fee portfolio but at the same time I can be hands-off and fairly stress free?"

Look at this post for the "Three Fund Portfolio" by Taylor Larimore http://www.bogleheads.org/forum/viewtop ... 10&t=88005

I am new to this forum as well, and I immediately became a huge fan of Taylor Larimore and how comforting his posts are with the information that he shares.

Three other links that I really would recommend you skim through, very helpful (these 3 articles really helped seal the deal for me):

1) http://bucks.blogs.nytimes.com/2011/08/ ... investors/
2) http://www.cbsnews.com/8301-505123_162- ... tag=mwuser
3) http://www.nytimes.com/2010/01/02/your- ... money.html


Finally, if you decide to invest at least $1M with Vanguard, you would qualify for their Flagship services and a free advisor:

https://personal.vanguard.com/us/whatwe ... andvoyager
“Failure is an extremely motivating force to those who are born for success.”
travellight
Posts: 2892
Joined: Tue Aug 12, 2008 5:52 pm
Location: San Diego

Re: I need "high net worth" investing advice please

Post by travellight »

Congratulations! I hope to have these issues to contend with in the future. :)
364
riskonoff
Posts: 225
Joined: Tue Aug 23, 2011 8:22 am

Re: I need "high net worth" investing advice please

Post by riskonoff »

I would like to add that I had a 'windfall' in 2007 and the Vanguard Flagship rep told me to put 80% of my money in equity market. This conversation took place with the market at the highs. It is very cookie/cutter. Thank god I did not listen to him. I put 35% in the equity market and it enabled me to be a steady buyer in the 2008 sell off. Who kows how I would reacted in 2008 if I had put 80% in the equity market. I figured not listening to the Vanguard rep saved me at least $1 mln.

FYI, I have all my money at Vanguard. Just don't take too seriously what the rep says. They don't understand risk for high net worth individuals.
Easy Rhino
Posts: 3278
Joined: Sun Aug 05, 2007 11:13 am
Location: San Diego

Re: I need "high net worth" investing advice please

Post by Easy Rhino »

Out of curiosity, how much experience do you have managing your investments up to this point? That would make a big difference on how much guidance you'll need going forward.
eucalyptus
Posts: 746
Joined: Tue Apr 24, 2007 1:24 pm

Re: I need "high net worth" investing advice please

Post by eucalyptus »

There can be a few benefits to money management firms over Vanguard and smaller investment advisory firms:

- info about excellent legal and accounting advisors accustomed to representing high net worth clients

- some provide lending facilities that can be very beneficial, though in this time of low rates ....

- should you need some extraordinary service - letter of credit to bid at an auction, quick money moves/availability, etc - Vanguard will be utterly useless, whereas some of the money managers will not only what you are talking about, and be ready and willing to help

- a good firm will consider all aspects of your life before giving investment advice

- access to alternative investments, though this may be the same as handing you rope

- you may encounter other useful connections through your local rep of a money management firm, like Bernstein or US Trust

Vanguard can be very difficult to work with in my experience. In fact, Vanguard IMO offers no advantages at all to high net worth clients. Of course, you pay for the advantages you receive elsewhere. Still, you may safely ignore those here who will tell you that there are no advantages to firms of the type you've mentioned. We have used Bernstein and US Trust.

It is important to understand how a money manager does its security selection!
Last edited by eucalyptus on Tue Feb 21, 2012 12:18 pm, edited 1 time in total.
Wagnerjb
Posts: 7213
Joined: Mon Feb 19, 2007 7:44 pm
Location: Houston, Texas

Re: I need "high net worth" investing advice please

Post by Wagnerjb »

riskonoff wrote:I would like to add that I had a 'windfall' in 2007 and the Vanguard Flagship rep told me to put 80% of my money in equity market. This conversation took place with the market at the highs. It is very cookie/cutter. Thank god I did not listen to him. I put 35% in the equity market and it enabled me to be a steady buyer in the 2008 sell off. Who kows how I would reacted in 2008 if I had put 80% in the equity market. I figured not listening to the Vanguard rep saved me at least $1 mln.

FYI, I have all my money at Vanguard. Just don't take too seriously what the rep says. They don't understand risk for high net worth individuals.
I agree with this comment about Vanguard. They are a wonderful mutual fund company....low cost and plain vanilla. But they are woefully inadequate when it comes to financial advice and sophisticated issues. As he said, very cookie cutter in their advice.

Best wishes.
Andy
User avatar
fredflinstone
Posts: 2829
Joined: Mon Mar 29, 2010 7:35 am
Location: Bedrock

Re: I need "high net worth" investing advice please

Post by fredflinstone »

you have received some good advice above. Here are a few more tips:

read the wiki on asset protection: http://www.bogleheads.org/wiki/Asset_protection

read Asset Protection by Jay Adkisson & Chris Riser.

