- Good Idea, Bad Start
- When Opportunity Comes Face to Face with Hard Work and Preparation
- End of an Era
- No Strategic Approach to Wealth Management
- Alarm Bells
- It's Hard to Grow Assets AND Enjoy the Fruits of Success at the Same Time!
- Our Wealth Represented More Than Cash
- We Needed to Get a Handle on Our Investment Portfolio
- Introducing Strategic Wealth Management
- We Are Stewards, Not Owners, of Our Wealth
- Taking Control for the First Time
- The Power and Purpose of Entrepreneurial Stewardship
- Philanthropy Has Emerged as a Shared Interest Among Many Family Members
- Closer Family Ties
- The Value of Family Lore
- How My Dad Taught Me the Value of Money
- A Book About Strategic Wealth Management
It’s Hard to Grow Assets AND Enjoy the Fruits of Success at the Same Time!
So where was the problem? First, I discovered that there were significant “costs” associated with our wealth that were continuously dragging down the value of our assets. To maintain the existing value of our assets—after distributing roughly 4% a year to family members, paying taxes, paying our investment advisor, paying brokerage fees, and adjusting for inflation—we had to generate roughly 9.5% a year in asset value growth. But because 40% of our assets were invested in bonds, the value of our stock holdings actually had to grow at an annual rate closer to 12%, almost the same 13% average annual growth rate that Carnation stock enjoyed year after year, decade after decade!
But that wasn’t all.
Over time, to enjoy the same level of investment income from family trusts that my parents enjoyed, I realized it wouldn’t be enough for us just to maintain the value of our assets. We had to increase their value because our family was getting bigger. I have three siblings, and among us we have nine children. If we wanted to live as well as my parents, we would have to generate not 12%, but nearly 17% growth in our stock portfolio year after year for the next 50 years. That’s impressive even for someone like Warren Buffett to achieve!
My fellow family members and I always assumed that there would be plenty of money to pass on to our children and grandchildren. But that assumption, I realized, wasn’t accurate. Even if we maintained our family’s assets in the coming years, spending what we earned net of fees, taxes, and inflation, it became clear that each of my children would have nearly 90% less wealth than my parents simply because the family was increasing in numbers. Growing up, I’d often heard the expression, “from shirtsleeves to shirtsleeves in three generations.” Now, I realized what that expression really meant. And I didn’t like its implications.
Clearly, none of us was about to starve or see a significant near-term change in our lifestyle. But with an eye toward the future, and on what each of us wanted to do next in our lives, my family and I realized that the fortune my great-grandfather and grandfather built, which had been lovingly preserved in family trusts, wouldn’t last another 86 years. My generation would have to work just as hard and be just as entrepreneurial to build our family’s assets for the future as our forebears had done in the past if we didn’t want to preside over a crumbling legacy.