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Wealth Manager
 

Wealth Manager

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http://www.paulcomstockpartners.com/...

http://www.paulcomstockpartners.com/
Paul Comstock Partners - Houston Wealth Management & Financial Services
2 Riverway # 1000, Houston, TX 77056-1949
(713) 977-2694
Paul Comstock provides investment advisory services,

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    Wealth Manager Wealth Manager Document Transcript

    • Our Perspective on Family WealthThe following information is of a proprietary nature.Dissemination to other parties is prohibited without priorconsent of Paul Comstock Partners.Copyright © 2009 Paul Comstock Partners.All Rights Reserved.
    • Paul Comstock Partners® Your Partner in Investment ConsultingFounded in 1982, Paul Comstock Partners is a fee-only, private, independent, wealth advisoryfirm. We provide high net worth individuals, families, private fiduciaries, private and public exemptorganizations with leadership designed to maximize the economic and non-economic benefits of theirfinancial capital. What Sets Us Apart We provide truly independent investment advice. We utilize a full range of traditional and alternative asset classes to meet portfolio objectives while minimizing risks. We incorporate unique client opportunities and issues into their investment allocation. We recommend managers that target absolute performance rather than minimizing a particular index. Our ClientsIndividuals and Foundations with investment assets of $10 million or greater, desiring financial andinvestment management planning.Wealthy Families, Individuals and Private Fiduciaries with investment assets of $20 million orgreater, faced with complex wealth management, transfer and administrative issues.Private and Public Tax-Exempt Organizations with investment assets of $20 million or greater, withan intricate financial structure and complex implementation and administrative issues.Family Offices with assets of $50 million or greater, managing multifaceted organizations,partnerships, and private companies involving family and internal professional staff. Objective AdviceOne of the foundations of our strategic planning and investment advisory services is our diligentattention in guarding our objectivity. Our firm is privately owned and is not under the control of anyparent organization or shareholders interested in selling investment products. Consulting revenue isour only revenue. We work on a fee-only basis and refuse to accept commissions from any serviceproviders. We do not originate investments. This freedom from the conflicts of interest that are soprevalent with many providers of investment advisory services allows our clients to have the comfortof knowing that our recommendations are based exclusively on what we believe to be in their bestinterest.
    • Family Wealth It’s not only about the money… it’s about people.Family wealth management is complex. It requires experience and sensitivity for the peopleinvolved. This fundamental philosophy means that people are always our primary focus. We atComstock are in the business of serving individuals, families, family offices, and their philanthropicentities with financial and investment advisory leadership through an organizational process thatengages them in a positive experience. Our clients always remain in charge.High Net Worth families often face critical issues associated with wealth. These issues mayinclude: incomplete data, conflicts of interest, overspending, unrealistic return expectations, inefficientorganizational structure, and successor leadership. If not properly addressed, any one critical issuecould jeopardize the family wealth. Areas of Focus Critical issues to the family’s wealth can be organized into four primary areas. When a critical issue occurs in Investments one area, it generally impacts the other three. While Wealth Transfer activity in each of these areas should be coordinated, too often the family’s legal, tax, and other advisors are not provided an opportunity to participate in developing Cash Flow integrated solutions. People Management Through our unique “Getting to the Beginning” process, realistic desired outcomes and the barriers to achieving them are identified. Key to the long-term success of managing each of the areas is the development of a thoughtful strategic plan. Risks to the family wealth are dealt with and mitigated within this plan. The venue for this effort is the family financial organization overseen by an informed and trained governance structure made up of designated family members. Family Advisory CouncilFamily Advisory Council (FAC) is comprised of legal, tax, and investment counsel along with otherspecialists who are free from personal conflicts of interest in the outcomes. The FAC works together inthe development of all strategic recommendations and presents them as a Council. The FACleadership comes from each of the professionals in their area of expertise. All recommendations arepresented after a consensus has been reached by the FAC.
