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Über dieses Buch

The meaning of wealth has become one of the least understood concepts of our time. Whether you desire wealth, have wealth, or wish to redistribute wealth, the roadmaps to success have been painted over by outdated financial models, politically charged rhetoric, and the mistaken belief that at its core wealth is simply a number. Tailored Wealth Management meets you where you are: a new college graduate, a retiring CEO, a journeyman carpenter, or a compassionate philanthropist. The book educates readers with a deeper understanding of their place on the national and global scales of wealth. It proves that the term “wealthy” can apply as fittingly to a gas station attendant as it does to a gas company president. It empowers the reader with the causes and effects that allow wealth to accumulate, to produce income, and to re-shape society through responsible gifting and philanthropy.

As American household wealth has recently crossed through $100 trillion, investors have become polarized between ineffective complexity versus blind “hope” simplicity. The under-funded pensions, retirement accounts, and social safety nets are a result of a failure of the status quo. Life, liberty, and the pursuit of happiness are not only inalienable rights but achievable goals open to the masses rather than the few. Tailored Wealth Management topples the walls that have quarantined families and individuals from becoming wealthy, staying wealthy, or passing the same on to the next generation and our communities.

This book provides solutions for the active, passive, small, and large investor arming the reader with the causes that lead to the effect of success.

Inhaltsverzeichnis

Frontmatter

The Landscape of Wealth Around the World

Frontmatter

1. Introduction

Abstract
Can a gas station attendant be wealthier than a gas company CEO? He can. As you read on, I’ll name names and identify repeatable ways that the attendant did it.
Niall J. Gannon

2. Average Americans: Stories of “Ordinary” Success

Abstract
In Investing Strategies, I shared the story of Dennis and Judy Jones who turned their life savings of $100,000 into a $3.6 billion company by the time they rang the closing bell of the New York Stock Exchange on August 30, 2000. The Jones’ tale of success, which brought them from the trailer they lived in as newlyweds to the upper echelons of wealth, is impressive; in fact, it is so spectacular, to bring us down to earth, I feel I should tell you a few stories about regular folks who achieved a more moderate success and how they did it.
Niall J. Gannon

3. Wealth: How Much Do You Need; How Much Is Enough

Abstract
Several attempts have been made at studying the income or net worth necessary for happiness. These studies warrant consideration not because they agree on a specific number, but because they attempt to measure how much is necessary to truly remove certain worries from an individual’s life. For starters, imagine what it would be like if you could live your life completely free of worry about a retirement nest egg or your ability to pay for your children’s college education. Removing these two worries from a family can be a financial goal in and of itself and can serve as a wonderful template for an older wealth creator considering how much and when to gift assets to his extended family.
Niall J. Gannon

4. The Growth of American Wealth: Its Impact on the Average Household Compared with the Forbes 400

Abstract
American households and non-profit organizations had a total net worth of nearly $100 trillion in net assets (after deducting $15.4 trillion in total liabilities including home mortgages) at year end 2017. While much has been written about the stagnating or under-performing wealth of the average family, viewing total household wealth paints a brighter picture than viewing any sub-component of society. When we studied the progress of US household wealth back to 1952, the annualized growth rate was 6.82%.
Niall J. Gannon

5. The Six Robbers of Wealth and How to Avoid Them

Abstract
In Investing Strategies for the High Net Worth Investor, I stressed that the only dollars that were material to long-term success were those that stayed in the portfolio net of an investor’s spending, taxes, fees, and inflation. To those wealth diminishers, two other things rob an investment portfolio of future success: late starts and mistakes. Many advisors and others who write about wealth accumulation focus on fees and then address the other five. In my view, this gets it completely backwards. In this chapter, I approach each of these wealth robbers in their order of importance based on the magnitude of the dollar impact on the portfolios of investors who get these issues right versus those who don’t.
Niall J. Gannon

6. The Wealth Lifecycle: From Building It to Passing It On

Abstract
The process of becoming or STAYING wealthy doesn’t come with an instruction or maintenance manual. In this chapter I’d like to address the various constituencies, who, I hope, are readers of this book. In doing so, I am assuming that each has an open mind and the willingness to adopt certain behaviors I will recommend. With that in mind, it makes the most sense to start at the beginning—with young people, as the habits of saving, frugality, and work ethic see their biggest development in the first two decades of life.
Niall J. Gannon

Technical Aspects of Tailored Wealth Management

Frontmatter

7. The Efficient Valuation Hypothesis: The Long View

Abstract
Tailored Wealth Management is a fitting title for this book because wealthy investors experience markedly different outcomes in managing their wealth, which makes a “one size fits all” approach ineffective. Cause and effect is a theme that runs throughout this book, and I am more than ever convinced that it is time to challenge two theories: (1) that stock prices are random and (2) that prices revert to their mean, two widely held theories used by wealth management firms, academics, and robo-advisors. Most investors have an understanding that inception yield is predictive of the future returns of a fixed income (bond) portfolio. We aim to illustrate that starting earnings yields are similarly predictive of the future returns in an equity portfolio, over 20-year investment periods.
Niall J. Gannon

8. Asset Allocation: Choices and Challenges

Abstract
This chapter explores the importance of getting the asset allocation decision correct at the inception and during the life of an investment portfolio. We will highlight the comparison between wealthy family portfolios and institutions, sharing observations of where complexity and a deviation from core assets failed owners of capital. We will discuss litmus tests for the quality and purity of assets in portfolios as well as the choices investors face when deciding to outsource this task to a professional.
Niall J. Gannon

