DIY for UHNW

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Topic Author
michaeljmroger
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DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 11:18 am

Bogleheads,

Last year I sold a portion of my shares for about $6.5M. In the meantime, two other things happened that I didn't anticipate:
  1. My company granted me a significant amount of additional shares
  2. The share's value increased dramatically
Overall, it means my total net worth is now approaching $30M. I worked really hard and arguably made a few reasonable choices along the way, but I honestly never expected to contemplate that kind of money. I'm obviously extremely fortunate, lucky, and grateful.

Now, I don't plan on selling the rest of my shares in the short term (definitely not this year at least), but it'll happen at some point, and I want to be prepared.

I'm currently managing some of my funds at Schwab and Vanguard, while Morgan Stanley manage the rest. As I'm starting to think about estate planning, I'd like to consolidate my portfolio in just one place in order to avoid overwhelming my heirs with multiple brokerage accounts and investment strategies. Vanguard would be my favorite option, but I'm a little bit worried about the DIY approach with this level of funds (anecdotally, one comment I saw yesterday in another post was discouraging someone to go the DIY route with a smaller portfolio than mine).

I'd like to understand what's radically different between managing $30k and $30M in typical Bogleheads fashion. I realize I need to find an estate planning lawyer (I should already do that actually), and work with a good tax advisor (I already have one) but, aside from that, is there really something that would prevent me from managing the funds by myself at Vanguard? It'd presumably save me around $300,000 per year in fees so, I'm sure you understand I'd prefer to avoid Morgan Stanley.

I tend to think that I know what I'm doing and that I have a pretty good understanding of asset allocation, tax efficiency, etc. but Morgan Stanley do a good job at convincing me about the opposite. Here's for example the portfolio I'd do if I was consolidating all my funds at Vanguard:
  • 15% Tax-Managed Capital Appreciation Fund (VTCLX)
  • 5% Tax-Managed Small-Cap Fund (VTMSX)
  • 10% Developed Markets Index Fund (VTMGX)
  • 20% Intermediate-Term Tax-Exempt Fund (VWIUX)
  • 15% California Intermediate-Term Tax-Exempt Fund (VCADX)
  • 20% Intermediate-Term Treasury Index Fund (VSIGX)
  • 15% Short-Term Inflation-Protected Securities Index Fund (VTAPX)
It’s a fairly conservative portfolio, but I don’t want to take more risks than needed as I already won the game. A few additional notes:
  • This asset allocation is inspired by the All Weather Portfolio, although I replaced the gold and commodities by short-term TIPS.
  • I don’t invest in emerging markets on purpose. This is a personal preference.
  • I tilt slightly to small caps because I believe there's potential for a higher risk-adjusted return.
  • I realize the 35% treasury bonds aren’t particularly tax efficient, but I’m not comfortable holding more muni bonds (I follow Bernstein's recommendation to have a maximum of 50% of the bond portfolio in munis). Since treasuries are exempt from state taxes, they look acceptable to me given the safety they provide.
  • Speaking of treasuries, I hesitated between VFIUX and VSIGX as they look very similar, but ended up going for the latter as I assumed it could be slightly more tax efficient.
So, to summarize my questions:
  1. Does this allocation look reasonable, and do you think I'm capable of managing ~$30M by myself?
  2. Is there really anything else than proper estate planning that I should be doing?
Thank you so much for your help!

fabdog
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Re: DIY for UHNW

Post by fabdog » Thu Jun 13, 2019 11:28 am

I don't see anything radically different, other than just the sum... If it was $3 million instead of $30 million, would you feel differently?

The allocation looks fine, conservative is fine, I might be even more conservative since as you say, you've won the game. I'd focus on your timeline for diversifying away your single stock risk, it's done well but no guarantee going forward. Does your position at the company come with an expectation of holding a certain amount of stock? So a clear plan of how you reduce that risk is your best bet.

And as a thought experiment... what will an advisor/broker do for you that you don't already propose? Annuities? Some Life Insurance! Some Alternative funds! Some proprietary funds only our HNW clients are able to access?

How would any of those improve upon the plan you already have created?

Another thought experiment... educating yourself as you are doing to manage this saves you $300K/year in fees... that's a nice sideline job :D

Mike

mac808
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Re: DIY for UHNW

Post by mac808 » Thu Jun 13, 2019 11:31 am

> Does this allocation look reasonable, and do you think I'm capable of managing ~$30M by myself?

Yes and Yes. I'm in the same boat and the majority of my assets are in a 5 fund lazy portfolio listed in the wiki. A minority are in angel investments that I make for fun. I previously owned rental real estate but sold everything and bought a REIT fund to reduce headache. There's not much need to diverge from a lazy portfolio until you are in the multiple hundreds of millions and direct ownership of private equity becomes meaningful. Of course, UHNW money managers will disagree so prepare for an onslaught of highly polished salespeople if your contact info leaks out to certain mailing lists. The most important thing you need is the discipline not to panic buy or sell but rather to stay the course. If you don't trust yourself to do that, then a trusted financial advisor may be worth hiring.

