WALNUT CREEK, CA--(Marketwired - October 20, 2016) - In a new article, Pillar Wealth Management, LLC, a private wealth management firm to affluent families, including some that have attained wealth reaching $400 million, explains how performance targets serve as the connection between a family's Investment Policy Statement and Family Constitution, respectively.
The article, which is available on the Pillar Wealth Management website and based on insights discussed in the firm's recently-published book The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million, points out that while every ultra-high net worth family is unique, they should each engage in in-depth discussions about what they want their wealth to achieve.
"Many families do not approach their wealth management from the direction of goal-attainment," comments the firm's co-founder Haitham "Hutch" Ashoo. "Rather, they approach it in terms of performance, and therefore base investment decisions on how much return they desire."
The article explains that focusing on performance instead of goal-attainment is flawed for two fundamental reasons:
- Assuming that a family seeks higher than Money Market or short/medium term bond returns, no one can predict -- let alone achieve -- a certain future performance.
- There is no allowance for educated and intelligent discussions about risk and return, since returns drive investment goals and targets vs. the other way around.
To avoid these mistakes and pitfalls, the article advises families to align their level of risk with their objectives and tolerances; which is an aspect that many advisors who serve ultra-high net worth families fail to address.
"Typically, these advisors use a questionnaire to identify their clients' risk," comments the firm's co-founder Chris Snyder. "This approach is wrong because it can cause families to over-estimate or under-estimate their risk tolerance, or prevent them from fully grasping what the impact of today's decisions may have on future generations. For these reasons, we encourage our clients to clearly define risk in their Investment Policy Statement."
The article wraps up by returning to a central theme that is covered frequently in the above-noted book: families should not focus on the return of individual investments. Rather, their focus should be on the net return of their porfolio after taxes, expenses, fees and inflation.
Concludes Ashoo: "After all, it is impossible to accurately determine the return without taking into consideration tax ramifications and other expenses that inevitably drain a portfolio."
The full text of Pillar Wealth Management's new article is available at: http://pillarwm.com/performance-targets-where-the-investment-policy-statement-family-constitution-intersect.
About Pillar Wealth Management, LLC
Haitham "Hutch" Ashoo and Christopher Snyder are privileged to have worked with ultra-high net worth families, some of whom attained wealth reaching $400 million, helping them achieve a positive change in their lives and finances. They cofounded Pillar Wealth Management, LLC, an independent, fee based, private wealth management firm. As their clients' go-to advisors, they are brought in to help with investment management, strategic planning, asset allocation, risk control, and tracking of their clients' progress towards life-goals. Their services are provided to a limited number of clients. They only accept a new client when they have determined that there is mutual admiration and respect and only if they can add substantial value to the client's financial life. Learn more at http://pillarwm.com.