Charles Lowenhaupt On Parents, Trustees And Complex Questions

April 7, 2017

Family Wealth Report and Charles Lowenhaupt discuss his concept of freedom from wealth, the Institute for Wealth Management Standards and why inheritors are being prevented from achieving the American dream.

The question arises when it comes to handing wealth to children: which role is easier – that of the parent or the trustee? It is not an easy one to answer. (more…)

See The Video From The Saint Louis Art Museum’s Exhibit: Art and War in Modern Japan

December 29, 2016

Watch this special video about Conflicts of Interest: Art and War in Modern Japan, currently on exhibit at the Saint Louis Art Museum. The exhibition showcases extraordinary visual material documenting Japan’s rise as a military power in East Asia, starting with the Meiji Restoration in 1868, then depicting events of the Sino-Japanese War (1894-1895) and the Russo-Japanese War (1904-1905), two wars between Japan and its imperial neighbors China and Russia, and then culminating with Pearl Harbor.

The exhibition is possible due to the generous gift of 1,357 Japanese prints and related works of art given to the Saint Louis Art Museum in 2010 by local donors, Charles and Rosalyn Lowenhaupt.

(more…)

An Open Letter To Warren Buffett

An open letter to Warren Buffett about Wells Fargo

October 17, 2016 | By Charles Lowenhaupt

Warren, where are you?

Your company, Berkshire Hathaway, is the single largest shareholder in Wells Fargo, which was recently fined $185 million by U.S. regulators for fraudulently opening accounts for millions of customers. CEO John Stumpf announced his resignation last week.

Yet, there has been no word from you, one of the most respected investors of all time. You’re a man whose social conscience and impact is among the most enlightened on the planet. You set the example for Bill Gates, Mark Zuckerberg and others, but you have been deafeningly silent about the Wells Fargo culture and action. Many shareholders, customers, city officials, federal legislators and others have publicly expressed their dismay and indignation about Wells’ egregious practices. Some have even stopped doing business with the bank in protest. (more…)

Brexit

Brexit: Keep Calm and Carry On

June 27, 2016 | By Charles Lowenhaupt

The UK vote to leave the EU is an epochal event. Its ramifications will be substantial for Europe and the world. No one knows what will happen next, but the passage of time will offer knowledge we do not have now.

Most immediately, the results have included dramatic drops in world markets. The Dow Jones Industrial Average fell 610 points, losing 3.4% of its value on the day after the Brexit vote was taken. We are likely to see continued volatility in the markets.

At times like this, the natural question is, “What should I do?” In our view, you should do what you should always do – remain thoughtful and measured. (more…)

Charitable LLCs

Lessons in Charitable LLCs: Is it Really a Sea Change?

June 17, 2016 | By Charles Lowenhaupt

The so-called “charitable” LLC has been getting some good press lately.

A month ago, Wealthmanagement.com ran a story entitled, “A Sea Change in High-Net-Worth Philanthropy?” In December, The New York Times reported that Mark Zuckerberg and his wife, Priscilla, created an LLC to help give away 99% of their wealth.

In both instances, the media pointed out that this legal structure is gaining favor among those with significant wealth – billionaires and deca-millionaires.

So what’s all the fuss is about? I’m really not certain, actually. (more…)

Due Diligence

Forget All The Misdeeds – Just Trust Us

May 20, 2016 | By Charles Lowenhaupt

Cerulli Associates says that US high net worth clients prefer to hold their money at wirehouses, private banks and trust companies. This includes clients with more than $20 million dollars in that group using the wirehouses, private banks and trust companies.

Since the financial crisis in 2008, the world’s 20 largest banks have paid more than $235 billion in fines. One might ask why, after years of misbehavior by many institutions, are wealthy investors still relying on them? One might also ask how the brokerage industry can continue to attract those wealth holders given all the misdeeds and the daily fines and penalties they continue to rack up? (more…)

Panama Papers Privacy

On Privacy And The “Panama Papers”

April 6, 2016 | By Charles Lowenhaupt

The leak of 11 million documents (“The Panama Papers”) from the files of a Panama law firm, Mossack Fonseca, represents an unprecedented exposure of what is considered highly confidential information about the secret financial dealings of the some of the world’s highest profile leaders and wealthiest individuals. (more…)

Bridging The Generation Gap: What is the Wealth For?

February 25, 2016 | By Charles Lowenhuapt

Significant wealth and family dynamics are always complex, but some aspects don’t change from generation to generation—or from continent to continent.

I was reminded of that during a recent trip to Sydney. Speaking at an event with a number of wealth holders and wealth inheritors, I had numerous conversations I’ve heard repeated again and again in the U.S., Europe and Asia. They go like this: Wealth creators say their children are aimless and lack their passion and direction. Family money, they say, has made their adult children soft. They bemoan the fact that the children lack “motivation.”
 For their part, adult children complain that their parents are
 too controlling. The children say they are passionate about
 their ideas and their future, but their overbearing parents 
are unwilling to help them use a small portion of the family
 fortune to change the world or fund their projects. (more…)

Zuckerberg Example: Demonstrating What The Wealth Is For

December 17, 2015 | By Charles Lowenhaupt

The birth of a child is a wondrous event, and all the more if you’re one of the richest – and most thoughtful – people in the world.