Scrooge McDuck
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Re: DIY for UHNW

Post by Scrooge McDuck » Thu Jun 13, 2019 11:48 am

Also in the same boat as you, and I went the DIY route at Vanguard. No regrets yet. I'll be interested to read the comments in this thread to see if I'm missing anything.

I would agree that you want someone to do estate planning and to do your taxes... but you're already on top of that.

Your portfolio looks fine. I invested a lot in the two tax-managed funds years ago and they've been fine for me, but I notice nobody talks about them much any more.

Topic Author
michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 11:58 am

fabdog wrote:
Thu Jun 13, 2019 11:28 am
what will an advisor/broker do for you that you don't already propose? Annuities? Some Life Insurance! Some Alternative funds! Some proprietary funds only our HNW clients are able to access?
I'm not entirely sure. They did mention they have access to "very unique funds" (their words), including Renaissance. I haven't dug deeper to be honest, but I guess I should try to clarify that with them.

JoinToday
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Re: DIY for UHNW

Post by JoinToday » Thu Jun 13, 2019 12:04 pm

michaeljmroger wrote:
Thu Jun 13, 2019 11:18 am
....anecdotally, one comment I saw yesterday in another post was discouraging someone to go the DIY route with a smaller portfolio than mine).
...

I tend to think that I know what I'm doing and that I have a pretty good understanding of asset allocation, tax efficiency, etc. but Morgan Stanley do a good job at convincing me about the opposite. ......
1. I saw the same comment discouraging DIY for larger portfolios. I am not seeing the issue other than greater importance of tax efficiency, and estate concerns.
2. as a previous poster stated, DIY and save $300K per year. It takes some effort to learn and set up your portfolio, but after that it only takes an hour per year. I suspect most of us here could live off of $300K/year.
3. Does Morgan Stanley give you any concrete reasons why they can do better than DIY? The one BIG advantage of a portfolio manager is they MAY prevent you from doing something really stupid, like panicking and selling everything at the bottom of the drop. The emotional aspect of investing should not be ignored.
4. I would call Vanguard, and have them make a portfolio recommendation. Ignore the international bonds, but take the rest of what they say.
5. Another option: Vanguard PAS, 0.3% fee. What does Morgan Stanley charge?
6. Simplify, simplify, simplify. Put everything in Vanguard.
I wish I had learned about index funds 25 years ago

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prudent
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Re: DIY for UHNW

Post by prudent » Thu Jun 13, 2019 12:05 pm

I congratulate you on your achievements, that's fantastic.

Even though I believe you can successfully manage any amount of money in Bogleheads style, there are other complexities that come with that level of assets. Estate planning, tax management, asset protection, risk management, philanthropy, concerns about next-generation behavior, etc.

I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution. Can't ignore the fees, which are certainly substantial, but I suspect that for less than what Morgan Stanley would charge just for investment management, you could get a whole cadre of professionals in one place and save yourself a lot of aggravation.

Not to say that an MFO is the right answer, just something to consider in your position, even considering the cost. And you surely can insist that investments be done the way you want.

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Raymond
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Re: DIY for UHNW

Post by Raymond » Thu Jun 13, 2019 12:11 pm

Congratulations!

+1 to fabdog's post.

I can only imagine the gnashing of teeth and wailing at your advisor's office when you pull your money from their management.

Out of curiosity, what do they have your money in currently?

Aside from the estate planning attorney and the tax adviser, consider umbrella insurance on top of your home and auto insurance.
"Ritter, Tod und Teufel"

Topic Author
michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 12:16 pm

Raymond wrote:
Thu Jun 13, 2019 12:11 pm
Aside from the estate planning attorney and the tax adviser, consider umbrella insurance on top of your home and auto insurance.
I already have one, although I should probably increase it ($1M at the moment).

LFS1234
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Re: DIY for UHNW

Post by LFS1234 » Thu Jun 13, 2019 12:31 pm

michaeljmroger wrote:
Thu Jun 13, 2019 11:18 am

I'm currently managing some of my funds at Schwab and Vanguard, while Morgan Stanley manage the rest. As I'm starting to think about estate planning, I'd like to consolidate my portfolio in just one place in order to avoid overwhelming my heirs with multiple brokerage accounts and investment strategies. Vanguard would be my favorite option, but I'm a little bit worried about the DIY approach with this level of funds (anecdotally, one comment I saw yesterday in another post was discouraging someone to go the DIY route with a smaller portfolio than mine).

If I recall correctly, you indicated elsewhere that 50% of your portfolio is self-managed, and the other 50% is managed by Morgan Stanley.