Buy a large umbrella liability policy. At least $5 million.

if you have kids, open 529s for them. Check to see if your state offers a tax deduction for 529 deposits. Also, check to see if your state shields 529s from creditors.

when you are ready to give money to charity, donate in as tax-efficient a manner as possible. Give appreciated stock (which you have held for at least 1 year) rather than cash.
User avatar
tuckeverlasting
Posts: 295
Joined: Sun Mar 27, 2011 9:50 pm
Location: The Emerald City

Re: I need "high net worth" investing advice please

Post by tuckeverlasting »

TimDex wrote:This was in contrast to a story I read years ago on how google educated its employees on index investing before going public. (The article was entitled "The best investment advice you'll never get" but the link I had to it has expired with linkrot and I can't find it on the web -- it was in a san francisco magazine). The gist was that financial advisers with the big brokerage firms do not have your interests at heart -- they have their own bottom line and your account is the way to it. tim
Here is the article: http://www.tradersnarrative.com/the-bes ... -1550.html

From the article:
“Saint Jack” [Bogle] is the living scourge of Wall Street.
It's Good To Be A Boglehead
AQ
Posts: 885
Joined: Mon Feb 25, 2008 10:38 pm

Re: I need "high net worth" investing advice please

Post by AQ »

When my assets grow, I become increasingly uneasy to put a sizeable amount in one instituion. Curious how those other high net worth people deal with that. Do they literally place tens of millions in vanguard, for example, and only vanguard?
User avatar
wjo
Posts: 509
Joined: Fri Jan 22, 2010 11:17 am

Re: I need "high net worth" investing advice please

Post by wjo »

Hi -

Welcome and congrats on the sale of your business. You have received much good advice above and you are definitely in the right place.

Some things to add:

Consider reading the Retire Early blog discussion of fees, managing a portfolio, planning, etc. Here is a link to his discussion of DFA advisors and fees: http://www.retireearlyhomepage.com/dfaadv.html (Note by posting this I am suggesting a look at the comparison of advisor fees and their costs; the DFA fund component is secondary). This list is also a good place to start looking at some other advisors. I can also add a recommendation if you PM me. (I would definitely agree that 1% or 60k a year is a good way for the high net worth advisor to make a lot of money and reduce your sum -- your instincts are good.)

$6mn is a lot of money, but don't plan a big lifestyle. At a 3% withdrawal rate (the highest I would recommend on an inflation adjusted basis), that is $180k per year. Practically, I wouldn't pull out more than $150k per year to make the money last over a long time. That said, $150k to spend even after taxes with no need to save a penny of it allows you to live pretty darn well in most parts of the country.

Good luck!

If you have the money sitting in a bank account right now, that is ok -- there is no rush to invest it. It is better to put a well considered plan in motion than go invest it in the wrong thing right away. You don't need to grow the money, but you do need to preserve it. The cost of a mistake is much higher for you at this point than any potential missed gains.
User avatar
fishnskiguy
Posts: 2635
Joined: Tue Feb 27, 2007 12:27 pm
Location: Castle Rock, CO

Re: I need "high net worth" investing advice please

Post by fishnskiguy »

The short answer:

Invest 25% in stock funds. Split that into 60% VG Total Stock Market 40% VG FTSE All World- Ex US fund.

Put the remaining 75% in fixed income. Find one, two, or three credit unions you can join and build a five year CD ladder in each of them up to the FCUA limit.
Put the rest in VG bond funds. 60% Total Bond Market fund and 40% VG Inflation Protected Securities fund.

After you weather the next huge bear market drop of 40% or more and don't panic, you have my permission to increase your stock portfolio to 35%. :)

There. I just saved you $60,000, did not charge you a cent and gave you a portfolio that will outperform 80% of all other 25/75 stock/bond portfolios, with zero Tums or Pepcid AC required. :sharebeer

Chris
Trident D-5 SLBM- "When you care enough to send the very best."
User avatar
BigFoot48
Posts: 3115
Joined: Tue Feb 20, 2007 9:47 am
Location: Arizona

Re: I need "high net worth" investing advice please

Post by BigFoot48 »

It's interesting how frequently people who have come into substantial wealth find this forum and ask for advice. I wonder how many more don't find it, and end up paying the 1% to a Big Brokerage Firm and get a 50 fund/stock/bond/financial instrument portfolio that is constantly churned and is incomprehensible as a bonus, and which seems to never quite manage a market return.

And yet in the end, as many of us believe, the answer is really just all so simple. I would direct the OP to Taylor Larimore's Three-Fund Portfolio as a starting point. Understand the value of that and you're 90% there. Then follow the other advice given in this thread for more understanding, tweaking for taxes, and background knowledge and you'll be close enough.

Start Here: http://www.bogleheads.org/forum/viewtop ... 10&t=88005
Last edited by BigFoot48 on Tue Feb 21, 2012 11:58 pm, edited 1 time in total.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: I need "high net worth" investing advice please

Post by john94549 »

Just wondering if this is just another troll post.

