Archive for the ‘NEWS AND COMMENTARY’ Category

Family wealth: finding purpose, fighting entropy

01 / 15 / 2019
by Charles Skorina | Comments are closed

A conversation with Stuart Lucas: wealth manager, educator, and family scion

Stuart Lucas has double-barreled credentials as a wealth manager.

He's a Harvard MBA who worked for years with top-shelf financial firms including Wellington Management Company and Banc One (now JP Morgan Chase), where he led their Ultra HNW unit.

And, he is himself an heir to family money by way of his great-grandfather, E. A. Stuart, who founded the Carnation Company.  In 1985, the closely-held business was sold to Nestle, and the proceeds were distributed among Mr. Stuart's descendants.

In 2004, Mr. Lucas merged his professional and personal worlds by founding Wealth Strategist Partners, which continues today as the investment advisor to his and selected other family offices.

He has gone on to design and lead a Private Wealth Management executive education program, designed specifically for wealthy families at the University of Chicago Booth School, now in its 12th year.  And, as an adjunct professor, he has taught a Wealth and Family Enterprise Management course at the MBA level.

All this experience has also been distilled into his widely-read book, Wealth: Grow It and Protect It, for general readers; and into academic-quality papers for The Journal of Wealth Management.

We're delighted that he made some time to talk to us.

Keeping it in the family

It is better to have a permanent income than to be fascinating.

- Oscar Wilde

Skorina: Stuart, you've focused on high-net-worth families and their money for decades as a practitioner; an academic; and even personally, as a member of an extended, affluent family.  You probably know as much about this stuff as anyone in the business.

Where do you begin with a new client who has to deal with all of this for the first time?

Lucas: Charles, it's true I've been doing this for quite a while, but no one knows everything about it.  I learn something new every day.

A family office with significant wealth has many moving parts.  There's money-management per se, which you focus on; and it's crucial.

But, there are also the structural, legal, and tax issues.  And there are opaque but vital intra-familial and cultural issues that have to be dealt with.  They're all important, and all inter-related.

The laws and tax rates keep changing, so do markets, and so do the families themselves.  We try to design and execute an integrated strategy that balances all these elements.

Skorina: So, how do you start the conversation with a new client?

Lucas: When we sit down with a family who's thinking about hiring a wealth manager or setting up a family office, my top discussion points are:

  • What do you want to accomplish with your wealth?
  • What's the right structure for managing your family money? How will it be governed?
  • How will your family members be educated about their wealth and held accountable to each other?
  • Do you understand that taxes affect everything? Tax-planning is critical for wealth-preservation.
  • You will need help: a wealth advisor, an attorney, an accountant, and perhaps a family-office or outsourced chief investment officer.

 

The first - and foundational -- question to answer is: What do you want to accomplish with your wealth?  A sense of purpose is as important in managing family money as it is in managing a business or any other human enterprise.

And it helps to weld a family together.  To keep them engaged, they must find a balance between their common and individual needs.



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Chief Investment Officer Pay in 2018/2019

12 / 08 / 2018
by Charles Skorina | Comments are closed

Our projections - Growth slowing to 7 percent for endowment CIOs

Back in October, we reported the latest-available compensation numbers for 74 chief investment officers at the biggest (over-$1 billion AUM) endowments.

We used the most recent filings for our data, but those numbers (for calendar year 2015) were already pretty stale.

As we said then, the hitch is the long time-lag -- more than two years -- before IRS data is publicly available.

Now we're back with our own estimates of what these CIOs are actually making right now, in real time, extrapolating from 2015 to 2018.

We find that typical CIO pay has been growing at a compound rate of more than 7 percent per year

We looked at a large subset of those original 74 CIOs, 32 who had held office for five consecutive years, 2011 to 2015.  It's a big enough and inclusive-enough subset (big and small, public and private, geographically diverse) that we feel comfortable projecting our findings to the whole population of 74 CIOs.

From that time-series we projected out three more years to get point-estimates for 2018.

(To be clear, this is total W2 compensation, including base, bonus and "other" as classified by the IRS.  It omits other benefits which are not taxable to the CIO, but which may be significant.)

The median big-endowment CIO made approximately $609,000 in 2011.  Five years later, in 2015, he or she was making about $1,100,000.  That's a rise of about 80 percent over five years.

Stated as a compound annual growth rate (CAGR), that's 12.6 percent per year.

But that's based on historical data.  We then needed to push our trendlines out from 2015 to 2018, for which we have no data.  So, stand back, some freshman math is required.

 

We found that CIO pay is still growing briskly, but that the growth rate seems to be slowing in recent years.

 

From 2015 to 2018, we estimate that the median CIO in our sample grew his/her pay from $1,100,000 to $1,380,000, for a rise of 26percent over three years.

 

As a CAGR, that's 7.1 percent per year.

 

The chart below shows the pay for the 32 CIOs in our study and projections for the 21 who are still in office this year.



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A Total Enterprise Approach to Endowment Management

08 / 02 / 2016
by Charles Skorina | Comments are closed


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Cambridge Elevates Recently Appointed President to CEO

05 / 14 / 2016
by Charles Skorina | Comments are closed


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We Love Our Ranch, but It’s Time to Say Adios

04 / 28 / 2015
by Charles Skorina | Comments are closed

Thirteen years ago my wife and I bought an 80-acre ranch in Carmelo, Uruguay in South America.  

It's out in the country, but only about 60 miles north of the great city of Buenos Aries in neighboring Argentina.

The old stone farmhouse was quaint and traditional (i.e., a little run-down) but we fell in love with it.

Then we replaced the front door.  And then...well, by the time we had finished with construction six years later, we had ourselves a hacienda in the Spanish Mediterranean/Santa Barbara style, with a main house, guest house suites, caretaker's house, and assorted other structures.  We added a few horses, cows, chickens, dogs, cats and presto, our retirement ranch was complete.

It's a great getaway because it's summer down there when it's winter in North America.  The mild climate, safety and stability, and the friendly people all led us to buy in little Uruguay instead of one of its giant but turbulent neighbors: Brazil to the north, or Argentina to the south and west.

Uruguay is the safest country in South America.  Property rights are secure for both citizens and foreigners; and the weather is pretty much the same as southern California, except that the rains are regular and there is plenty of water.

It's a beautiful, peaceful place to relax when you really need to get away from it all, but it's a long commute from California.

My search work, which I love, does not leave us as much time as we would like for the long trip down and back.  It's a much easier trip for someone living on the east coast to connect to Montevideo or Buenos Aries from New York or Miami.

So, we've reluctantly decided it's time to sell.

The links below will take you to a lot of photographs of the house, grounds, and surrounding area which will give you a much better idea of what it's like.

Please feel free to contact me directly if you have questions, or you can call our broker, Patrick Archer.

See: https://www.facebook.com/EstanciaTierraSanta

See: http://estanciatierrasanta.com/

Patrick Archer: patrick@investba.com

USA:  1.800.251.2720  URY:  598.98.822.048  Skype: patrickarcher



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