Three Key Met Exhibitions in New York

Based in New York City, Peter Culver most recently served BNY Mellon as a senior wealth director, working for the company for 14 years. Outside of his professional work, Peter Culver supports a number of local art institutions, including the Metropolitan Museum of Art.

Operating out of three locations across New York City, the Met upholds the simultaneous goals of supporting fine arts studies and celebrating 5,000 years of art. As such, the museum hosts countless exhibitions each year that cover a wide range of artistic areas. During the remainder of 2016, the Met is featuring three key exhibits:

Kerry James Marshall
Through the support of the Andy Warhol Foundation for the Visual Arts and the Ford Foundation, the Met will hold an exhibit of Kelly James Marshall’s works. From October 25, 2016-January 29, 2017, visitors at the Met Breuer will be able to view almost 80 pieces from Marshall’s career of over three decades. With a theme of breaking through societal stereotypes of people of color, the exhibit will feature pieces across such media as comic books, murals, and narrative paintings.

Diane Arbus
Entitled “In the Beginning,” the Diane Arbus exhibition at the Met, currently running, showcases over 100 images from the portfolio of the prolific photographer. In particular, the museum is displaying photos from the early portion of her career, when she cultivated the distinctive photography style for which she has become known. The exhibit at the Met Breuer will end on November 27, 2016.

Jerusalem 1000-1400
The Met’s upcoming Jerusalem 1000-1400 exhibit will focus primarily on those works that reflected the Holy City’s influence of art throughout that particular period. Thanks to around 60 international lenders, the exhibit will feature more than 200 different pieces. Hosted at the Met Fifth Avenue, Jerusalem 1000-1400 opens September 26 and runs through January 8, 2017.

In an earlier post, we explored the all-too-prevalent malady of “benchmark – itis” – that is, measuring wealth management success solely in terms of investment performance.  In this follow-up post, we look at practical techniques advisors can use to to transform their conversation with clients – and indeed their whole practice – to a “goals-based” model.

Numerous studies document that wealth management clients favor a holistic, goals-based approach over a product and performance approach.  How can advisors make this approach central to their practice and get buy-in from their clients?  Here are a few concrete suggestions:

Introduce a goals-based approach right at the beginning.

·      At your very first meeting with a new prospect, explain that your process is planning-based, with the key objective being to meet the client’s wealth management goals.

·      Pinpoint exactly what the prospect’s real-life goals are.  People will rarely describe these in terms of investment performance.

·      Get an agreement from the prospect that success will be measured in terms of meeting the goals they have identified, not investment performance.  If you help them meet their goals, you should get an “A”.  You will of course report investment performance on a regular basis, but the key measure of success will be the achievement of the client’s goals.

·      Lay the groundwork for asking for referrals based on successful achievement of goals.

Document the primacy of goals.

·      Every firm has an “Investment Policy Statement”.  This only serves to over-emphasize investments.  Use instead a “Wealth Management Plan”.

·      In the Wealth Management Plan, document the client’s goals (financial and other) and make it clear that achieving these goals will be the key measure of success.

·      Also include a “service protocol” – e.g, the frequency and content of client meetings, calls, etc.  Make this a key part of meeting the client’s goals.

·      Get the client(s) to sign and return the Wealth Management Plan.

Organize client meetings around goals.

·      Every firm has a standard client review report.  Too often, these reports are filled with pages and pages of investment statistics, and very little discussion of client goals.

·      Restructure your meetings and reports, as follows:

o   Begin by asking the client for a personal and financial update. Are there any important changes?

o   Confirm the goals in the current Wealth Management Plan.  Are any changes needed?

o   Ask the client directly if you are meeting their goals, both financially and from a service perspective.

o   With this as background, then review the investments. Here the focus should be on performance in the attainment of goals vs. raw numeric performance (I.e. Benchmark - Itis.)

o   Document all important changes in a revised Wealth Management Plan, mail it to the client and get the client to return a signed version.

Make sure all your materials focus on goals.  

·      Standard Investment Policy Statements and client meeting reports are two of the more notorious offenders in setting a focus on performance vs. wealth management goals.  But there are many other areas where you may be undermining the goals-based approach.

·      Make sure all your materials underscore your focus on goals: brochures, flip books, websites, newsletters, client satisfaction surveys to name just a few.

Follow these simple suggestions and you will transform your practice to a truly goals-based culture. Your clients will be happier, and so will you!

For additional information on important wealth management issues, please go to my blog, peterculver.blogspot.com, or visit me on LinkedIn, www.linkedin.com/in/pculver.

A Better Way To Approach Index Investing

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

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

Investors who have used an index approach during the recent bull market have been well rewarded for their efforts: (1) They captured the performance of a market that has more than doubled in the past 8 years, and (2) They kept their costs low, because index funds and ETFs generally have lower fees than active money managers.

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

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

A better way to approach index investing is to follow a tax-efficient index strategy that’s designed to capture the loses in any particular index. Here’s how this works.  First, instead of investing in index mutual funds or ETFs, you invest in a portfolio of individual stocks that is 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 stocks in the index. Second, on a regular basis you sell stocks when their prices decline. The sales of the ‘losers’ generate tax losses that can be offset against any gains in the index portfolio or against any other gains the investor might have.

