Preserving Wealth: What Families Should Do

Despite what some may believe, not all successful entrepreneurs started with a large sum of money, nor did they always come from a privileged background. Many built their fortunes with nothing but determination – determination to turn their vision into reality, and provide for their family. Years of hard work and dedication are well worth it in the end when they can sell their business for a good profit, ensuring their family is financially secure.

Yet, all too often people spend lots of time and energy building wealth, and far less time on ensuring it is preserved. A majority of high net worth families fail to successfully transfer wealth from one generation to the next.

What can you do to ensure your family wealth is preserved? Family wealth advisor Peter Culver focuses on steps families can take.

Start the Discussion Today
While most parents know the conversation about wealth and preservation needs to happen, they wait too long to have it, or don’t have it at all. Problems arise when family members learn of wealth transfers and don’t understand the reasons behind them, and family conflicts occur. Having the conversation today will benefit all family members, from each generation.

Schedule Family Meetings
Family meetings allow everyone to share news and concerns in an open and direct way. You can deliberate and make shared decisions, and everyone is kept on the same page. They also offer the opportunity to teach younger family member about finances and family traditions.

Have a Mission Statement
This is an excellent tool for promoting shared family values. It outlines a family’s goals and priorities, and is used as a basis for making family decisions.

Speak to a professional
Families can benefit from the guidance of a wealth advisor who has the financial expertise and outside perspective to help guide the conversation. Their focus is on the management of the wealth, and they have no emotional ties.

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When It Comes To Your Finances, Don’t Get “Benchmark-itis”

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When it comes to your finances, do you ever feel fatigued by constantly trying to reach benchmark after benchmark?  Adopting a “goal- based” approach can help you avoid “Benchmark-itis.” Of the following 2 choices, which do you find to be the most important to you:

  • Meeting or passing benchmarks

or

  • Meeting your personal finance goals.

However hard active money managers might try, studies show that they rarely beat the market. They almost always fall short when compared to their “benchmark,” e.g., the S&P 500. In defiance of this fact, managers stubbornly stick to a system that measures wins in terms of benchmarks, while flooding their clients with statistics.

This is a bad approach where clients are concerned. Investments should be considered just one of many available tools that are there to help clients reach their financial goals. The measure of success should always be squarely on how the client’s investments performed rather than the money manager.

If you’re wondering whether or not your investments are suffering from “benchmark-itis,” ask yourself:

  • Do I have a balance sheet & cash flow statement?
  • Do I have a my financial goals planned out for the next three, five or even ten years?
  • Are my goals realistic in light of my resources and the historical rates of return?
  • Have I recently done an analysis of my investments and determined that they are positioned to help meet my goals?
  • Do I revisit my goals yearly and analyse my progress in meeting them?
  • Does my financial advisor listen to my goals or spend more time talking products and performance?

Answering NO to any of these questions means you are at serious risk of not meeting your goals. If you are looking for a better way forward, please contact me, Peter Culver at pculver928@gmail.com or 917.697.4156 and we’ll talk about your financial goals.

Peter Culver Says Establish Goals and Avoid Focusing on Benchmarks for Financial Success

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Anyone who has ever been on a diet or explored a weight lifting program knows that setting goals is pivotal. Whether they are weekly, monthly or yearly, setting up goals can help people accountable. Today, we will look at the reasons a goals based plan can produce better dividends than benchmarking or money managers, who often can lead you into the dreaded benchmark-itis.

Actual performance and benchmarking very rarely align, according to must studies. Yet most money managers will stick to their system failure after failure considering hitting it big one time will make up for the failures. This is a dangerous game to play when you are entrusted with the money and savings of another human being. Peter Culver puts an emphasis on focusing how each individual client performed as opposed to how a money manager did. Unsure if benchmarking is impacting your bottom line? Check out the following questions to shed some light on the situation.

  • Are you currently utilizing a written cash flow statement and balance sheet?
  • Do you ever consider if your goals are realistic – considering your resources and historical rates of returns?
  • Are your financial goals concrete for the next two, five, ten and 20 years?
  • How often do you re-visit your goals and the progress associated with them?
  • When is the last time you did a detailed analysis of the current state of your investments? If recently, has this helped position you perfectly to meet your goals?
  • Does your financial advisor seem more focused on pushing their own agenda then listening to your goals?

