Family Wealth Management: Seven Imperatives for Successful Investing in the New World Order 1st Edition

an extraordinary synthesis of all the major factors that matter for preserving and building multigenerational family wealth...a much needed, long overdue guide for the practitioner

This is a pretty solid investment book, with the twist being that the investment strategies can be longer term, and with some secondary focus on keeping family issues from destroying a fortune.Although the book eventually becomes pretty dense, there are times when I would believe the authors are trying to make a skinny book into an acceptable length, although this is obviously not the case because the book is pretty thick for the genre. What I mean is they are pretty wordy at times, which is not my favorite style of writing. I'd be curious how many times the phrases "family wealth management" and "new world order" come up. The latter I find annoying because it sounds like such a catch phrase, particularly since the advice given is not so far off from what you normally hear.As far as the family part goes, they often warn about family problems, with no concrete solutions given. That's understandable because how can you run someone else's family for them, but by mentioning some of these issues, the active reader might read between the lines and start taking some of these things into consideration that they hadn't thought of before.It's not quite the kind of book that has me so enthralled that I cannot put it down, but on the other hand I do not (yet?) have a family fortune to manage. I can easily recommend it as part of a library that all family players should read before coming into (or at the very least before having to manage) wealth.

This is a very in depth book about family wealth management. The two authors are very well versed in every aspects of this complex multi-faceted subject. They impart a ton of information and a lot of reasonably practical advice. Yet, they can’t avoid a pervasive contradiction throughout the book. And, that is, contrary to what they advance, simplicity seems to most often beat out complexity. Let me explain.The authors make a case that the old approach of investing is dead. By that they mean that Harry Markowitz 1950s Modern Portfolio Theory promulgating asset diversification across just a few publicly traded asset classes is now obsolete. The world is now too complex, moving too fast, with many interdependent risks rendering this approach outdated. The new approach entails investing in many more asset classes including private equity, hedge funds, commodities, real estate, and infrastructure. The focus of their investment return test is the recent financial crisis with the related capital markets downturn (and upturn) from January 2008 to September 2009. On a related graph (pg. 257), they indicated that most asset classes were highly correlated during the downturn. And, that standard diversification did not work…… Oh really. Notice that in this one graph, the one asset class not shown is bonds. Bonds (outside of the nefarious MBS, CDOs) provided an effective risk cushion during their reviewed period. I checked the record of Vanguard Balanced Index Fund (60%/40% Stocks vs. Bonds; the approach the authors think is so outdated) during this exact same period. And, it preserved capital during this wrenching downturn far better than all the other alternative asset classes the authors showed in their graph. The Economist in a recent article picked up on that too, as it mentioned that the mentioned 60%/40% asset allocation fared far better than hedge funds and private equity during the downturn. In other words, those fancy alternative asset classes did not provide any incremental diversification benefits to the standard 60%/40% asset allocation. This in itself contradicts much of the investment advice that the two authors impart throughout the book. To their credit, the two authors quote a bunch of other experts that state that simplicity most often beats out complexity. Just to mention a few, in the preface Stephen Georges states exactly that (60%/40% did far better during the downturn than most complex diversifications alternatives). Later, Dr. Thierry Malleret (pg. 41-43) states that investors’ success will be enhanced by keeping investment strategies and allocations simple. Later, Robert Maynard (Pg. 163-164) states that a complex world does not entail complex solutions, but just the opposite.Despite this one major rebuttal to the author’s investment management philosophy, this book is very interesting and imparts a lot of information. Just to mention a few tools and insights I found very interesting: on page 253, the authors share a practical way of estimating bond returns over the next 10 years (just look at their current yield at yearend, and it gives you a good estimate of annual returns over next decade). On page 261, they share a similar method for estimating prospective stock returns as devised by John Boggle (founder of Vanguard). Regarding Private Equity, the authors state this is a 2-tier market. The top 10% of managers can generate Alpha returns. The vast majority of the remainder can’t. I am also wondering how persistent that top 10% of managers is. Once you look this issue, private equity investing may look even more unattractive. The authors advance that the vast majority of wealthy families fail in achieving their goals from one generation to the next. An even greater percentage fails to maintain their financial status over only three generations. This three generation hurdle is true in all cultures and throughout modern times. The authors impart a lot of information regarding dividing your investments into several different buckets (liquidity, medium and long term investing). They call this approach mental accounting. This makes a lot of sense, but in no way does this contradict the Modern Portfolio Theory (even though the authors advance it does).They come up with numerous 7 steps or 6 steps for successful family wealth preservations in addition to their own. Those are invariably interesting and valuable. As an aggregation, they sometimes feel a bit overwhelming.There are many more insights within this book than just the few I mentioned. In summary, this is a worthwhile and thorough book. However, you have to withstand the mentioned heavy dissonance throughout the book (simplicity vs. complexity).

A good read. I learned a little about family office functioning

I have a passing interest in investing and personal finance. My "passing interest" is motivated by wanting to insure that I succeed in retirement, whereby success is defined as, "not eating Alpo in my golden years," or making sure our savings last longer than we do. Somewhere along the way, I learned that the best way to insure that we won't outlive our savings is not to spend them. Who knew that by saving just 5% more, a 30-year retirement plan could be extended to infinity? So I slightly altered our retirement goal, but that introduced a new problem: what to do with the nest egg after we're gone?While this book covers a lot of financial ground (portfolio theory, asset allocation, investing strategy), most of those topics simply cannot be well covered in just a few pages or even a chapter. I didn't find those sections particularly helpful. Fortunately, the book does include a number of references to very good books for further reading. Where this book really shines is in covering the family aspects of managing wealth.If one manages to accumulate wealth, how do they insure that distributions enhance their heirs lives, rather than creating trust fund babies? How can distributions be structured so that they promote family unity and harmony? How does a family avoid the "rags to riches to rags in 3 generations" syndrome that's so common? These questions and many more I had never thought to ask are all well covered in this book. I strongly encourage anyone who may leave behind any personal wealth to read this book.