For 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 and ETFs. The main take-away: if you like index investing but are faced with major tax implications as a wealthy investor – a tax-managed portfolio o f individual stocks is likely to produce a better result than an index fund or ETF.

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 minimums for mid cap, small cap and international stocks.

    Indexing works best in the most ‘efficient’ segments of the market, where the majority of managers don’t  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

Where’s The Biggest Risk: Inside Your Portfolio or Inside Your Family?

Wealthy investors worry about many things that can injure their portfolios – bad markets, fees,  taxes.  However, the biggest danger to your investments may lie outside your portfolio. In this post, Family Wealth Advisor Peter Culver discusses the importance of family dynamics in preserving wealth.

It was the classic American story. A hardworking entrepreneur, who started with nothing, built a highly successful business over his 30-year career.  At the end, his best exit strategy was to sell his business, and he received a handsome payday – in cash.

The entrepreneur and his spouse began a search for an investment manager to help them with their new-found wealth.  They ultimately selected one, but the reason may surprise you.

With most of the investment managers they interviewed, the pattern was the same.  A “flip book” filled with investment charts and impressive stats, and lots of talk about how great the manager was.

Peter Culver used a difference approach.  The conversation went like this:

·      Peter Culver: With your new-found wealth, we can imagine there are many wonderful things you can do.  Our question is this: What do you see now as the biggest risk in your future.

·      Entrepreneur:   We have always lived a modest lifestyle, and so we know that we will never have any financial issues.  Our biggest worry is that this tremendous wealth will have many bad consequences for our 14 year-old son.

Up until this point, the entrepreneur and his spouse had limited experience with liquid wealth or modern wealth management.   They were “immigrants to wealth.” But their concern about their son was highly astute: for families of wealth, the biggest risk to preserving that wealth is not investment performance, fees or taxes – it is whether or not they and their heirs are prepared for that wealth.

Peter Culver explains that the pattern of “shirtsleeves to shirtsleeves in three generations” is a world-wide phenomenon.  In the majority of cases, entrepreneurial wealth wealth rarely lasts beyond the entrepreneur’s grandchildren.  And the cause isn’t investments or taxes, because this dissipation of wealth is just as prevalent in poor and wealthy countries.

What is the cause?  Numerous studies show that the breakdown occurs because of “family dynamics”: poor communication across the generations and no preparation of heirs to assume the responsibility of substantial wealth. 

Over the long run, the key to preserving wealth is a healthy family dynamic.  Peter Culver described many things families can to do: hold regular family meetings, including all generations; have a family “Constitution” or “Mission Statement”; tell your kids and grandkids about your wealth (at the right age) and train them in the skills they need to preserve it; engage in family philanthropy, where every one is involved.

The good news is that there’s lots of help out there.  For an overview of the problem, Peter Culver recommends that parents read James Hughes’s Family Wealth – Keeping It in the Family. He also notes that there are wonderful practical suggestions in Children of Paradise: Successful Parenting for Prosperous Families, by Lee Hausner, and Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, by Roy Williams and Vic Preisser.

Are you worried about the harm your wealth might do to your family? If you would like to discuss you own situation in more detail, please contact Peter Culver at pculver928@gmail.com or 917.697.4156.  For Peter Culver's background, please visit him on Linked In at linked.com/in/pculver.

      Are You Suffering From “Benchmark-itis”?

What is more important to you – beating a benchmark or another money manager, or reaching your personal financial goals?  Please read on to learn how adopting a “goals based” approach can help you avoid the curse of “benchmark-itis.”

Numerous studies show that most so-called “active” money managers – money managers who try and beat the market – rarely do so.  When their actual performance is compared against their “benchmark” (for example, the S&P 500), they come up short.

Despite this, money managers doggedly stick to a system that measures success in terms of benchmarks, and inundate their clients with benchmark statistics. Although they rarely win, most money managers keep trying to beat someone.

This approach does not serve clients well. Investments are just a tool – and only one of the available tools – to help clients reach their financial goals.  The real measure of success should be whether or not the client actually reaches their goals.  Put another way, the focus of success should be on how the client did, not on how the money manager did.

Does your wealth management suffer from “benchmark-tiis”?  Ask your self these questions:

·      Do you have a written Balance Sheet and Cash Flow Statement?

·      Do you have a concrete set of financial goals for the next 3, 5 and 10 years?

·      Have you evaluated whether your goals are realistic --- in light of your resources and historical rates of return?

·      Have you done a detailed analysis of your current investments – to see if they are properly positioned to meet your goals?

·      At least once a year, do you re-visit your goals and your progress in meeting them?

·      Does your financial advisor spend more time talking about products and performance or helping you meet your goals.

If you have answered YES to any of these questions, you are at serious risk of not meeting your financial goals.  There is a better way.  By using a client-focused, “goals-based” approach, you are much more likely to meet your goals, and you will sleep better at night.

Are you worried about meeting your own financial goals? Please contact me at pculver928@gmail.com or 917.697.4156 to learn more.

© 2016 Peter F. Culver