In your particular case, I think you should leave it exactly the way it is. You're very experienced in business and presumably no longer young; you are obviously comfortable with this solution, and you are now for some reason vacillating between doing more self-managing and doing less self-managing. So leave it the way it is. The advice would be different for a 30 year old where cutting out the expensive middlemen can make a difference between a very good retirement and a much less good one, but that is not your situation. Even if Morgan Stanley (or some other top-notch financial institution) collects 1% in managing half of your portfolio, you should somehow be able to scrape by just fine.

If you have not yet read Jeffrey Condon's "Beyond the Grave", I suggest that you do. Not necessarily for his specific prescriptions, but for the varied and eye-opening stories regarding the infinite number of ways that things can go wrong. Very useful for estate planning.

Your heirs' biggest problem will not be dealing with several financial accounts instead of one - a truly trivial matter. In your position, I would strongly consider putting a top-notch corporate trustee in the loop at least as a co-trustee. Whoever your successor will be is going to be thrust into a situation which most people would find nerve-wracking and intimidating. The corporate trustee has experience with these matters and can handle everything properly, as well as taking pressure off any family member (your spouse? a child?) who might find themselves being pressured by other heirs to do things they shouldn't be doing.

An additional benefit of having 50% of your assets managed professionally is that there is protection of half the estate in case your judgment fails and you start doing unwise things. This happens.

The most complicated part of the puzzle may be what to do if you become incapacitated. If you have close family, your corporate trustee is able to allocate funds to your care, and there is no conflict of interest whereby anyone might be tempted to skimp on your care in order to increase their inheritance, this might be relatively easily resolved. I'm not sure how best to handle an incapacity issue in the event that no close family is available to be involved. Others must have faced that problem, and there must be solutions - at least for people with 8-figure net worths.

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michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 12:32 pm

prudent wrote:
Thu Jun 13, 2019 12:05 pm
I congratulate you on your achievements, that's fantastic.
Thank you!
prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I've never considered multi-family offices for whatever reason. Any good names to recommend?

MotoTrojan
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Re: DIY for UHNW

Post by MotoTrojan » Thu Jun 13, 2019 12:41 pm

You seem to have the right idea. I’d prefer Total International but that won’t change much. I think I’d want more equity too, maybe 40%, but I can’t truly imagine what I would do with $30M.

chicagoan23
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Re: DIY for UHNW

Post by chicagoan23 » Thu Jun 13, 2019 12:47 pm

At the UHNW level, I would consider diversifying to different countries. I would take $7-9 million (25% or so) and split it among custodians in Singapore, Switzerland and maybe one other wealth-friendly jurisdiction. You would need expert advice to do this and to comply with the US reporting requirements to the IRS, but you have so many eggs, I would keep some in a different basket.

Topic Author
michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 4:29 pm

Just a quick note to thank all of you for your help and guidance! I cannot openly talk about this with most of my friends, and obviously every company I talk to isn't exactly impartial, so it's nice to have a community I trust that I can get advices from.

maximuum
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Re: DIY for UHNW

Post by maximuum » Thu Jun 13, 2019 4:39 pm

You may want to consider VTSAX (perhaps with a small value fund) instead of the tax managed funds. While the tax managed funds are just a few basis points more tax efficient than VTSAX, they might change the stocks they are tracking or close (like tax managed international). With VTSAX, you know exactly what you are getting.

barnaclebob
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Re: DIY for UHNW

Post by barnaclebob » Thu Jun 13, 2019 4:59 pm

30mil is ultra high net worth? I thought you needed 9 figures for that.

MotoTrojan
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Re: DIY for UHNW

Post by MotoTrojan » Thu Jun 13, 2019 5:02 pm

maximuum wrote:
Thu Jun 13, 2019 4:39 pm
You may want to consider VTSAX (perhaps with a small value fund) instead of the tax managed funds. While the tax managed funds are just a few basis points more tax efficient than VTSAX, they might change the stocks they are tracking or close (like tax managed international). With VTSAX, you know exactly what you are getting.
+1. Frankly I think you'd be fine just using VTSAX (forget any small component) and then whatever flavor of International you desire. At such a low AA you'd probably get a more efficient boost in expected returns by just bumping your overall equity AA up 3-5%. I also think having those 4 bonds is over-complicated but it can't hurt. Do you have a specific purpose for each?

bsteiner
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Re: DIY for UHNW

Post by bsteiner » Thu Jun 13, 2019 5:38 pm

JoinToday wrote:
Thu Jun 13, 2019 12:04 pm
...
5. Another option: Vanguard PAS, 0.3% fee. ...
They're 0.3% on the first $5 million, but less above $5 million. It's 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://investor.vanguard.com/financial ... visor-fees. So on $30 million it would be $42,500, or about 0.14%

I think it's an option worth considering.

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jakehefty17
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Re: DIY for UHNW

Post by jakehefty17 » Thu Jun 13, 2019 6:15 pm

First off, congratulations on your success.

