Advising Ultra-affluent Clients and Family Offices

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2009-05-04
  • Publisher: Wiley
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Praise for Advising Ultra-Affluent Clients and Family Offices"Michael Pompian's book Advising Ultra-Affluent Clients and Family Offices is noteworthy for its comprehensiveness. Michael combines 'the big picture' with detailed, prescriptive, and actionable strategies; advisers to wealthy families will receive a detailed understanding of how a quickly evolving landscape impacts their business and its implications for their clients."-John Benevides, President, Family Office Exchange"This book should be on the reading list of anyone who wants to be a full-fledged professional in our industry. Michael Pompian has wisely chosen to focus on practical descriptions and recommendations; in my view this is a great plus, as we need more educational resources in this field. Congratulations. The book is well worth reading."-Jean L.P. Brunel, CFA, Managing Principal, Brunel Associates, LLC"Ultra-affluent clients want information and advice integrated and in real time. So planning, investing, and measuring become a continuous process. This is very hard to do. Michael Pompian articulates a clear and insightful road map which outlines the process, components, and human factors needed to create a sustainable world-class wealth management program-both advisers and wealth owners would be wise to follow Michael's lead."-Stephen Martiros, founder, Summitas (www.summitas.com) Managing Partner, CCC Alliance (www.cccalliance.com)"As wealthy families become more globalized, their needs for wealth preservation and growth have become more complex and sophisticated in times of financial uncertainty. Michael Pompian has crafted an insightful and comprehensive guide for enhancing your own capabilities and awareness on how to advise the most demanding clients. A must-read for all financial advisers!"-Dr. Kurt Moosmann, MBA TEP CFP; cofounder and Managing Partner of Dara Capital Ltd., Zurich, Switzerland"Without incorporating the critical components of effective family governance and the awareness of generational and behavioral issues, families of wealth and their advisers are operating blind in their wealth management pursuits. Michael Pompian's book gives both advisers and family members essential insights for discovering the risk factors they must consider in today's environment and in finding the resources required to provide consummate solutions."-Lisa Gray, graymatter Strategies LLC, author of The New Family Office and Generational Wealth Management"Advising Ultra-Affluent Clients and Family Offices is a valuable 'handbook' that covers all the major areas of wealth management. While Mr. Pompian has written the book primarily for wealth advisers, Advising Ultra-Affluent Clients and Family Offices will provide invaluable insights to ultra-affluent individuals and families, particularly those who are thinking about setting up a family office or becoming clients of a multifamily office."-Paul R. Perez, CFA, Managing Director, Family Advisory Services, Northern Trust"I like the way Michael Pompian presents this material. It covers the waterfront with a clear, concise, and compelling treatment. This book will prove useful for family members and family office executives. I especially admire the multigenerational orientation."-Bradley G. Fisher, CEO, Springcreek Advisors LLC (Multi-Family Office), Corte Madera, California

Author Biography

Michael M. Pompian, Cfa, Cfp, is the director of the Private Wealth Consulting Group for Hammond Associates-based in St. Louis, Missouri-which consults to over $55 billion. He works with some of the largest family offices in the United States. Prior to joining Hammond Associates, Pompian was a wealth management adviser with Merrill Lynch, a private banker with PNC Private Bank, and served on the investment staff of a family office. He earned an MBA from Tulane University and holds a BS in management from the University of New Hampshire. Pompian is a member of CFA Institute and the New York Society of Securities Analysts. He is also the author of Behavioral Finance and Wealth Management (Wiley & Sons). Pompian is married with three sons and can be reached at mpompian@haifc.com.