We seem to be getting a bunch lately ("I just came into a gazillion dollars, any recommendations?")
User avatar
LH
Posts: 5490
Joined: Wed Mar 14, 2007 2:54 am

Re: I need "high net worth" investing advice please

Post by LH »

You may want to pay the money. I would go for a 0.25 AUM at 6 million though. Or at most 0.5 AUm.....

anyway, pay the money, see what they do and recommend for you the first year. 20 to 30K for a "full service" for one year, and see what happens. Then, you will not make any big mistakes (in theory, your advisors can still make them though) and you will have time to read and such, get comfortable.

Then, evaluate what they have done. If its really not much, then go and do it one your own thereafter.

But it sound like, with that amount of money, things like

estate planning
High level tax sheltering (putative ultra large millionaire "IRAs", still have no clue, but hear about it )
Wills
Asset protection

Come into play. that do not really come into play so much for smaller portfolios, a lot of which for instance, may already be asset protected by being in 529s, ERISA, IRAs to some extent, or significant net worth in a house in joint tenancy by entirety and such.... That kinda thing, you will scale out of with 6 million in cash. Might be time to get fancy, tax wise and asset protection wise?

Might be worth it to really hit it hard the first year. Pay the fee (0.25 AUM to 0.5 AUM) and run by any questions you have here, and read up on it.

Its semi-hard finding a financial adviser that really acts in your interest though from what I hear.

Good luck : )

LH
PreserveCapital
Posts: 551
Joined: Thu Mar 05, 2009 2:19 pm

Re: I need "high net worth" investing advice please

Post by PreserveCapital »

$1 million Vanguard Total Stock Index Admiral

$1 million Vanguard Total International Stock Index Admiral

$1 million VIPSX vanguard TIPS fund

$1 million vanguard intermediate tax exempt fund

$500,000 Vanguard short term treasury VFISX

$500,000 in FDIC bank account(s)

$1 million in five year CD ladder--$200k/year

Take $10,000 from the bank account and go on a nice vacation to Hawaii (or your place of choice.) Don't touch the investments otherwise. Take only the money out you need for your living expenses for the next three months.

Research. Study. Evaluate. Consult with a fee-only advisor on an hourly basis but do not let same manage your money. Review your portfolio in 3 months. At that time, develop your medium to long term plan and adjust allocations as necessary.
riskonoff
Posts: 225
Joined: Tue Aug 23, 2011 8:22 am

Re: I need "high net worth" investing advice please

Post by riskonoff »

john94549 wrote:Just wondering if this is just another troll post.

We seem to be getting a bunch lately ("I just came into a gazillion dollars, any recommendations?")
i imagine it is a troll. however, the discussion is worthwhile. i have seen it too many times that guys make a ton of money and then lose it all. It is very sad.

Larry Swedroe talks about reducing your risk if you meet your financial goals etc.. I think many of these guys (gals) get over-confident in all facets of their life and greedy as well. They just don't realize that they have essentially realized their financial goals. It is almost as if they are alchoholics and they need someone to take the punch bowl away. Maybe that is the role of a good Advisor.

I guess you can say that your strengths are often times your weakness as well.
User avatar
SamGamgee
Posts: 603
Joined: Wed Nov 07, 2007 12:21 pm

Re: I need "high net worth" investing advice please

Post by SamGamgee »

It seems to me that the answer is very simple: Park the money somewhere very safe / low risk ... and start reading some good books on the subject.

If I had 6 million I'd probably put 2 million in cash, 2 million in bonds, and 2 million in an index fund. It really is that simple.
beareconomy
Posts: 461
Joined: Sat Sep 11, 2010 9:01 am

Re: I need "high net worth" investing advice please

Post by beareconomy »

[quote="PreserveCapital"]$1 million Vanguard Total Stock Index Admiral

$1 million Vanguard Total International Stock Index Admiral

$1 million VIPSX vanguard TIPS fund

$1 million vanguard intermediate tax exempt fund

$500,000 Vanguard short term treasury VFISX

$500,000 in FDIC bank account(s)

$1 million in five year CD ladder--$200k/year

Take $10,000 from the bank account and go on a nice vacation to Hawaii (or your place of choice.) Don't touch the investments otherwise. Take only the money out you need for your living expenses for the next three months.

Research. Study. Evaluate. Consult with a fee-only advisor on an hourly basis but do not let same manage your money. Review your portfolio in 3 months. At that time, develop your medium to long term plan and adjust allocations as necessary.[/quote]


Not a bad portofolio plan. Low fee. The only thing I would add is maybe I would buy like $5oo k in precious metals such as gold, silver, palladium. Just decrease the allocation accordingly.

Also, you don't have to pay that 1% fee. That is easily gonna save you 80k/ year. The TIPS fund will protect you against inflation.