If I were to find myself in such a fantastic predicament, I'd consider a portfolio very similar to the one you've constructed. 30/70 Stock to bond ratio historically has provided superior risk-adjusted returns. Looks like you've thought out your specific bond allocations as well.

You didn't provide your age, which would influence my allocation decisions. Regardless of "winning the game"... but that's just me.
michaeljmroger wrote:
Thu Jun 13, 2019 11:18 am
  1. Does this allocation look reasonable, and do you think I'm capable of managing ~$30M by myself?
    If you ask me, there's no reason to pay someone to do something you can easily do yourself.
  2. Is there really anything else than proper estate planning that I should be doing?
    Depends. Financially, it sounds like you're on the right track with your planning. If you are uneasy, consider seeing a for-fee financial planner for some professional feedback. Might be worth your dollar for the peace of mind.
Thank you so much for your help!
Vanguard PAS services is a perfectly reasonable solution as well, although it may be hard to let someone else manage your money. At this point, it seems you're pretty well invested in building your own plan. Good luck!
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

Topic Author
michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 9:03 pm

MotoTrojan wrote:
Thu Jun 13, 2019 5:02 pm
I also think having those 4 bonds is over-complicated but it can't hurt. Do you have a specific purpose for each?
I do, but feel free to let me know if my reasoning is wrong:
  • I follow Dr Bernstein's advice to limit the muni allocation to 50% of the bond portfolio, and limit state-specific munis to 50% of the entire muni allocation. So, in my case, it means about 20% VWIUX and 15% VCADX (since VWIUX already has about 10% of CA bonds).
  • I chose 20% of intermediate treasuries as they're one of the best diversifiers for equities, and they're exempt from state taxes.
  • Finally, the 15% in VTAPX hedge against unexpected inflation, which seems important to me given the fairly low stock allocation.

MotoTrojan
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Re: DIY for UHNW

Post by MotoTrojan » Thu Jun 13, 2019 9:10 pm

michaeljmroger wrote:
Thu Jun 13, 2019 9:03 pm
MotoTrojan wrote:
Thu Jun 13, 2019 5:02 pm
I also think having those 4 bonds is over-complicated but it can't hurt. Do you have a specific purpose for each?
I do, but feel free to let me know if my reasoning is wrong:
  • I follow Dr Bernstein's advice to limit the muni allocation to 50% of the bond portfolio, and limit state-specific munis to 50% of the entire muni allocation. So, in my case, it means about 20% VWIUX and 15% VCADX (since VWIUX already has about 10% of CA bonds).
  • I chose 20% of intermediate treasuries as they're one of the best diversifiers for equities, and they're exempt from state taxes.
  • Finally, the 15% in VTAPX hedge against unexpected inflation, which seems important to me given the fairly low stock allocation.
Seems reasonable, still more complicated than needed arguably but easy enough to manage.

Topic Author
michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Thu Jun 13, 2019 9:20 pm

bsteiner wrote:
Thu Jun 13, 2019 5:38 pm
JoinToday wrote:
Thu Jun 13, 2019 12:04 pm
...
5. Another option: Vanguard PAS, 0.3% fee. ...
They're 0.3% on the first $5 million, but less above $5 million. It's 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://investor.vanguard.com/financial ... visor-fees. So on $30 million it would be $42,500, or about 0.14%

I think it's an option worth considering.
Thanks for your feedback!

I actually considered that option and had a call with Vanguard to discuss their PAS services.

Despite the fact that I liked what I heard, I'm having a hard time convincing myself it'd be a good move. In terms of portfolio management, they'd do something very similar to the portfolio I described earlier, so it's a bit annoying to pay them to do pretty much the same thing. They also provide other services, but for some reason I'm not entirely convinced those services are as good as their funds. It seems like a fairly secondary department to me, not one of their core skills. I could definitely be wrong though.

MotoTrojan
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Re: DIY for UHNW

Post by MotoTrojan » Thu Jun 13, 2019 9:58 pm

michaeljmroger wrote:
Thu Jun 13, 2019 9:20 pm
bsteiner wrote:
Thu Jun 13, 2019 5:38 pm
JoinToday wrote:
Thu Jun 13, 2019 12:04 pm
...
5. Another option: Vanguard PAS, 0.3% fee. ...
They're 0.3% on the first $5 million, but less above $5 million. It's 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://investor.vanguard.com/financial ... visor-fees. So on $30 million it would be $42,500, or about 0.14%

I think it's an option worth considering.
Thanks for your feedback!

I actually considered that option and had a call with Vanguard to discuss their PAS services.

Despite the fact that I liked what I heard, I'm having a hard time convincing myself it'd be a good move. In terms of portfolio management, they'd do something very similar to the portfolio I described earlier, so it's a bit annoying to pay them to do pretty much the same thing. They also provide other services, but for some reason I'm not entirely convinced those services are as good as their funds. It seems like a fairly secondary department to me, not one of their core skills. I could definitely be wrong though.
You seem to have a fuller understanding than what I’d recommend PAS for. I’d absolutely self-manage.

