Tips on Wealth Management


- Stick with the game plan. A wealth-management strategy isn't constructed to work every single day. It's designed to work over time, and sticking with it requires the ability to resist emotional tugs. At the same time, the plan must evolve to fit the changing needs of the family. "You try to counsel people not to think too much about what happened in the last week, last month or even last quarter," said Greg Sanford, chief executive of U.S. Trust Co. N.A. He counsels a three-to-five year outlook.

- Diversify. Consider the person who has made all his money in Southern California real estate. Now it's time to diversify in order to reduce the risk of exposure to a single asset class. The adviser is suggesting selling some of the properties.

- Consider charitable giving. There are tax benefits and social benefits to charitable giving. Besides consider your legacy!

- Hire professionals. At minimum, a good accountant, a tax attorney and an estate planner are needed to handle a large portfolio, as well as some professional money management skills.

- Set aside enough to live on. Most uber-wealthy need $300,000 to $500,000 a year, although a particularly jet-setting family may need $2 million.


- Don't borrow against a concentrated holding. Ask Bernie Ebbers, the deposed chief executive of Worldcom Inc., about this one. Or John Rigas, founder of Adelphia Communications. It's an appealing way to avoid capital gains taxes, but borrowing has its risks namely, the asset value declines. Meanwhile, L.A.'s Gary Winnick cashed out of $750 million in Global Crossing stock, long before his company filed for Chapter 11 bankruptcy protection.

- Don't chase the latest fad. On the Westside, there's an attorney working at a major firm who demanded that his trust company put more of his portfolio into technology, especially dot-com companies. The trust company resisted, increasing the tech position but not as much as the client wanted. There was tension. When the bubble burst, the client lost 15 percent of his portfolio, but that was better than colleagues who lost 80 or 90 percent.

- Don't try to do it all yourself. Granted, there are horror stories out there from people who have been misled by the pros they had trusted. But even if you're comfortable with the investment side of managing your affairs, there are no-brainer moves a competent professional would point out that you might miss on your own. Nevertheless, vigilance goes a long way.

- Don't let your emotions rule your actions. Markets continue to be ruled by greed and fear. If people have made money they will be tempted to invest more. If they've lost, they will want to sell it all and put their money in Treasuries. Generally, going too far in one direction or the other is a mistake.

Anthony Palazzo

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