By Taylor Ranker, II, chief executive officer of Questmont Virtual Family Office
As a successful business owner you do, in fact, have a target on your back. As your wealth and visibility grow so does that target. If you are in this category with dozens, or even hundreds, of employees you are one of the United States’ most productive citizens. You create the jobs, the healthcare and the stability that the United States so desperately needs. You also deserve to be defended and protected from this “Circle of Vultures.” Sadly, the vultures can come from outside the fort or inside the fort. By inside the fort we are describing people you already know and probably trust. This can be your golf buddy, brother or sister, an old friend, or, essentially, someone who already has a seat at the table. The vultures outside the fort often come from the financial advice or insurance industry. Trust me, I know, as I started my career over 30 years ago as a life insurance agent and investment broker. My main intention then was to make myself money. I am still paying my penance for those years.
Let’s start with the vultures in the financial advice industry and a tool we refer to as the hierarchy of financial advice. At the top, or epitome, of which is the single-family office, think Bezos, Buffet and Michael Jordan. They have created their own family office, which is an entity that exists to offload the complexities and responsibilities of large wealth. At the bottom is the agent or broker. They have inherent conflicts. They work on commission, often have sales quotas and often only represent the products of one company. There is no problem with this if it is fully disclosed and transparent to the buyer, which all too often it is not. They may claim to be a wealth manager or financial advisor. Personally, this drives me nuts, it is like being the drug representative but acting as if you are their doctor. The next tier up we refer to as a financial or investment advisor. At this level, the focus tends to be on investments and performance goals. At this level, they are often not competent in other planning areas. The next tier is true wealth management (don’t get me fired up) which are the buzz words of my industry for the last 20 years.
There is an actual industry definition of wealth management which is: wealth management equals investment consulting + advanced planning + relationship management. Our own observations lead us to believe that fewer than 8% of licensed advisors actually deliver on this. Wealth management includes investment consulting, portfolio management, asset allocation design, manager due diligence, risk evaluation and performance analysis. Then the fun really begins because we add advanced planning, which includes tax mitigation, estate and charitable planning and asset protection, to boot. As if that wasn’t enough, the final piece is relationship management, which entails managing the entire family and all their advisors (tax, legal, insurance, wealth) in one coordinated team.
The top tier is “family office” which can also include multi family and virtual family offices. At this level, the word “defend” begins to enter the playbook, as these families frequently need defending from inside and outside the fort.
We have seen the many forms this can take, such as our client who owns several manufacturing companies (with a net worth over $100 million) but very little liquidity, equaling less than $3 million. During the Covid lockdown, his best golf buddy suggested he invest in a real estate deal he had going. When our VFO real estate expert examined the deal, it turned out it was an operating marina, which would have required a $1,000,000 investment which would remain illiquid, for years. It also was in the bottom 25% of all operating marinas in the country for profitability. It sucks when we must defend our clients from a close friend.
Another client, in their mid-fifties, hired us to help exit their business. The older partner was in his mid-seventies. We represented the younger partner, who had $50 million dollars after they sold the business. His best friend worked for a group who began trying to sell them a $10 million life insurance policy, under the guise of paying estate taxes. This would have incurred a $60,000 annual premium and a $60,000 commission to the broker.
We conducted a wealth stress test for this client and discovered that they had already been sold $9 million worth of life insurance. So, if we simply took the existing life insurance and placed it inside an irrevocable life insurance trust, that would get it out of their estate and cover the estate tax. They could save $60,000 a year. In this case, they learned from the mistake before it even happened.
Do you feel like your advisory team is defending you and your interests? Is your team coordinating and meeting on a regular basis? If not, they can’t know and protect your interests. Has your team ever performed, or much less even heard of, a “wealth stress test”? If not, maybe the vultures are circling overhead.
As President of Questmont Strategic Wealth Advisors, Taylor K. Ranker, II, enjoys putting his 30+ years of experience to use by helping clients discover their life’s dreams and ambitions, then consulting with them on how to make them happen. Reach Taylor at [email protected].
Securities offered through Kestra Investment Services, LLC, (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Service, LLC, (Kestra AS) an affiliate of Kestra IS. Questmont Strategic Wealth Advisors, Inc., is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