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willthrill81
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Re: DIY for UHNW

Post by willthrill81 » Thu Jun 13, 2019 10:17 pm

Congratulations. :beer

A 30/70 AA in the funds you have listed is perfectly reasonable. You seem to be very capable of doing the portfolio management yourself; unless you fiddle with your AA, it shouldn't take more than a couple of hours or so each year. Your AA is definitely conservative, not just "fairly" so, but you could probably withdraw close to $1 million annually in today's dollars in perpetuity from it. Of course, you can't live on that, but it's a good start. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

JoinToday
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Re: DIY for UHNW

Post by JoinToday » Thu Jun 13, 2019 10:20 pm

MotoTrojan wrote:
Thu Jun 13, 2019 9:58 pm
michaeljmroger wrote:
Thu Jun 13, 2019 9:20 pm
bsteiner wrote:
Thu Jun 13, 2019 5:38 pm
JoinToday wrote:
Thu Jun 13, 2019 12:04 pm
...
5. Another option: Vanguard PAS, 0.3% fee. ...
They're 0.3% on the first $5 million, but less above $5 million. It's 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://investor.vanguard.com/financial ... visor-fees. So on $30 million it would be $42,500, or about 0.14%

I think it's an option worth considering.
Thanks for your feedback!

I actually considered that option and had a call with Vanguard to discuss their PAS services.

Despite the fact that I liked what I heard, I'm having a hard time convincing myself it'd be a good move. In terms of portfolio management, they'd do something very similar to the portfolio I described earlier, so it's a bit annoying to pay them to do pretty much the same thing. They also provide other services, but for some reason I'm not entirely convinced those services are as good as their funds. It seems like a fairly secondary department to me, not one of their core skills. I could definitely be wrong though.
You seem to have a fuller understanding than what I’d recommend PAS for. I’d absolutely self-manage.
I agree with MotoTrojan. Investing is not that difficult. The compelling reason for Vanguard PAS in my opinion include:
a. You don't have the time to learn about investing, or
b. You are concerned about the transition to your spouse after your demise, and she (or he) has no interest in investing
c. You worry about panicking after a market downturn.

DIY if a, b, or c don't apply. PAS if a, b, or c apply to you. Post here (on this forum) for the best advice.
I wish I had learned about index funds 25 years ago

aristotelian
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Re: DIY for UHNW

Post by aristotelian » Fri Jun 14, 2019 2:00 am

I remember hitting 100k and thinking 1m would be a lot of money. Now I am at 1m and it is really not different except for the number of zeroes. I would go for it with the caveats you mentioned. Might be worth looking into something things like setting up a charitable foundation or trust. Read the Bogleheads Wiki on windfalls.

mchampse
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Re: DIY for UHNW

Post by mchampse » Fri Jun 14, 2019 2:24 am

Only reason I can think of for having an advisor would be for your heirs if you pass away. You are definitely good at staying the course from what I’ve gathered, but your heirs may not be. My parents are UHNW mainly from doing well in real estate. Staying invested in securities is harder for them so their advisor keeps them from doing anything stupid.

MotoTrojan
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Re: DIY for UHNW

Post by MotoTrojan » Fri Jun 14, 2019 2:41 am

mchampse wrote:
Fri Jun 14, 2019 2:24 am
Only reason I can think of for having an advisor would be for your heirs if you pass away. You are definitely good at staying the course from what I’ve gathered, but your heirs may not be. My parents are UHNW mainly from doing well in real estate. Staying invested in securities is harder for them so their advisor keeps them from doing anything stupid.
Definitely need to protect yourself from age and poor decisions. My grandparents would have $30M most likely if they’d just have used index funds.

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michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Fri Jun 14, 2019 12:30 pm

prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I researched the topic a little bit and it seems like https://www.northerntrust.com and https://www.bessemertrust.com have a great reputation. I’ll give them a call and see how I feel about it.

not4me
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Re: DIY for UHNW

Post by not4me » Fri Jun 14, 2019 2:48 pm

michaeljmroger wrote:
Fri Jun 14, 2019 12:30 pm
prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I researched the topic a little bit and it seems like https://www.northerntrust.com and https://www.bessemertrust.com have a great reputation. I’ll give them a call and see how I feel about it.
This may be a bit off topic from your OP &/or may be a subset of the above. Prompted by your point about the difference between "managing $30K & $30M"...your approach looks fine for the 'managing' aspect. But $30M gives you new options for "why" you manage. This may be where an objective, 3rd party might help change your paradigm. It won't apply to everyone. Extreme example would be Bill Gates -- the reason he invests now is different than when he was starting out! You might not realize the options available to you in terms of supporting a cause, organization, etc. Perhaps the lawyer/accountant you have now can pitch ideas, but don't limit yourself to how the $ in managed, but why. Your thinking may need to expand.