If there is one thing I've learned in life, it is the best person to manage my money is myslelf. I know more than anyone else about my money. Your goal is be diversified as described above and pay the lowest fees possible. Vanguard fits that bill.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: I need "high net worth" investing advice please

Post by YDNAL »

nosher1 wrote:Hello,

I have approximately $6 million in cash from the recent sale of my business. Trying to figure out what to do with this cash is extremely stressful and dizzying.
Coming to an internet Forum to seek input appears a bit suspect. Sorry, that's how I see it and wanted to get it out of the way.

A couple of things:
  • What have you done (did you do) to prepare for this next stage in life (I'm assuming this wasn't an overnight decision to sell)?
  • Regarding investments, it may actually be easier than facing the everyday challenges of running some successful businesses. And, investing $6 million should be no different than investing $600K.
Regarding personal circumstances, some shouldn't (don't?) change as a business owner transitions away from running the business. Things like estate planning and insurance (life, health, liability), since all of this should be properly in place. Other circumstances may change, like.. Planning to retire? How much did the owner make from the business and how much is expected from investments? Etc. etc.

In regards to the original post, being under stress and dizzy is evidence of lack of planning and evidence that professional wealth-management help is necessary.
Last edited by YDNAL on Wed Feb 22, 2012 9:18 am, edited 1 time in total.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
User avatar
sometimesinvestor
Posts: 1271
Joined: Wed May 13, 2009 6:54 am

Re: I need "high net worth" investing advice please

Post by sometimesinvestor »

just noting that on balance this is a set of some of the best advice I have noticed on any thread.
KyleAAA
Posts: 9498
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: I need "high net worth" investing advice please

Post by KyleAAA »

tuckeverlasting wrote:
TimDex wrote:This was in contrast to a story I read years ago on how google educated its employees on index investing before going public. (The article was entitled "The best investment advice you'll never get" but the link I had to it has expired with linkrot and I can't find it on the web -- it was in a san francisco magazine). The gist was that financial advisers with the big brokerage firms do not have your interests at heart -- they have their own bottom line and your account is the way to it. tim
Here is the article: http://www.tradersnarrative.com/the-bes ... -1550.html

From the article:
“Saint Jack” [Bogle] is the living scourge of Wall Street.
This is a great story. I have to say I'm impressed by Google doing the responsible thing and doing its best to educate its people before throwing them to the wolves.
User avatar
dmcmahon
Posts: 2855
Joined: Fri Mar 21, 2008 10:29 pm

Re: I need "high net worth" investing advice please

Post by dmcmahon »

PreserveCapital wrote: $1 million Vanguard Total Stock Index Admiral
$1 million Vanguard Total International Stock Index Admiral
$1 million VIPSX vanguard TIPS fund
$1 million vanguard intermediate tax exempt fund
$500,000 Vanguard short term treasury VFISX
$500,000 in FDIC bank account(s)
$1 million in five year CD ladder--$200k/year
Solid plan IMO. Here's my more aggressive take:

$2 million Vanguard Total Stock Market Index (or DFA equivalent)
$1 million Vanguard Total International Index (or DFA equivalent)
$1 million TIPS bonds (purchased outright at auction)
$1 million hard assets (e.g. real estate)
$1 million 5-year CD ladder and cash in FDIC/NCUA accounts

I do not see the need for tax-exempt but it depends on whether the OP still has high current income from other sources. Income from this portfolio could be approx. $100-120k without invading principal and while allowing principal to grow with inflation. Note: just some ideas, not to be taken as investment advice, I'm just a guy on the internet.
LongtermInvestor1
Posts: 6
Joined: Thu Dec 29, 2011 10:05 pm

Re: I need "high net worth" investing advice please

Post by LongtermInvestor1 »

Hello Norman,

As others have already said welcome to this forum and you are in a safe place!

As a matter of disclosure this is my first post with my new user name here. Back in 2000 or 2001 I lurked in this forum and posted a few times under a different login name (wish I could remember it). I received some very kind advice from smart wise folks here when I was just starting down the path of investing out of high load funds and individual stocks. I can still recall when I posted that I wanted to invest only in stocks funds as I thought they had such a greater return then bonds and did not care about diversification (they were kind enough not to call me an idiot)! BTW, I took their wise advice and diversified across the market - thank goodness.

So why am I posting after such a long absence... well my wife and I started a family and I was busy with a technology start up (still very lame excuse overall). However your post resonated home with me as about 5 months ago the start-up company that I worked very hard for was acquired by a big technology company. My family and I will overall thankfully end up netting near 1/3 of your payday. So I have some idea of what you may be going through. My feedback for you is this:

- First congratulations!