On “Giving Tuesday” two weeks ago, Facebook Founder Mark Zuckerberg and his wife, Priscilla Chan, announced the birth of their first child, a daughter Max. At the same time, in a 2,200-word letter to Max, they pledged that 99% of their Facebook stock will go to charitable purposes to promote equality and human potential. The shares, currently valued at $45 billion, would be one of the world’s largest gifts ever. It puts Zuckerberg on par with philanthropists Warren Buffet and Bill Gates, two of the world’s most generous givers.

Not surprisingly, an act of this magnitude elicits a lot of commentary and deservedly so. Bill and Melinda Gates said the gift is “an inspiration to us and the world.” Philanthropist and former New York City Mayor Michael Bloomberg said, “when it comes to philanthropy, 30 is the new 70.” (more…)

Why Investors Are Concerned

By Donna Gilding

Everywhere you look these days, investors are concerned about market risk. Some of the biggest risks facing investors today are fears about the impact of changes to US monetary policy, the resilience of the Eurozone, the strength of the US equity markets, the lack of potential in the global fixed-income markets and the strength of China’s stock market.

The heightened market uncertainty, and the perceived lack of opportunity in the US equity and fixed-income markets, has encouraged investors to funnel vast sums of money to alternative assets. This surge of money into private equity, hedge funds and infrastructure funds has raised questions about the ability of alternative managers to deliver the exceptional returns that many investors are seeking. (more…)

Second Quarter 2015 Market Review

By Donna Gilding

The month of June was a pretty lousy month across the board. Equities and fixed income posted negative returns. The quarter was lackluster, especially for interest-rate sensitive securities such as REITs and MLPs. On a year-to-date basis, US and emerging markets small cap stocks have been the best performers. The Russell Microcap, for example, is up 2.80% and emerging markets small cap is up 8.25%. (more…)

The Export-Import Bank: Why it Still Matters

By Donna Gilding

The Export-Import Bank was created in February 1934, as part of the New Deal, to finance trade with the newly established Soviet Union. A second bank was created a month later to finance trade with Cuba and shortly thereafter expanded to include all countries with the exception of the Soviet Union. Congress passed legislation to combine the two banks in 1935. They also granted the unified bank more powers along with more capital. While the Bank did extend credit to a few countries, such as Italy and China prior to World War II, its primary efforts were concentrated on Latin America as part of the Good Neighbor Policy. (more…)

Will Consumers Spend the Oil Dividend?

By Donna Gilding

In the latter half of last year, the price of crude oil dropped by over 50%. This was soon followed by a significant decline in the price of gasoline for motorists. It was assumed that this drop in price would have freed up money to spend elsewhere. The markets bet on this. The run-up in the US stocks last year reflected the belief that cheaper oil would act as a stimulus to the economy. This, in turn, would allow the Fed to increase rates, attract funds to the US, and push up the dollar. (more…)

Why Fairness Trumps Equality In Sharing The Family Wealth

By Charles Lowenhaupt

Question: When should wealth owners plan to leave unequal portions to their children?

Answer: Strange as it might seem, “almost always.”

Before dividing an estate, wealth owners need to get past the definitional ambiguity of “equal” and “unequal.” Most wealth holders define “equal” as a dollar-for-dollar split where each child gets the same amount. Yet another perspective might consider meeting needs equally, regardless of amounts. Research shows that about two-thirds of people choose dollar-for-dollar equality at death — but in our experience, most opt for equally meeting needs while they are alive. (more…)

What Can’t Money Buy?

By Charles Lowenhaupt

The challenge of living with great wealth or raising children with great wealth is putting money in its place. That notion may seem oddly counter-intuitive because most people believe they have dominion over their money, not the other way around. In fact, money poorly managed often exerts a force of its own and has unintended – and often negative – consequences.

The key question is this: How should the wealth creator or wealth inheritor lead life to its fullest without drowning in the administration and emotion that can come with riches? (more…)

What Will 2015 Bring: Three Economic Scenarios to Consider

By Donna Gilding

2014 turned out to be a notable year for a number of reasons even excluding geopolitical risks and global financial crises:

  • Small cap stocks had a great December and fourth quarter – up 2.97% and 10.06% respectively
  • REITS and long Treasuries were the best performers for the quarter – up 14.35% and 8.62%
  • REITS and long Treasuries led the markets for the twelve-month period – up 30.26% and 25.07%
  • We did not see a lot of folks betting on either REITS or long bonds of any flavor.