cherijoh
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Re: DIY for UHNW

Post by cherijoh » Fri Jun 14, 2019 3:16 pm

Scrooge McDuck wrote:
Thu Jun 13, 2019 11:48 am
I invested a lot in the two tax-managed funds years ago and they've been fine for me, but I notice nobody talks about them much any more.
Most of the posts from people seeking feedback on their investments are not UHNW investors. Many of the non-UHNW Bogleheads have a large enough percentage of their assets in traditional 401k/IRAs that they can keep their entire allocation to bonds in tax-advantaged accounts, so no need for a tax-managed fund. The TSM and international funds I have in taxable are very tax-efficient, so I've never considered the need for tax-managed funds.

The problem of course is this doesn't scale up, because UHNW investors will most likely have the bulk of their investments outside tax-advantaged accounts.

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willthrill81
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Re: DIY for UHNW

Post by willthrill81 » Fri Jun 14, 2019 3:33 pm

cherijoh wrote:
Fri Jun 14, 2019 3:16 pm
Scrooge McDuck wrote:
Thu Jun 13, 2019 11:48 am
I invested a lot in the two tax-managed funds years ago and they've been fine for me, but I notice nobody talks about them much any more.
Most of the posts from people seeking feedback on their investments are not UHNW investors. Many of the non-UHNW Bogleheads have a large enough percentage of their assets in traditional 401k/IRAs that they can keep their entire allocation to bonds in tax-advantaged accounts, so no need for a tax-managed fund. The TSM and international funds I have in taxable are very tax-efficient, so I've never considered the need for tax-managed funds.

The problem of course is this doesn't scale up, because UHNW investors will most likely have the bulk of their investments outside tax-advantaged accounts.
Index funds like VTSAX are very tax efficient indeed. Over the last decade, Vanguard reports that the return after distributions, assuming the highest tax rates, on VTSAX was just 47 basis points lower than the pre-tax return, 16.05% vs. 15.58%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Pigeye Brewster
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Re: DIY for UHNW

Post by Pigeye Brewster » Fri Jun 14, 2019 4:05 pm

willthrill81 wrote:
Fri Jun 14, 2019 3:33 pm

Index funds like VTSAX are very tax efficient indeed. Over the last decade, Vanguard reports that the return after distributions, assuming the highest tax rates, on VTSAX was just 47 basis points lower than the pre-tax return, 16.05% vs. 15.58%.
In 2018, VFIAX was actually slightly more tax-efficient than VTSAX. They had roughly the same dividend yield, but qualified dividends were 94% for VTSAX and 100% for VFIAX.

LFS1234
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Re: DIY for UHNW

Post by LFS1234 » Fri Jun 14, 2019 10:24 pm

michaeljmroger wrote:
Fri Jun 14, 2019 12:30 pm
prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I researched the topic a little bit and it seems like https://www.northerntrust.com and https://www.bessemertrust.com have a great reputation. I’ll give them a call and see how I feel about it.
Should be an interesting opportunity to ask them for the names of some (non-in-house) estate attorneys who they feel would be appropriate for your particular situation, as well as why they feel each of those names might be a good fit for you.

Similarly, when you speak with estate attorneys, that would be a good opportunity to ask them for Trust Company(/MFO?) suggestions, as well as about the advantages and disadvantages of each given your needs.

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michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Fri Jun 14, 2019 11:25 pm

LFS1234 wrote:
Fri Jun 14, 2019 10:24 pm
michaeljmroger wrote:
Fri Jun 14, 2019 12:30 pm
prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I researched the topic a little bit and it seems like https://www.northerntrust.com and https://www.bessemertrust.com have a great reputation. I’ll give them a call and see how I feel about it.
Should be an interesting opportunity to ask them for the names of some (non-in-house) estate attorneys who they feel would be appropriate for your particular situation, as well as why they feel each of those names might be a good fit for you.

Similarly, when you speak with estate attorneys, that would be a good opportunity to ask them for Trust Company(/MFO?) suggestions, as well as about the advantages and disadvantages of each given your needs.
Yes, I will. Bessemer Trust for example requires a $10M minimum account, so I assume they have everything high-net-worth individuals usually need. If anything, I’d probably be a small client for them.

It’s funny how I’m now contemplating these family offices and private wealth managers. That’s literally the opposite of the Bogleheads culture I’ve been embracing and advocating for a while now. I don’t know yet if it’s a logical, reasonable progression given my financial evolution, or if I’m just completely losing my mind...

Zombies
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Re: DIY for UHNW

Post by Zombies » Sat Jun 15, 2019 2:05 am

It’s probably the latter.

I’m in a similar boat and DIY because I can’t find any “edge” from going with a professional every time I’ve investigated it. It helps that I enjoy personal finance and read this site thoroughly and daily.