- Be careful. As soon as my company was acquired, my tax attorney unbeknown to me turned into a stock broker who moonlights in high load funds, annuities and insurance. He had many great ideas (which he really could not explain) of how my wife and I should invest all of our new money. Also he wanted us to open a brokerage account that he would of course fully manage for us. He provided all his expertise for free without first asking us how we were currently invested and basically just tried the charm route. Thankfully I recalled both the great advice that I have received and/or read about here in this forum and we passed on his high load recommendations that would have lined his pockets. This was actually a stressful time as my wife really likes this individual and trusted him (as did I prior to this hard core charm press). Yes I know we need a new tax attorney. :)

- Take some time - I went through some surprising stressful days when the thought of how to invest this money really bothered me. It is both a great problem to have and something that can possible really weigh on you, as it did in my case as I continually pondered how not to screw this investment situation up for my family!

- I have finally after a few months of waiting (on purpose) and a lot more research here decided my allocation strategy into some additional real estate investments, but mostly back into index funds (btw, the Vanguard index funds are mostly the same ones that I selected and held since back in 2001). In regards to the real estate, my wife is a stay at home mom who over the course of the last few years likes to buy distressed real estate in good locations and fix them back up to health to rent them. We are invested for the long term here and not trying to flip etc. Luckily we have invested after the housing crash (unless there is another one of course - yikes). BTW regards to individual stocks temptations, it is a personal decision and I still love to watch Mad Money. But I have said no to picking stocks as I recall prior to finding this forum how well I did - not.

- The advice you have already received already here is spot on, take your time and do some research about diversified investing across the market. Also read this forum and enjoy the benefits of these smart wise folks who post here. Also take some time and read some of the books that are outlined here. Alternatively you could go to one of the recommended firms that can manage your portfolio for you mostly in index funds and for a set fee (note I am not investing this way nor have a stake in any of these firms). But it is a way to go if you do not have the time or desire to do your research and invest your own money etc.

Lastly please keep the 60k that these Wealth Management firms would take every year out of your pocket and just follow Nancy Regan's wise advice and just say "no" to the wolves at the door.

All the best to you,
Stan

PS. A belated and sincere thank you to Taylor & Mel and all the other kind great folks who make this forum happen. My family and I really appreciates it big time and long term!
Muchtolearn
Posts: 1563
Joined: Sun Dec 25, 2011 9:41 am

Re: I need "high net worth" investing advice please

Post by Muchtolearn »

AQ wrote:When my assets grow, I become increasingly uneasy to put a sizeable amount in one instituion. Curious how those other high net worth people deal with that. Do they literally place tens of millions in vanguard, for example, and only vanguard?
Yes. I have it all at Vanguard except for a checking account at Chase that I use for routine cash flows in and out.
User avatar
convert949
Posts: 411
Joined: Thu May 07, 2009 8:33 am
Location: Fort Myers, FL

Re: I need "high net worth" investing advice please

Post by convert949 »

Hi nosher1,

Congrats... I went through the same situation in 2005. I had many of the same feelings that my nest egg was too large to manage on my own. Those that contacted me at that time did everything they could to reinforce that I was right.

At that time, decided to split the "after tax" amount between my existing relationship with Vanguard and Ameriprise, with whom I also had a relationship. What I found is that having that advice has little value as the risk they suggest you take is necessary only to pay all those fees. I found that out the hard way in 2008 when I saw 30% of my nest egg evaporate, mostly in the Ameriprise account.

Woke up one morning towards the end of that year and decided as a semi-retired person, that I had the time to manage my own money. Bought some books including those of John Bogle through which I found this forum. Since then, I have fired my advisor, taken control of my own investments (yes, if you can run a company, you CAN handle money), sold the terrible insurance products, expensive funds and complex (35) number of ETF's suggested by the advisor and consolidated it all into 6 funds at Vanguard, accumulating 6 figures of tax losses in the process.

Since then, I have slept better, build my own smaller home as general contractor (also self taught), set up accounts to help my parents and kids, volunteer more, started buying "off lease" auto's and remarkably, rebuilt my portfolio on my own with much lower risk.

I owe it all to John Bogle and this forum... In other words, you could do worse, way worse...

Good Luck

Bob
User avatar
stemikger
Posts: 4950
Joined: Thu Apr 08, 2010 5:02 am

Re: I need "high net worth" investing advice please

Post by stemikger »

I dont' have any adivce to give you, but what a great problem to have.

Congrats, Good Luck and I'm jealous. LOL.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
Saving$
Posts: 2518
Joined: Sat Nov 05, 2011 8:33 pm

Re: I need "high net worth" investing advice please

Post by Saving$ »

LH wrote:You may want to pay the money. I would go for a 0.25 AUM at 6 million though. Or at most 0.5 AUm.....

anyway, pay the money, see what they do and recommend for you the first year. 20 to 30K for a "full service" for one year, and see what happens. Then, you will not make any big mistakes (in theory, your advisors can still make them though) and you will have time to read and such, get comfortable.