Table of Contents

Forewordp. xiii
Prefacep. xv
Acknowledgmentsp. xvii
Introduction to Advising Ultra-Affluent Clients and Family Officesp. 1
Who Are the Ultra-Affluent?p. 3
Defining the Ultra-Affluentp. 5
Quantifying Ultra-Affluence Among Total Global Wealthp. 10
Looking to the Futurep. 11
A World of Opportunities for Advisersp. 17
Understanding the Mindset of the Ultra-Affluent Clientp. 19
Why Advising the Ultra-Affluent is Differentp. 20
What Ultra-Affluent Clients Value in and Adviserp. 23
Building Relationships by Asking Questions and Listening to the Answersp. 29
Matching Client with Adviserp. 32
Consultant Questionnairep. 33
Conclusionp. 37
Wealth Attitudes, Aspirations, and Investor Behavior of Ultra-Affluent Clientsp. 39
Family Aspirationsp. 40
Wealth Attitudes of Ultra-Affluent Clientsp. 42
Where Psychology Meets Financep. 47
Investor Biasesp. 48
Conclusionp. 60
Noninvestment Best Practicesp. 61
The Challenges Associated with Wealthp. 61
Guidelines for Sustaining Multigenerational Wealthp. 63
Conclusionp. 71
Investment Strategies for Ultra-Affluent Clients and Family Officesp. 73
Practices of the Best Investment Organizationsp. 75
Differences between Endowments and Private Investorsp. 76
Investment Committeesp. 77
Investment Policy Statementsp. 82
Key Considerations for Portfolio Oversightp. 88
Conclusionp. 93
Asset Allocation Considerations for Ultra-Affluent Clients and Family Officesp. 95
What is Asset Allocation?p. 96
The Importance of Assumptions in the Asset Allocation Selection Processp. 97
The Importance of Asset Allocationp. 99
Considerations in Asset Allocation for Individual Investorsp. 100
Domestic and International Equityp. 111
Introduction to U.S. and International Equity Securitiesp. 112
The Five-Step Equity Strategy Processp. 115
Domestic and International Bondsp. 135
Introduction to Bondsp. 137
Descriptions of Bond Asset Classesp. 141
Private Equityp. 159
What Is Private Equity and How Does It Work?p. 162
Three Primary Types of Private Equity Investmentsp. 166
Creating a Customized Private Equity Programp. 172
Hedge Fundsp. 179
What Is a Hedge Fund?p. 180
Hedge Fund Investing by UACs and Family Officesp. 185
A History of Hedge Fundsp. 187
The Legal Environment of Hedge Fundsp. 189
Hedge Fund Strategiesp. 191
Manager Selectionp. 202
Real Assetsp. 203
The Portfolio Benefits of Real Assetsp. 204
Real Estate: A Long-Term Inflation Hedgep. 205
Natural Resourcesp. 210
Multigenerational Considerations for Ultra-Affluent Clients and Family Officesp. 223
Selecting an Adviserp. 225
Trust: The Key Ingredientp. 226
How UACs Select an Adviserp. 228
Questions for Prospective Advisersp. 234
Conclusionp. 237
Selecting a Custodian and Investment Vehicle Structurep. 239
Custodial Servicesp. 239
Investment Vehicle Structurep. 250
Conclusionp. 257
Considerations for Creating a Family Officep. 259
What is a Family Office?p. 261
Challenges of Wealthp. 262
Practical Reasons to Create a Family Officep. 264
Challenges of Running a Family Officep. 265
Services Provided by a Family Officep. 267
Administrative Considerations for Establishing a Family Officep. 268
Considerations for Establishing a Private Trust Companyp. 274
Conclusionp. 277
Wealth Transfer Planningp. 279
Estate Planning Basicsp. 282
Conclusionp. 295
Special Topics for Ultra-Affluent Clients and Family Officesp. 297
Concentrated Equity Risk Managementp. 299
What Constitutes a Concentrated Equity Position?p. 300
Concentrated Stock Risk Minimization Strategiesp. 304
Conclusionp. 315
Family Governancep. 317
Generational Divisionp. 318
Family Governance: An Essential Part of Successfull Wealth Transferp. 319
The Incredible Familyp. 320
Policiesp. 326
Stages of Developmentp. 327
Conclusionp. 328
Risk Management and Asset Protectionp. 331
Family Office Risk Managementp. 332
Individual Family Member Risk Managementp. 337
Legal Assert Protectionp. 341
Conclusionp. 344
Philanthropyp. 345
Philanthropic Strategy Development through Asking Questionsp. 347
Mission Statementp. 348
Implementation of Philanthropic Strategyp. 349
Philanthropic Investingp. 352
Best Practices of Giving Large Gifts to Colleges and Universitiesp. 355
Appendix: The Next Generation: Redefining the Philanthropic Landscapep. 358
Multigenerational Asset Allocation Strategiesp. 367
Different Asset Allocations for Different Generationsp. 369
Single Allocation for an Entire Familyp. 370
Customized Asset Allocation by Generation or Family Unitp. 371
Asset Allocation Targetingp. 374
The Behavioral Finance Approach to Asset Allocationp. 374
Conclusionp. 375
Notesp. 377
Indexp. 387
Table of Contents provided by Ingram. All Rights Reserved.

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