Lessons on Investing From America's Richest Family

Just like us, the rich want to maintain their lifestyle, preserve wealth and have money for their heirs or philanthropy. And when it comes to investing, there are several ways the rest of us should take a cue from them:

The very wealthy have a plan. Sam Walton's plan started in the early 1950s, when, on the advice of his father-in-law, he set up a family partnership, made up of him, his wife, Helen, and their four children, to own his two variety stores. By doing that, he began planning his estate and building family wealth years before he opened the first Wal-Mart in 1962.

Nowadays, most very wealthy people have a team of advisers and an investing strategy in place that should work even when the worst imaginary case becomes real. Small investors, too, should have a comfortable investment process that works in good times and bad.

A financial adviser can be invaluable in helping you with this, but so can a trusted family member or friend who will help you stick to your plan when you start to doubt it.

The very wealthy live below their means Walton, who died in 1992, was famously frugal, driving an old pickup truck and flying coach. Many very wealthy people spend much more extravagantly, but even so, "most of our ultrawealthy clients have a lifestyle that is well below their means," says Craig Rawlins, president of Harris myCFO Investment Advisory Services, which serves wealthy families.

When you don't spend everything, he says, "you have a better opportunity to weather this volatility because you know there's a cushion there."

The very wealthy value cash flow. One of the most painful lessons of 2008 was the recognition that we need to keep enough in cash or liquid investments to weather a stretch when the value of everything else is in flux. Every investor should have a "SWAN" account—for "sleep well at night."

That's a different number for every investor," but you should have enough in bank accounts, bonds or other liquid investments that you can leave your stocks alone when market volatility defies logic./p>

Sturdy, dividend-paying stocks also can help. Annual dividends on the Walton family's 1.68 billion shares of Wal-Mart stock add up to $2.45 billion a year, enough to buy plenty of groceries and just about anything else.

The very wealthy focus on risk, not return. Larry Palmer, managing director, private wealth management, at Morgan Stanley Smith Barney, said he has never had a client say, "My objective is to have my family wealth beat the S&P 500." Rather, he says, clients focus on what kinds of risks they are taking with their portfolio.

The Walton family wealth long has been tied to its Wal-Mart stock, now valued at $83.6 billion. But Sam also bought the tiny Bank of Bentonville in 1961, and it is now part of the family-owned Arvest Bank, an $11.5 billion banking company. Walton Enterprises also owns a chain of small newspapers that, along with other interests, offer diversification and push the family's estimated combined wealth close to $100 billion.

Small investors need to similarly manage their portfolios, making sure that their holdings of stock and other volatile investments aren't so great that they are putting more at risk than they intended to.

The very wealthy hang on.  The super-rich don't sell because they are fearful—though some may be selling right now for investment reasons, such as cutting the tax bite on holdings with big gains. The Walton family ownership of Wal-Mart stock hasn't changed since late 2002, when some shares were transferred to charitable funds.  --2011 August 13   WALL ST. JOURNAL

Wealth programs for the Ultra Rich in Asia

Private banks are jostling to capture an emerging class of customers - the well-heeled children of their ultra rich Asian clients.

They roll out days- or weeks-long wealth management programmes for groups of well-off youngsters aged 18 to 30 who return to Asia when their Ivy League or Oxbridge schools break for vacation.

The programmes are no breather from their regular schedules. From the moment they step out of their five-star hotel lodgings in downtown Hong Kong, Singapore or Macau, they are whisked off to trading simulations, talks by real-life philanthropists, and seminars about family business succession conducted by the private bank's family office.

Oh, and there's also the after-hours hob-nobbing.

Out of the 10 private banks that BT spoke to, seven run such tailored programmes for children of their ultra high net worth (UHNW) Asian clients who are likely to have assets above US$25 million, though that standard varies from bank to bank. Those which offer such programmes have been running them for between four years and 15 years.

The privileged few who are accepted into these programmes are taught by in-house and invited experts on how to navigate the thorny sensitivities of family business and wealth succession, as well as other more textbook topics such as the art of investing.

And they go home with a ready-made opening to broach an oft-not-talked-about topic with their parents.

Wealth management programmes teach them about trading simulations, family business succession.  --  2011 July 25   BUSINESS TIMES

Managing Wealth Takes Agility
Administering family business finances calls for a diverse skill set of IQ, EQ, sensitivity and creativity

Communication is the key to get those across to determine what’s changed, if you’re on target, or perhaps need to be revised due to market conditions, health or transitions in the family environment or business.”

“Most of all, the business has to be run as a business. As long as there are clear lines of communication, respect and nurture, from all aspects, however many family members are involved, it can be a very rewarding and successful business.”   -- 2011 May 3-9   BUSINESS IN VANCOUVER

 

 

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