9. Defining Moment: Your Objectives, Assumptions, and Other Factors Affecting Long-Term Returns

Abstract
According to the June 8, 2018, release from the US Federal Reserve, the combined unfunded liability of private and public pension funds stood at $3.9 trillion. This stunning failure to fund the future of many American retirees was avoidable. Throughout this book, I have cautioned investors about the dangers of making “long-term” assumptions about the potential of various investments based upon backward-looking data points. This chapter will compare the results of four investor surveys: IPI/Campden Family Performance Tracking, NACUBO, US Household Net Worth, and the Forbes 400 from 1997 to 2017.
Niall J. Gannon

10. Taxation at the Top: Its Long-Term Effect on the Assets

Abstract
This chapter will share a century of data showing the top income tax rates, capital gains rates, estate tax rates as well as the levels that put an investor in the top brackets. The chapter will stress the flexibility that investors must develop in order to own tax-sensitive portfolios, knowing that the rates they will experience along the way are likely to change. We will draw conclusions that taxes are an inescapable part of history. Income tax rates tend to go up during times of war and economic crisis. The wider the gap between income and capital gains tax rates, the more attractive stocks become when compared to taxable bonds. Gifting generally carries less of a tax burden than estate taxes.
Niall J. Gannon

11. Portfolio Optimization: The Impact of Taxation, Turnover, and Time Horizon on Net Returns

Abstract
In this chapter we share the after-tax return of the S&P 500 since its inception. The annualized, after-tax return for a high net worth investor who began investing in 1957 and who liquidated her portfolio on December 31, 2017, was 7.36%. The model also took into account the impact of state taxation. The main objective of the chapter was not only to calculate the after-tax return on equities, but also to compare stock and bond returns on a net basis. Thus, we were trying to observe the after-tax equity risk premium (or lack of risk premium) that was available to investors throughout the period. We supposed (when we began the study) that there were times when bonds outperformed equities on a net basis. That supposition turned out to be correct.
Niall J. Gannon

12. Building Your Investment Team

Abstract
A wealth management team should begin with your CIO or wealth advisor. Once you have appointed this person, you should round out the team with a trusted estate planning attorney, a CPA or a tax professional, a successor trustee, along with various “as needed” vendors and professionals hired for specific short-term tasks along the way which may include a family office executive, an executive director of your family foundation, and multiple lines of insurance advisors.
Niall J. Gannon

13. Educational Resources for Investors

Abstract
Critical thinking, curiosity, and a healthy dose of skepticism are necessary traits of a successful long-term investor. While gut feeling when making decisions is significant and good judgment about the trustworthiness of an advisor is also important, I must stress that an educated, broad perspective on wealth and its meaning cannot and should not be outsourced to an advisor. I will recommend a few books which should form your core reading list as well as share the names of some national organizations that seek to bring investors together in the spirit of collaboration and learning.
Niall J. Gannon

Successful Spending, Philanthropy, Gifting and Estate Planning

Frontmatter

14. Spending: How Much Is Too Much?

Abstract
Let’s not beat around the bush: the ultimate objective for every dollar a person has ever earned, invested, or saved is to get rid of it during their lifetime or by passing it on to heirs after their death. This is as certain as death and taxes. Whether you spend it, give it to charity, or leave it to heirs, it is a fact that it will leave your hands one way or another.
That said, spending money wisely in the here and now may be even more important than the charitable gifts you leave after you are gone. Dollars spent immediately compost (or redistribute, if you prefer that word) into the soil of the free market economy and into the hands of another consumer.
Niall J. Gannon

15. Philanthropy: What You Need to Know to Donate Wisely

Abstract
If done effectively and deliberately, giving money away can give you one of the strongest adrenaline rushes available to a human being. A philanthropic dollar can also give you one of the largest, if not the largest, returns on investment available. (I’ll cover the arithmetic of this later in this chapter.) The purpose of this chapter is to provide you with a 50,000-foot-view of the state of American giving so that you can make an informed decision as to how you will participate, or if you wish to participate at all. The 2017 Giving USA report produced by the Indiana University Lilly Family School of Philanthropy reported that Americans gave $390 billion to philanthropic causes in the previous year.
Niall J. Gannon

16. Gifting and Estate Planning: Determining the Right Time to Transfer Wealth

Abstract
There are a number of books that address the various trusts and estate planning structures available to average and wealthy families. In this chapter, I will focus on experiences from families that might help in your own planning. I will also focus on developing a mindset and attitude about the meaning of wealth for your heirs in order to feed the ultimate work ahead in formulating your estate plan.
Niall J. Gannon

17. Epilogue

Abstract
We can become wealthier when we recognize our own circumstances on a global scale, then make choices to allocate resources and habits that can feed OUR definition of wealth—whatever that may be. Managing wealth can be accomplished by filtering out the noise that has led to the complex portfolios that have failed investors over the past two decades. Understanding the relationship between earnings and interest rates is key—remembering that success is always swayed by the price you pay for an asset. The only investment performance that counts over time is that which exists after mistakes, inflation, taxes, and fees.
Composting or redistributing wealth is a necessary and healthy part of the financial ecosystem of our communities and our world. A conscious plan for spending, philanthropy, and legacy for our heirs can and should be a rewarding exercise.
Niall J. Gannon

Backmatter

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