Every year I ask my accountant “is there really nothing else I can do?” and other than give even more to charity, the answer seems to be no. I’m not even sure why I have an accountant, as I run the numbers myself anyway to check and they always come up the same.

I’ve come to the conclusion that with a good understanding of what’s required, the only reason to pay a pro’s fees (outside of good estate planning which calls for a good, likely expensive lawyer) is to feel good about “qualifying” for that service. I prefer to save the fees instead.

LFS1234
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Re: DIY for UHNW

Post by LFS1234 » Sat Jun 15, 2019 8:33 am

michaeljmroger wrote:
Fri Jun 14, 2019 11:25 pm

It’s funny how I’m now contemplating these family offices and private wealth managers. That’s literally the opposite of the Bogleheads culture I’ve been embracing and advocating for a while now. I don’t know yet if it’s a logical, reasonable progression given my financial evolution, or if I’m just completely losing my mind...
Talking to someone doesn't mean you have to hire them. I'd treat these interviews as fact-finding expeditions which have some similarity to blind dates: everyone's going to be on their best behavior but the odds are well over 90% that any particular prospective partner won't be the right one for you, at least at this time. Hopefully you'll gain useful knowledge and be able to improve your selection criteria for future encounters. Additionally, there is always a possibility that at some future time, some previously rejected institution might be a much better fit. Meanwhile, treat these fact-finding expeditions as adventures and enjoy them!

I saw a 12-year old article according to which Bessemer had a minimum account size of $10M, had an average "relationship" (does this include multiple same-family accounts?) of $27M, and that their average new account size was $37M. Additionally, it sounds like they provide a lot of services at no additional charge, meaning that their charges are likely to be on the high side, and that if you don't want or need their full menu of services you'll be paying for them nevertheless. I would certainly talk to them! They represent one extreme of the business and its always good to have a good idea of the full palette of services that are out there. They will be interested in talking with you and they'll put their best foot forward, so you'll probably have some interesting conversations with some interesting people.

I saw elsewhere a 2017 article according to which Northern Trust had a minimum account fee of $20K, but for their $5M minimum account size this translated into 0.4% of assets. Furthermore, those fees were gradually reduced to 0.05% of assets for amounts over $30M. This being for personal directed trust services; if you want additional services you pay extra. But if you want the bare basics, the fees are far below 1% of AUM. And with a relationship of that type, you'd still have speedy access to capable professionals for additional services as needed; you'd just have to be willing to pay extra for those services. This type of relationship probably makes more sense to self-made financially savvy people, while the Bessemer type relationship may be optimal for families who have been living off of trust funds for generations.

My impression of the way the trust company business typically works, from the standpoint of the trust officer, is the following:

1) Grandpa, who is self-made, walks in at age 70 with his $37M account. His main purpose for doing this is to ensure as smooth a transition as possible when he dies or becomes disabled.

2) Grandpa dies, and after the estate is settled and the government, grandma and others have been provided for, his four kids inherit $4M each.

3) The trust company will attempt to keep the kids' money in-house, but reality is that in most cases, the money will be either spent or transferred elsewhere within a few years. To the extent grandpa's good investment genes get passed on, his kids won't like paying unnecessary fees either.

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TomatoTomahto
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Re: DIY for UHNW

Post by TomatoTomahto » Sat Jun 15, 2019 8:45 am

Zombies wrote:
Sat Jun 15, 2019 2:05 am
It’s probably the latter.
I’m in a similar boat and DIY because I can’t find any “edge” from going with a professional every time I’ve investigated it. It helps that I enjoy personal finance and read this site thoroughly and daily.
Every year I ask my accountant “is there really nothing else I can do?” and other than give even more to charity, the answer seems to be no. I’m not even sure why I have an accountant, as I run the numbers myself anyway to check and they always come up the same.
I’ve come to the conclusion that with a good understanding of what’s required, the only reason to pay a pro’s fees (outside of good estate planning which calls for a good, likely expensive lawyer) is to feel good about “qualifying” for that service. I prefer to save the fees instead.
👍
The payoff is an elevated version of being able to discuss “what my money people say.” Not worth it.

Get a good estate attorney to draw up wills, trusts, etc. I employ a CPA, in large part because DW’s employer attributes income to multiple states (long story) and I’m lazy and have a phobic reaction to reading tax regulations.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Sandtrap
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Re: DIY for UHNW

Post by Sandtrap » Sat Jun 15, 2019 9:01 am

bsteiner wrote:
Thu Jun 13, 2019 5:38 pm
JoinToday wrote:
Thu Jun 13, 2019 12:04 pm
...
5. Another option: Vanguard PAS, 0.3% fee. ...
They're 0.3% on the first $5 million, but less above $5 million. It's 0.2% from $5 million to $10 million, 0.1% from $10 million to $25 million, and 0.05% above $25 million: https://investor.vanguard.com/financial ... visor-fees. So on $30 million it would be $42,500, or about 0.14%

I think it's an option worth considering.
+1
Wholeheartedly agree!
It would cost nothing to conference with VPAS.