Then, evaluate what they have done. If its really not much, then go and do it one your own thereafter.
LH
The problem with this approach is these type of advisers try to put people in load funds. Many of these funds have upfront loads of up to 5%. So in the first year you pay the 1% management fee, and they put in funds with a 5% load, and you have lost 6% out of the gate. Does not sound good to me. You might be better off just keeping it in the bank at first. Should not take you a year to get reasonably comfortable with some basic concepts like the 3 fund portfolio, etc.
pascalwager
Posts: 2327
Joined: Mon Oct 31, 2011 8:36 pm

Re: I need "high net worth" investing advice please

Post by pascalwager »

This is simplistic, but as a recent business seller, you may find parallels with Taxable Ted, in William Bernstein's last two books ("Four Pillers of Investing" and "Investor's Manifesto"). Bernstein develops a portfolio for Ted (who sold an electronics business) including a detailed rationale for the various assets.

If you choose to use an advisor, a 1% management fee is too high for a $6m investment. Bernstein is also an advisor, but only for $10m investments and up.

If you do hire a passive-oriented advisor, you'll probably end up with a three-factor model (slice-and-dice, small/value) portfolio using DFA funds, although Rick Ferri seems to also use other fund companies.
VT 60% / VFSUX 20% / TIPS 20%
Topic Author
nosher1
Posts: 4
Joined: Mon Feb 20, 2012 11:41 pm

Re: I need "high net worth" investing advice please

Post by nosher1 »

Thank you so much for all of the feedback (I started this thread)! I am more interested in hiring a firm than reading books and doing it myself. Just the thought of getting investment advice from books makes me dizzy and nervous (did I mention that thinking about investing my money makes me both dizzy and nervous) because if I read 10 good books, while they are likely going to give similar, good advice, they are all going to give me 10 different sets of advice. So, which book do I ultimately follow? Do I use a dart board to pick the book I follow for my investments? Do I go with my "gut"? I don't trust my gut when it comes to investing, so why would I trust my gut when choosing an investing book to follow? What I really want to do, for my peace of mind, is pick a management firm, tell them my risk tolerance (which is "moderate"), and let them do the rest. Picking a firm is not much different than picking a book to follow, I suppose, but at least I can just make the decision, and not have to think about investing on a day-to-day basis.

A few people recommended Portfolio Solutions, but I do not think I would choose them. First, their fee is not as low as it originally appears. It is 0.25% PLUS expenses. Their website says the funds typically cost around 0.15%, so that brings the cost up to 0.40%, plus a few hundred dollars per year in trading fees. The big, full service firms all charge around 1%, but that includes all costs. So, Portfolio Solutions is cheaper, but not 75% cheaper. The primary reason I would not consider a firm like that is, above all else, especially in the wake of the Bernie Madoff scandal, is, how safe is my money from being literally stolen? I think if I use a large, extremely established firm like Bernstein, Bessemer Trust, etc., I probably don't have to worry about the firm stealing my money. With a small, privately owned firm, I think anything is possible. While 99+% of the small, privately owned firms are not Ponzi schemes, this fear would probably preclude me from ever hiring a small, privately owned firm to manage my investments. I think the concept of Portfolio Solutions make some sense, but I don't see how I can trust them in that regard. Plus, when using a mix of index funds, the most important things are selecting the right asset classes (large cap, small cap, foreign, emerging markets, bonds, etc.) to invest in, choosing the exact asset allocation amongst the funds, and re-balancing at the right time. Who is making those decisions? Rick Ferri, by himself? What if he uses bad judgement? Are there checks and balances at his firm? Does he publish his historical performance figures (before and after taxes)? Vanguard and Fidelity also offer full service, fully managed index fund investing in the 0.40% fee range. That's cheaper than 1%, but is it that much cheaper? Maybe, sort of.

I think what I am looking for is an investing solution that (1) is truly low-cost (around 0.20%/year total cost range for $6 million invested), (2) is fully managed/automated, (3) has solid performance with historical after-tax performance numbers to prove it and (4) is from an extremely trusted, large company.

Does this exist? If it does not exist, is this not a huge void in the marketplace that would attract billions and billions of dollars from high net worth investors?

Thanks!
Norman
Lollytiger
Posts: 165
Joined: Sun May 08, 2011 10:12 pm

Re: I need "high net worth" investing advice please

Post by Lollytiger »

Some comments:

