Last month, I mentioned that I was reading Wealth : Grow It, Protect It, Spend It, and Share It by Stuart E. Lucas. This book discusses the concept of strategic wealth management and then dives deeper into the specific topics of values, defining wealth objectives, managing investments, selecting advisers, taxes, promoting family wealth stewardship, philanthropy, multigenerational planning, and much more.
I have read many financial planning books, but I have never really read about wealth management. I found the topic to be very interesting and potentially very important for me and my family as we grow our assets and start dealing with the (very modest) wealth of our parents. I must admit that I was a bit put off at first by the discussions family offices and the management of massive family fortunes for income production over multiple generations. However, I discovered many of the wealth management discussions in this book are relevant to my modest family wealth today and could become very important in the future as my family continues to accumulate assets. I want to share with you some of my observations from this unique book.
First, Stuart Lucas, the author of Wealth, definitely has the credentials to write this book on wealth management. He is the fourth-generation heir of E. A. Stuart’s Carnation Company fortune. He has a Harvard MBA and is a Chartered Financial Analyst. He manages his family’s wealth and has run their family office. His career has included several wealth management positions. Stuart Lucas today is the Chairman of Wealth Strategist Network LLC, an independent provider of strategic wealth management educational services to individuals, families and financial institutions. It really looks like Stuart Lucas has practiced what he is preaching in his book.
I immediately like the fact that Lucas challenges the classic approach to wealth management. As with most traditional financial advice, the classic approach to wealth management is incomplete and geared more towards the interests of managers. Stuart Lucas introduces a more holistic approach that he dubs the “Strategic Wealth Management Framework”. This framework is guided by eight principles of strategic wealth management that act guideposts. These strategic wealth management principles listed in Wealth are as follows:
- Take charge and do it early.
- Align family and business interests around wealth-building goals and strategies.
- Create a culture of accountability.
- Capitalize on your family’s combined resources.
- Delegate, empower, and respect independence.
- Diversify but focus.
- Err on the side of simplicity where possible.
- Develop future family leaders with strong wealth management skills.
These principles can then help guide and direct your family’s values, resources and communication. Out of this core, your family can then set financial objectives, select advisers, and plan for the type of legacy you want to leave. I really like the way this fully integrated framework is built on the core of your family’s values and resources so that it can meet your unique objectives.
Some of my favorite parts of this book include the list of issues to discuss with your family at the end of each chapter. I also like the way Lucas divided up the wealth management industry into three categories, “The Capital Kibbutz”, “The Secret Society”, and the “Enchanted Forest”. The Capital Kibbutz is the safe world of index funds and term life insurance. The Secret Society is the domain of investors that have figured out how to make returns in excess of the risks they assume and includes the realm of hedge funds, private equity funds and actively managed investments. The Enchanted Forest is where everyone else ends up getting lost in the glitz and glamour of investing. I also found Stuart Lucas’ discussion of tax planning both refreshing and very reasonable. He does not encourage the use of exotic tax shelters (used in an unethical manner by some wealthy families) and actually acknowledges that you should consider thinking of the federal government as investment partners and not adversaries. He points out the obvious tax savings from saving early and being a long-term investor. You can’t argue with that sound advice. Finally, be sure to read the appendix on learning the language of wealth management, which I actually found to be rather funny and entertaining.
I hope someday to be able to put some of the more advanced topics discussed in this book, such as philanthropy and multigenerational planning, to work but for now I am more focused on wealth accumulation versus management. I believe, however, that like with most things in life it is always best to be prepared (it’s probably the Boy Scout in me) so I encourage you to take a look at Wealth.