Perspectives on Long-Term Wealth Sustainability

In this 2012 FOX Fall Forum session, Jack Parham discussed the difficulties families face in shifting from concentrated, wealth-creating portfolios to diversified, wealth-sustaining portfolios. He was joined by Paul Judy, a sophisticated first-generation wealth owner, who recounted lessons learned about creating and sustaining wealth, setting investment goals, and engaging family members and advisors.

Some key takeaways:

• Practices that serve us well in creating wealth can be detrimental in sustaining wealth. Most wealth created by concentrating risk in a single industry/area. When we concentrate risk we amplify risk and  return. Sustaining wealth depends on diversifying. This means lower returns but less risk. 
• People have different goals, aspirations and pain thresholds. Your portfolio should reflect these things.
• Goals-based investment gives you a better chance of achieving goals.
• Goals-based investing applies Maslow’s hierarchy of needs to wealth planning
• Families need to get comfortable with having sub-optimal portfolios (may not be the most efficient according to SHARP ratio).
• We need rules and processes in place in order to honor the family’s the goals. 
• Reporting must match the framework. Tied to goals.

• Wealth strategy meant to enhance family relationship. Speak to their needs
• His philosophy was that the wealth he accumulated would largely go to charity. 
• Created family foundation to continue charitable giving but also give the family a chance to work together. Run very much like a family business
• The foundation is becoming very much a part of the next couple generations’ lives.
• Went through advisor review process with FOX and chose Eton
• Looking for trust, care and reliability
• Trying to get children involved in the discussion about investment goals, which is a work in process
• Define buckets and plug investment options into the right buckets