1) Your reasoning regarding Portfolio Solutions sounds okay to me. I doubt they will pull a Madoff, but with $6 million you can very well err on the side of safety in exchange for paying higher fees.
2) With $6 million, for the same reason as before your risk profile should be "low", not "moderate". Your tolerance can be whatever it is, but since you have already "won" financially, there is no need to take risk. On the other hand, even if your lifestyle on $3 million is the same as it is on $6 million it will be pretty emotionally traumatizing to lose all that much money. In general people are more unhappy about their losses than they are happy about their gains.
3) One of the central tenets of Boglehead thinking revolves around historical data that shows investing performance doesn't persist. That is, past performance is not well correlated to future performance. In fact, it may not be correlated at all, it's been a while since I read the books in which this was illustrated. As such, the 10 year performance of X fund is pretty much considered meaningless. There are dramatic examples of this like with Bill Miller's fund, which beat the S&P for 10+ years in a row before it didn't (in a drastic way).
4) VTINX (Vanguard Target Retirement Income) seems reasonable as it is a) low cost b) fully automated c) composed of various broad bond/index funds which all have solid historical performance. This is highly unlikely to be due to the whole "if 1000 people flip coins, you will have one guy who gets alot of heads and people think he is skilled at flipping coins" luck problem (the parallel is that if you have 1000 actively managed mutual funds, you will surely get at least one with amazing historical performance) d) Vanguard is large, very trusted and would have troubles pulling a Madoff, see http://www.bogleheads.org/forum/viewtop ... 39#p148439. But still, you would want to read up and have some understanding of why it is set up the way it is.
SGM
Posts: 3341
Joined: Wed Mar 23, 2011 4:46 am

Re: I need "high net worth" investing advice please

Post by SGM »

Some experience with an advisor:

A small advisor group works with a custodian brokerage firm which sends monthly statements to the elderly client. The small advisor group broke off from a large company and brought the client with them. After the first million the fees get smaller. The advisors come out to the elderly client's house on a quarterly basis and make recommendations. He holds the client's hand and the client mostly holds state specific munis by the client's choice. This is marginally better than the local bank which was an earlier advisor. One of us looks over the shoulder of the advisor. The elderly client, highly intelligent but with no background in investing, has done better than the stock market over the last 10 years using a narrow focus on munis.

I think the advisor does not do much to earn his fees. The few MFs have too high fees. He may have slipped some stock in there to the client's benefit. The client refuses to take any capital gains as the client is very averse to paying taxes and mostly lives off social security and gives a lot to charity. The client is not very acceptable of advice period. The client has a life expectancy of 5 years then the govt and the heirs will have their chance.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
livesoft
Posts: 86077
Joined: Thu Mar 01, 2007 7:00 pm

Re: I need "high net worth" investing advice please

Post by livesoft »

nosher1 wrote:... because if I read 10 good books, while they are likely going to give similar, good advice, they are all going to give me 10 different sets of advice. So, which book do I ultimately follow? Do I use a dart board to pick the book I follow for my investments? Do I go with my "gut"? I don't trust my gut when it comes to investing, so why would I trust my gut when choosing an investing book to follow?
Very interesting in a silly sort of way. Is this a problem with all decisions for you? How do you buy a car, a TV, a restaurant meal? Why do you need to follow any book? Why can't you make up your own mind after a little bit of research? (It turns out that the 10 books give the same advice, not different advice, so this is lots easier than it sounds.)

In some sense, are not 10 responses to this thread much like the 10 books? How do you know which one to follow? Do you go with your 'gut'?

Finally, a word about fees. All mutual funds have fees. "The big, full service firms all charge around 1%, " but that DOES NOT INCLUDE ALL COSTS. Here is an interesting post from someone who uses an advisor with relatively low fees, but even those low fees are causing an issue: http://www.early-retirement.org/forums/ ... 60209.html
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
convert949
Posts: 411
Joined: Thu May 07, 2009 8:33 am
Location: Fort Myers, FL

Re: I need "high net worth" investing advice please

Post by convert949 »

nosher1 wrote:Do I go with my "gut"? I don't trust my gut when it comes to investing, so why would I trust my gut when choosing an investing book to follow? What I really want to do, for my peace of mind, is pick a management firm, tell them my risk tolerance (which is "moderate"), and let them do the rest. Picking a firm is not much different than picking a book to follow, I suppose, but at least I can just make the decision, and not have to think about investing on a day-to-day basis.
Wow :shock: Would you trust your advisor's gut? How does that give you peace of mind?

OK, pick one book... If you don't like to read much buy "John Bogle's Little Book on Investing". It summarizes why owning the market and keeping expenses low are the key. More importantly, considering what you are contemplating, it also explains the limitations of active management. Should help you sort through all of the advisor rhetoric you will hear.

Regards,

Bob
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: I need "high net worth" investing advice please

Post by Default User BR »

nosher1 wrote:A few people recommended Portfolio Solutions, but I do not think I would choose them. First, their fee is not as low as it originally appears. It is 0.25% PLUS expenses. Their website says the funds typically cost around 0.15%, so that brings the cost up to 0.40%, plus a few hundred dollars per year in trading fees.
I suspect you're wrong about this. I believe the .15% average expense refers to the expense ratio of the funds themselves. It's highly unlikely other firms are covering that for you. More likely they just are not disclosing it as one of "their" expenses. Unless they are planning on picking individual stocks for you, in which case you REALLY don't want them.

These are things you would know if you read the books. Even if you decide to use a manager, you need to gain background information so you know what they are doing.

This is a lot of money. Is it not worth a bit of your time?