    • Wealth Transfer - Estate Planning Estate planning attorneys are the cornerstone of the wealth transfer process, legally documenting client objectives, designing asset protection and the reduction of estate and gift taxation. Each ownership entity created in the process requires ongoing management and often exposes individual family members to potential fiduciary liabilities. Well thought out plans can still bring about unintended consequences. Wealth Transfer Our Role: Working with the FAC, we provide support in developing realistic distribution objectives that have a high probability of sustainability. Once a distribution plan is developed, we assist in preparing beneficiaries for their future roles and responsibilities. Working as a member of the professional advisory council, we provide guidance in the development of the family “money” business organization, including current and successor leadership identification and training. Our role includes assisting families in communicating and implementing their plans through family meetings; one- on-one coaching; and our specialized quarterly, semiannual, or annual wealth reports. Giving Support and Leadership to the Management of Wealth Transfer Entities Example Client ScenarioMr. and Mrs. Transfer have three adult children and two grandchildren. Both grandchildren are from one daughter. Another daughter ismarried; their son is single, living in New York as a promising actor. Various levels of financial responsibility and management interest existamong the children.Critical Issues (one of four): Being fair and equal in gifting to their children.Desired Outcomes:1. Create a distribution plan that provides equal lifestyle values to each child while recognizing differences in circumstances.2. Provide assistance for each child to follow his or her dream, but not rob them of their ability to be self-sufficient.Barriers:1. The family units created by the children vary in the number of people, making it hard to be equal.2. Income generation, investment abilities, and personal financial responsibility vary among their children.Action Items:1. Mr. and Mrs. Transfer are to create a statement describing experiences they would like for their heirs. A Family Endowment is to be established to provide such experiences as education, foreign travel opportunities, family reunions, and financial support for maintaining the vacation property. The Family Endowment provides benefits on an individual basis, based on individual needs and desires as well as the extended family unit as a whole.2. Trusts are to be established that provide equal lifestyle support to each of their children.3. Provisions for control of the trust by each child are based on various criteria discussed with, and understood by, each child.4. Each child will be apprised of the plan and will be responsible for providing any desired lifestyle subsidy for his or her spouse and children when his or her death occurs.Leadership: The members of the Family Advisory Council provided assistance to the parents in developing the plan. Communication tobeneficiaries is to occur during family meetings and personal beneficiary conferences.Results: Family members have realistic expectations of what will be provided to them and their heirs, as well as what they must providefor on their own.
    • Cash Flow - Lifestyle Management Cash flow requirements and projections are the central point of all investment, expenditure, and wealth transfer decisions. Often there is a disconnect between the expected level of investment return on assets and actual returns with current spending and gifting objectives. It is not uncommon for tactical wealth transfer or investment decisions to be made for tax or pure return purposes while ignoring cash flow Cash Flow requirements. The total return concept of liquidating capital assets to meet cash flow Management needs is great in theory but may cause significant risk to capital values if proper planning around portfolio volatility, liquidity, and tax consequences is not considered. Our Role: We provide present and forward cash flow modeling utilizing our proprietary Monte Carlo investment return analysis and various portfolio distribution scenarios. All modeling includes projections based on wealth transfer events, both current and those driven by mortality. We give leadership in modeling future family organization structures to provide the FAC, staff, and family members with realistic long-term budget planning. Empowering Decisions by Providing Analytical Facts... Information That Matters Example Client ScenarioMrs. Cash was spending at a double-digit percentage rate on the fair market value of her investments.Critical Issues (one of five): A consolidated family office operating budget and asset structure, necessary to develop a reasonableexpectation of the source of funds for sustaining a certain lifestyle, was not available.Desired Outcome: Develop a realistic spending budget based on current asset allocation and wealth transfer objectives.Barriers:1. Availability of consolidated data and sources of information free from vendor and staff conflicts of interest.2. Ability to “tighten the budget belt” of beneficiaries.Action Items:1. Develop a current FMV inventory of assets and liabilities (including cash flow dependency issues).2. Create a realistic budget based on forward-looking returns and the assets available to generate them.3. Create a priority of expense worksheet for determining where budget cuts could and should occur.Leadership: The Family Advisory Council provides leadership under the oversight of the CPA along with input from family members andstaff.Results: Reduction in staff and office overhead, as well as personal budgets, sufficient to reduce the annual distribution requirementfrom invested assets to a low single-digit level while maintaining priority lifestyle objectives.
    • Investments - Private & Public While the creator of the wealth is very savvy in business operations, he or she often lacks the resources to conduct successful due diligence when investing outside his or her expertise. Many people turn to national banking, insurance, or brokerage firms with consulting teams to fulfill that process. The challenge with this approach is the inherent conflict these organizations have regarding product recommendations and an Investments unwillingness to analyze their compatibility with the separate business holdings of the investor. Our Role: Successful investing must control risk and deliver adequate returns for forward planning, consumption needs, tax liabilities, and inflation protection. We are engaged to provide active investment analytics and advice to construct and implement an investment program that incorporates the business acumen of the client and the existing portfolio of assets. We seek enhanced returns through