If you are nodding a lot while reading through these questions, you could probably be in a better position financially. Better ways are available through client-focused initiatives. Learn if your current financial advisor gets certain comps for pushing certain investments. This is a major red flag. Working with Peter Culver could provide you with the financial guidance you deserve.

If you’re even slightly worried about the state of your finances, don’t sit back and do nothing. The time to get proactive is now. Give Peter Culver a call at 917.697.4156 or email pculver928@gmail.com.

A Better Way To Approach Index Investing

If you like the concept of index investing – capturing market returns with low fees – you may be losing many significant tax benefits. If you’re a wealthy investor who likes buying index mutual funds, Peter Culver has a better approach for index investing! Read on to learn more.

Many studies have revealed that majority of so-called ‘active’ money managers who try and beat the market rarely do so. As their performance is compared against their ‘benchmark’ like the S&P 500, they come up short.

With that in mind, investors who’ve used an index investing approach during the recent bull market have been well rewarded for their efforts. (1)They captured the performance of the market that has more than doubled in the past 8 years. (2) They kept their costs low because index mutual funds generally have lower fees than active money managers.

However, for wealthy investors, there’s one very important limitation to index funds – tax efficiency. When you buy an index fund, you own all of the stocks in the index and your results are the average result of all the stocks within the index. The means you have no control over what happens to the individual stocks in the index, specifically the tax consequences.

In any given year, including the middle of a long bull market, some of the stocks in the index will be down. If you were to buy an index fund, there isn’t a way to ‘harvest’ the losses and offset them against your gains. But for wealth investors, these tax losses can work in their favor and be very beneficial.

The better way to approach index investing is by following a tax-efficient index strategy that’s designed to capture the loses in any particular index. Here’s how they work – first, instead of investing in index mutual funds, you invest in a portfolio of individual stocks that are designed to ‘replicate’ an index. For instance, it’s possible to match the risk/return characteristics on the S&P 500 with about 250 of the stock in the specific index. Second, on a regular basis you sell stocks when their prices decline. The sales of the ‘losers’ generate tax losses that can be used to offset against any gains in the index portfolio or against any other gains the investor might have.

When it comes down to wealthy investors who may face income taxes of 40% to 50% and capital gains taxes of 25% to 30%, the after-tax return is what really matters. Several tax-efficient index managers have after-tax returns that are better than index mutual funds. The main take-away: if you like index investing but are faced with the above tax implications as a wealthy investor – a tax-managed portfolio of individual stocks is likely to produce a better result/performance compare to an index fund.

Additionally, like any type of investing strategy, there are some caveats to keep in mind. For instance:

  • Tax-efficient index portfolios have minimum entry points, so most managers have a minimum of $500k to $1 million for indexing large cap stocks along with the possibility of higher minimum for mid cap and small cap stocks.
  • Indexing works better in the most ‘efficient’ segments of the market, where the majority of managers don’t try to beat the index – generally in US stocks and developed international stocks.
  • Keep an eye out for so-called tax-efficient ‘overlay’ portfolios – this approach utilizes a 2nd portfolio that’s overlaid on top of an existing portfolio that attempts to add some tax-efficiency. It may be better than nothing but it’s nowhere near as good as the direct tax-managed portfolio.

The Long Wharf Theater Brings New Haven Together

Long Wharf Theater pic
Long Wharf Theater
Image: longwharf.org

Financial industry veteran Peter Culver helps clients manage their wealth and plan for the future. Most recently, he served as as a senior wealth director of BNY Mellon in New York, New York. Also a supporter of the arts in his community, Peter Culver has served as a board member of many cultural organizations, including the prestigious Long Wharf Theater in New Haven, Connecticut.

The Long Wharf Theater became a reality in 1965, thanks to the efforts of local community leaders and art lovers. From humble beginnings with a meager budget and borrowed materials, the theater has grown into a community mainstay over the last 50 years.

Today, the Long Wharf Theater boasts two stages and produces six plays annually, in addition to its wonderful children’s programming. It also works hard to engage the community and make everyone in New Haven feel welcome. From post-show discussions to partnerships with local libraries, the Long Wharf Theater has created a rich and integrated community experience.

Patrons of the New Haven Free Library can check out a free pass, which allows them to see plays at Long Wharf Theater. The theater itself is home to a mini library. Visitors can check out books in the lobby and return them to their local branch library anywhere in Connecticut.