2014 is the sixth year with positive returns, the third year of double-digit returns and the 4th longest bull market in post-war history. (more…)

Mobility and Freedom From Wealth

By Charles Lowenhaupt

The noted journalist Robert Frank tells us that the world’s rich are buying visas and passports to the tune of billions a year. Large private jet sales are booming, and luxury travel is being sold in every magazine and newspaper. A friend of mine whose parents were Holocaust survivors owns hotels in six or seven places around the world and in each maintains a penthouse. When I ask whether his real estate holdings are good investments, he says they are his best: “They lose money, but they allow me the comfort of knowing that I can always leave where I am to find security somewhere else.”

If wealth is for anything, it is for freedom – freedom to lead the life you want to lead, freedom to become all you can become, freedom to find freedom when a homeland does not offer it, and freedom to travel. Mobility is a luxury that the rich have become accustomed to whether they come from the U.S., from China, from Russia, from Saudi Arabia or from Venezuela. (more…)

A Surprising Period of Unwavering Confidence

By Donna Gilding

Even as the headlines include wars in the Middle East and Eastern Europe, and as the European Central Bank announced further rate cuts, the consensus of our managers is that complacency and confidence continue to exist in the US. For example, none of the following events was greeted with apprehension about overheating or an imminent correction!

  • In the four years ending in August 2014, the S&P 500 gained more than 80% and crossed 2000 mark for the first time
  • The new jobs numbers for August were disappointing and showed that the US failed to create at least 200,000 new jobs for the first time in seven months.

Last year, even the suggestion of ending of quantitative easing, created a spasm in the global markets. However, once the tapering started, the stock market took it in its stride. (more…)

What Does It Take To Get Rich?

By Charles Lowenhaupt

In my experience, getting rich takes vision, hard work, and good luck.  Wealth inheritors have the luck, but they often lack the vision and hard work.  So preserving wealth is a whole different matter from creating it.

I have been very fortunate to have known wealth creators, either directly or through their descendants.  One of the most impressive I ever met was a Japanese industrialist who I had the privilege of meeting as a teenager.

He is still alive today and almost one hundred years old, and his life is instructive about what is possible. (more…)

Market Tranquility and Geopolitical Risks in 2014

By Donna Gilding

Geopolitics and political economics typically have a lot of impact on the financial markets. Given all of the recent turmoil, it’s therefore surprising that the markets remain unfazed by the growing instability around the world.  Of note, we have looming civil war in the Ukraine, Cold War rhetoric between the West and Russia, territorial tensions in Asia and populist nationalism in Europe.  A Dutch columnist recently wrote:  “……If anything characterizes recent history, it is the degree to which the 19th century, unexpectedly and to the astonishment of many, makes itself felt in the 21st century…” (more…)

The Joy of Collecting

By Charles Lowenhaupt

Philip Shulman was one of the great collectors I have ever met.

When we were first acquainted, he had just retired as a postal worker in San Francisco. He had spent many years in the military and then working for various companies before he took the position with the post office.  His wife had died and her two children, his step children, were his only family.  I was introduced by a Japanese print dealer who told me that for a number of years. Phil had purchased prints of the Sino-Japanese and Russo-Japanese wars, our own interest, but had not been heard of for five or ten years. (more…)

Five Priceless Pieces of Wisdom

By Charles Lowenhaupt

For more than 100 years, we’ve been helping individuals and families manage significant wealth. During that time, we’ve learned a lot and wanted to share some of our collective wisdom – and humor – with our friends. (more…)

Conventional Wisdom and Interest Rates

By Donna Gilding

Conventional wisdom in the investing world asserts interest rates will rise, but probably not for the next two or three years.  The Bank of England and the Federal Reserve seem to be shuffling toward an exit from easy monetary policy.  In addition, the European Central Bank seems to be considering an easing.  On March 25, Jens Weidmann, president of the Bundesbank, suggested that the ECB might have to be “a little more forceful to keep the Euro zone economy out of deflation.”  It is likely that the ECB will continue to be dictated to by its weakest members, which have been known to produce resentment and tension. (more…)

A $3 Billion Mistake?

By Charles Lowenhaupt

The entire world is wondering why 23-year-old Evan Spiegel, Snapchat’s co-founder and CEO, turned down a $3 billion offer from Facebook last month.

Media reports said Spiegel won’t entertain offers for Snapchat until next year, when the messaging service (now all the rage, particularly among women) may have even more users and a higher valuation. In other words, they believe that maybe he just wants more money.

But there’s another reason that could explain his decision. Perhaps a 23-year-old couldn’t imagine what to do with billions. (more…)

Reg Reform Won’t Bring Clients Back to Public Markets

By Charles Lowenhaupt

Financial Advisor IQ
July 2013

Speaking at Finra’s annual conference in Washington, D.C., last month, Richard Ketchum, the securities industry self-regulator’s CEO said, “The financial services industry has weathered many challenges in the last few years: a recession, significant frauds, a flash crash. And while we have worked hard to prevent those kinds of events from being repeated, they have had a lasting effect on investors’ trust and created a true crisis of confidence in the markets.”

So what does Finra propose to do about the financial chicanery and technological glitches that have shaken financial markets in recent years? Impose more regulation. For the world’s wealthiest families, however, mere regulatory reform isn’t enough.
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