each avenue available while focusing on risk reduction. Delivering More Than Just Returns Example Client ScenarioMr. Owner sold his business to a public company and received both cash and securities in payment.Critical Issues (one of six): Making investments in a manner that sustains current lifestyle cash flow needs while providing growth inprincipal value equal to or greater than inflation.Desired Outcome: Create a diversified portfolio of investments that, working together, provide a high probability of fulfilling cash flowand growth needs over a protracted period of time.Barriers:1. Cash flow needs require high returns with corresponding risks of achieving those returns.2. Receiving lower than historical asset class returns.3. Loss of personal control over investment results.4. Decisions based on information laced with conflicts of interests.Action Items:1. Develop an investment allocation, utilizing projected asset class returns, having a high probability of achieving realistic annual distribution requirements on an after-tax and inflation basis.2. Provide sufficient cash equivalent reserves to meet the next year’s distribution needs.3. Engage delegated management with an historical record of value-added returns on an after-tax basis.4. Develop decision-making information free from conflicts of interest.5. Establish performance benchmarks and a system for monitoring results.Leadership: We served as the leader in information and data development on all investment issues for the Family Advisory Counciland client as well as all implementation cost negotiations.Results: An investment plan with implementation recommendations was accomplished, allowing the portfolio to mature beforeliquidation of previously made investments was required for meeting lifestyle needs. Negotiations regarding acquisition andmanagement costs provided significant savings that reduced overall planning costs and ongoing monitoring costs.
    • People – Owners & Beneficiaries Most observers of inherited wealth understand the potential harm to the recipients’ personal development. On the other hand, properly used wealth can assist in providing a venue for self- expression and productivity, creating a sense of personal fulfillment and purpose. People other than family members often have access to this wealth and may exert self-serving influence on the family. Developing an organization structure that provides family governance and People staff/advisor accountability is essential, as is the leadership succession of that structure. Wrestling with individual beneficiary issues such as chemical dependency, ability to work with siblings, the role played by spouses, and establishing family office staff accountability often requires specialized guidance and leadership. Our Role: We provide a strategic, as well as tactical, organizational leadership for the family to deal with individual and collective issues they face. Critical to the success of such leadership is reaching consensus of the shareholders/stakeholders/beneficiaries for the goals to be achieved. We provide leadership over the strategic plan for a positive forward change when required. In "Riches either serve or govern the meeting the relationship and communication needs of families, we provide access to the very possessor.” -- Horace best specialists in any required area. It’s Not Only About Money… It’s About People Example Client ScenarioThe People family consists of Mrs. People and her four adult children. Mr. People had been successful in his business enterprises and, uponhis death, left Mrs. People with a portfolio consisting of publicly traded securities, real estate holdings, and interest in several privatebusinesses in which the family had majority or sole ownership control. The businesses, real estate holdings, and securities portfolio werebeing managed out of the family office.Critical Issues (one of six): Provide a family oversight structure that maintains policy control and establishes advisor and family office staff.Desired Outcomes:1. Create a family governance organization made up of Mrs. People and her four children, wherein all policy decisions are monitored and reported on.2. Establish a successor leadership structure for the children, providing for shared responsibility and consensus decision making.3. Create performance benchmarks for staff and advisors.Barriers:1. Sibling leadership expectations that are not agreed upon or mutually acceptable.2. Mrs. People’s inability to share control.3. Competency of children to assume governance responsibilities.Action Items:1. Establish rules of governance that are reached on a consensus basis.2. Develop an action plan for delegation of active business management.3. Create performance benchmarks for family office staff and external advisors.4. Develop a training program for presentation at family meetings on governance and oversight responsibilities.Leadership: Leadership was provided by an external specialist in family communications working with the family and Family Advisory Councilon the business governance responsibilities. Family meetings were established by the Family Advisory Council, along with the specialist, witha training curriculum focusing on the governance and interpersonal communications required to successfully oversee the family wealth.Results: The family is currently engaging the third generation in the process, while the first generation has relinquished all organizationcontrol. The members of the second generation developed a rotation system for chairing the effort and the establishment of committees withspecific oversight responsibilities. Family member rotation between committees has assured the development of competency in each requiredarea of oversight.
    • Contact InformationPaul Comstock Partners ®Two Riverway, Suite 1000Houston, TX 77056Main (713) 977 2694Fax (713) 877 1363New York Satellite Office1120 Avenue of the Americas, 4th FloorNew York, NY 10036www.paulcomstockpartners.com