Brian
User avatar
fishnskiguy
Posts: 2635
Joined: Tue Feb 27, 2007 12:27 pm
Location: Castle Rock, CO

Re: I need "high net worth" investing advice please

Post by fishnskiguy »

The smaller firms like Portfolio Solutions will put in writing that they have a fiduciary responsibility with you. The larger firms (Merrill Lunch, Prudential, Smith Barney, etc) will NEVER sign such a statement, because they can't. They are sales people posing as "advisors". Their sole job is to make as much money as possible for themselves and their firms.

Chris
Trident D-5 SLBM- "When you care enough to send the very best."
milestogo
Posts: 193
Joined: Sun Aug 08, 2010 7:16 pm

Re: I need "high net worth" investing advice please

Post by milestogo »

Hi
Welcome to Bogleheads. It is ok to want help with managing your investments. You could divide such a large amount between 2 or 3 advisors if you really do not want to diy. It's a way of diversifying! I would consider Ferri or Swedroe or Evanson until you can read a little and feel more comfortable. It is not in your best interest to go with any advisor who charges a large "management fee" and commisions as well. Please read William Bernstein's book INVESTORS MANIFESTO!! It is short and very helpful.
Congratulations on such success and on finding the forum. This is a great place to get good advice. I think you could just do it yourself but if that seems overwhelming use one of the other options for awhile. Don't help support some financial advisor who is really just a salesman in disguise.
Also attend to estate planning and asset protection asap. Wishing you all the best in your new situation!
tibbitts
Posts: 23726
Joined: Tue Feb 27, 2007 5:50 pm

Re: I need "high net worth" investing advice please

Post by tibbitts »

The OP is wasting way too much time worrying about this. On the one hand, he may not be aware, but $6 million isn't that big a deal among many members of this forum. On the other hand, it's enough that it matters much less how it's invested than it would if the amount was smaller. People with less money need to worry more about trying to maximize investment return. Unless the OP is in an unusual situation, maximizing return from $6 million, vs., say, just buying some treasuries with the entire amount, just wouldn't affect most peoples' lives that much.

Paul
Saving$
Posts: 2518
Joined: Sat Nov 05, 2011 8:33 pm

Re: I need "high net worth" investing advice please

Post by Saving$ »

nosher1 wrote: A few people recommended Portfolio Solutions, but I do not think I would choose them. First, their fee is not as low as it originally appears. It is 0.25% PLUS expenses. Their website says the funds typically cost around 0.15%, so that brings the cost up to 0.40%, plus a few hundred dollars per year in trading fees. The big, full service firms all charge around 1%, but that includes all costs.
This is EXACTLY the problem. It does not include all costs. There are three types of common costs. In fact many money managers don't even want you to know about all these costs, so many of them are well hidden.

1. Direct Costs: These are type that are charged directly to your account, where you actually see the money coming directly out of your account. One day you had $100, the next day you have $99 (at 1%). This is the cost that most people see, the cost you focus on, because of the way the cost is charged.

2. Fund Cost: These are the expense ratios of mutual funds. You NEVER see the direct effect of these as a deduction from your assets. It is NOT included in the fee any firm charges, because the expense ratio is different for every fund. The fund expense ratios just reduce your overall return. EVERY fund has an expense ratio; it is the cost of managing the fund, and is charged to your total assets in the fund. This comes out of the funds returns (or losses) before you ever see it. So if your $100 would earn $4 based on the funds investments, but the fund has a 1% expense ration, you now earn only $3. But if your fund has an expense ratio of .07%, you get $3.93. Over time this really adds up.

3. Load Costs: Many funds sold by these money managers have loads of up to 5% just as a cost for you to buy the fund. You pay $100 to buy shares, but only get $95 worth of shares because the broker and the fund company split the 5% load or sales charge. This is also not part of the costs disclosed by a typical broker.

You have received good advice on this forum. You need to do a bit to educate yourself on how you can get charged.
User avatar
fishnskiguy
Posts: 2635
Joined: Tue Feb 27, 2007 12:27 pm
Location: Castle Rock, CO

Re: I need "high net worth" investing advice please

Post by fishnskiguy »

The OP comes here, asks a good question, gets lots of good answers AND NOT A SINGLE BAD ONE. In the end, he wants to go with a broker at a major wire house who will surely make him broker.

We have done our best. I recommend we move on.

Chris
Trident D-5 SLBM- "When you care enough to send the very best."
livesoft
Posts: 86077
Joined: Thu Mar 01, 2007 7:00 pm

Re: I need "high net worth" investing advice please

Post by livesoft »

fishnskiguy wrote:The OP comes here, asks a good question, gets lots of good answers AND NOT A SINGLE BAD ONE. In the end, he wants to go with a broker at a major wire house who will surely make him broker.
You misread his post. He did not say he wanted to go with a broker at a major wire house. To make this clear, I would not consider Bernstein to be a major wire house.
Wiki This signature message sponsored by sscritic: Learn to fish.
Post Reply