Tailored Wealth Management: Exploring the Cause and Effect of Financial Success PDF
Preview Tailored Wealth Management: Exploring the Cause and Effect of Financial Success
Exploring the Cause and Effect of Financial Success Niall J. Gannon Tailored Wealth Management Niall J. Gannon Tailored Wealth Management Exploring the Cause and Effect of Financial Success Niall J. Gannon The Gannon Group St. Louis, MO, USA Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness. The views expressed herein are those of the author and do not necessarily reflect the views of any organizations or entities in which the author is in employment or association. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. ISBN 978-3-319-99779-7 ISBN 978-3-319-99780-3 (eBook) https://doi.org/10.1007/978-3-319-99780-3 Library of Congress Control Number: 2018959110 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer International Publishing AG, part of Springer Nature 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration © Piriya Photography / Moment / Getty Cover design by Tjaša Krivec This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland For Riley and Fiona Acknowledgments I offer gratitude to my editor, Tula Weis at Palgrave Macmillan, for believing in this project two years ago and for having the vision to help see it through. I am grateful to my developmental editor, Ellen Coleman, for not only com- pleting her task with skill but also bringing new perspective to my views on the central topics of the book. Thank you to the families whom I have come to know and serve over the past 25 years for believing in me and offering a classy example of how to lead a well-lived life. Thank you to my wife, Gretchen, and my two daughters, Riley and Fiona, for enduring my loud and aggressive typing style that echoed through our home on many a day and night over the past year. I remain grateful to Pat Kearns for offering me an internship at Shearson Lehman Brothers in 1991 that has led to such a fulfilling career. Thanks to Mark Bebensee from The Citadel and the late Sister Agnes Catherine Williams, OSU. Thank you to colleagues and members of the CFA Institute for providing peer review on the Efficient Valuation Hypothesis, especially Brett Neubert, CFA. Overwhelming thanks to Scott Seibert, CFA, who co-authored the Efficient Valuation Hypothesis whitepaper and agreed to update valuation formulas, graphs, and tables for inclusion in this work. Thank you to the edi- tors at Seeking Alpha, especially Mark Pentacoff, for highlighting our paper and agreeing to start a new debate in the financial services industry about the driver of portfolio returns over time. Thanks to Charlotte Beyer, founder of the Institute for Private Investors and author of Wealth Management Unwrapped (Wiley, 2nd edition, 2017), for being so insistent that I continue to research ways to improve private investor outcomes. vii viii Acknowledgments Thank you to Dr. Aswath Damodaran, finance professor at New York University, for making his historical models available in an open-sourced for- mat upon which we built our models. Thank you to Charlie Henneman of the CFA Institute, whose invitation to address the delegates of the 2008 CFA Annual Conference led to my first book, and the models and refinements that grew from it. Thank you to the members of Tiger 21, the Family Office Exchange, the Institute for Private Investors, Campden Wealth, and the Portfolio Management Institute for allowing me to share my work with their members. Thank you to His Holiness, Pope Francis, for helping me understand and act on ways to improve the human condition in the poorest parts of the world. I maintain the ultimate level of respect and gratitude to Matt Rogers, Sarah Govreau, and Cindy Feaster for their dedication to the wealth management and family office profession. Contents Part I The Landscape of Wealth Around the World 1 1 Introduction 3 2 Average Americans: Stories of “Ordinary” Success 7 3 Wealth: How Much Do You Need; How Much Is Enough 17 4 The Growth of American Wealth: Its Impact on the Average Household Compared with the Forbes 400 25 5 The Six Robbers of Wealth and How to Avoid Them 35 6 The Wealth Lifecycle: From Building It to Passing It On 45 Part II T echnical Aspects of Tailored Wealth Management 55 7 The Efficient Valuation Hypothesis: The Long View 57 8 Asset Allocation: Choices and Challenges 65 9 Defining Moment: Your Objectives, Assumptions, and Other Factors Affecting Long-Term Returns 77 10 Taxation at the Top: Its Long-Term Effect on the Assets 93 ix x Contents 11 Portfolio Optimization: The Impact of Taxation, Turnover, and Time Horizon on Net Returns 111 12 Building Your Investment Team 127 13 Educational Resources for Investors 139 Part III Successful Spending, Philanthropy, Gifting and Estate Planning 147 14 Spending: How Much Is Too Much? 149 15 Philanthropy: What You Need to Know to Donate Wisely 157 16 Gifting and Estate Planning: Determining the Right Time to Transfer Wealth 173 17 Epilogue 181 Index 183 List of Figures Fig. 10.1 Top marginal tax bracket 96 Fig. 10.2 Top capital gains tax bracket 100 Fig. 10.3 Estate tax rates 103 Fig. 10.4 Historical estate tax rates versus dollar amounts 104 Fig. 10.5 Gift tax rates 107 Fig. 10.6 Historical gift tax rates versus dollar amounts 108 Fig. 11.1 Growth of $100 (1957–2017) 124 Fig. 15.1 Donor type in billions 158 Fig. 15.2 Donation beneficiaries 159 xi
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