I write about the creation and management of exceptional wealth. Opinions expressed by Forbes Contributors are their own.
The super-rich (net worth = US$500 million or more) and single-family offices very often make use of the most sophisticated wealth management strategies and products. Interestingly, many less affluent families, though still wealthy, have the impression that these exceptionally wealthy families have access to tax and investment secrets – strategies and products only they can source. In the current financial services’ environment they are mistaken, as the reality is far more sobering.
To begin with, except for bespoke one-off tax planning, the very best wealth managers can deliver any financial solution existing today. Sophisticated and motivated financial and tax professionals can re-engineer any strategy or product in existence. Nothing is inherently proprietary.
According to John Bowen, founder of AESNation and author of Becoming Seriously Wealthy, “While some wealth management strategies and financial products require very specific fact patterns, including certain capital criteria, the reason many affluent families are not using or considering most of the more sophisticated and potentially very powerful wealth management solutions is simple. They are not working with high-caliber wealth managers. In the world of financial advisors, a great many of them are pretenders who want to do a good job for their clients, but lack the knowledge and skills to deliver state-of-the-art solutions to the successful and wealthy.”
Consider private placement life insurance (PPLI). At one time it was limited – for various reasons – to the wealthiest families. “Today affluent individuals can benefit from highly customized private placement life insurance policies and private placement variable annuities,” says Frank Seneco, president of the advanced planning firm, Seneco & Associates. “The financial requirements for these products are fairly low. A person would need to only invest $500,000 for a private placement variable annuity and $1 million for a private placement life insurance policy. Furthermore, a significant change over time is that today affluent investors can select any qualified investment manager to run the money. This gives them enormous flexibility just like the super-rich.”
The real wealth management “secret” of the super-rich and single-family offices is their ability to identify and select the most erudite, adept, and practiced wealth managers and related professionals. The super-rich or their single-family offices do their homework. They are appropriately circumspect and rely strongly on professional referrals as well as making calculated use of second opinions.