You are not on contract with Vanguard to do this. They can set it up and you can work with them over time to see how things pan out. Discontinue their services as you wish while leaving their framework intact.

Years ago, I had a number of discussions with VPAS advisors about the 0.2% fee as it was leaps and bounds better than any other brokerage that I was vetting at the time. They were very helpful, informative, and "zero hard sell". (Though I did end up managing on my own to save fees). :happy

Again, you might want to conference with a Vanguard VPAS advisor(s), it costs nothing and would be interesting for you.

FWIW: I have a business friend, early retired, recently in a similar position as yourself with somewhat larger assets. After running the gamut of brokerage conferences and helpful advisors, he ended up self managing his portfolio and is doing great with it.
Do indeed confer with all the professionals you need, CPA, Estate Attorneys, etc.

j :)

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michaeljmroger
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Re: DIY for UHNW

Post by michaeljmroger » Sat Jun 15, 2019 10:38 am

Zombies wrote:
Sat Jun 15, 2019 2:05 am
It’s probably the latter.

I’m in a similar boat and DIY because I can’t find any “edge” from going with a professional every time I’ve investigated it. It helps that I enjoy personal finance and read this site thoroughly and daily.

Every year I ask my accountant “is there really nothing else I can do?” and other than give even more to charity, the answer seems to be no. I’m not even sure why I have an accountant, as I run the numbers myself anyway to check and they always come up the same.

I’ve come to the conclusion that with a good understanding of what’s required, the only reason to pay a pro’s fees (outside of good estate planning which calls for a good, likely expensive lawyer) is to feel good about “qualifying” for that service. I prefer to save the fees instead.
As far as I know, the value they add to a typical Bogleheads portfolio (aside from all the trust services etc.) is diversification in your investments. Instead of having 100% of your risks concentrated exclusively in stock index funds, they invest in private companies, real estate, hedge funds etc.

Zombies
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Re: DIY for UHNW

Post by Zombies » Sat Jun 15, 2019 11:00 am

michaeljmroger wrote:
Sat Jun 15, 2019 10:38 am

As far as I know, the value they add to a typical Bogleheads portfolio (aside from all the trust services etc.) is diversification in your investments. Instead of having 100% of your risks concentrated exclusively in stock index funds, they invest in private companies, real estate, hedge funds etc.
I don’t think that’s “value.” I spent time recently with some old friends who are very successful hedge fund guys. They, too, use Vanguard for most of their personal investments. Sure, they have investments in their own fund, but they’ve seen enough to know chasing exotic return is a flight of fancy.

You seem to want generally conservative investments, so I don’t know why you would want to go after these other approaches. The model is simple IMO (at least for my holdings):

- vast majority in Vanguard 3 or 4 fund portfolio
- angel investments in tech that I find interesting, with a negligible portion of my overall portfolio
- a house I’m happy with. Have decided not to do a second home for all the reasons people state on those threads, just rent when I travel. No real estate “investments” with all the headache
- a large chunk available to invest in my own private company if and when I do that, which I’ll sell Vanguard funds to fund

I’m not that conservative allocation wise, but I’ll flow with the market, have quick access if I ever want money for things, and use institutional shares and pay basically nothing in fees.

I’m very happy with that.

desiderium
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Re: DIY for UHNW

Post by desiderium » Sat Jun 15, 2019 11:20 am

michaeljmroger wrote:
Fri Jun 14, 2019 11:25 pm
michaeljmroger wrote:
Fri Jun 14, 2019 12:30 pm
prudent wrote:
Thu Jun 13, 2019 12:05 pm
I think I would look into a "multi-family office" (MFO) to see if maybe that is a good solution.
I researched the topic a little bit and it seems like https://www.northerntrust.com and https://www.bessemertrust.com have a great reputation. I’ll give them a call and see how I feel about it.

It’s funny how I’m now contemplating these family offices and private wealth managers. That’s literally the opposite of the Bogleheads culture I’ve been embracing and advocating for a while now. I don’t know yet if it’s a logical, reasonable progression given my financial evolution, or if I’m just completely losing my mind...
I think it comes down to cost, services rendered and alignment of interests. DIY is cheap; what you get is dependent on your own skills and behavioral psychology. The interests are unified. Advisors should have an alignment of interests; i.e. they should not make anything off the investment products themselves. You should be able to transparently see the costs. Looking at the services rendered, you have fairly complicated inheritance issues and taxation is going to be a major (and complex) component of your investment yield. All of us have behavioral risk.

As you weight the cost/benefit and explore different options, get your estate and possibly trust plan established.

Good luck and congratulations on your good fortune

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