We normally think of investments first when the subject of wealth management comes up.  And that’s likely because making money is more fun to talk about when compared to asset protection, or estate planning or other planning elements. 

We have investment advisory last on the Circle of Needs, when starting at the top and moving clockwise.  Does that mean that investments are unimportant?  It doesn’t, but it reflects our viewpoint that your investments need to be flexible with regards to the other elements of planning.

Let’s discuss an example.  One of the best structures for families with very profitable businesses to consider is establishing a captive insurance company.  We could get in the weeds in a hurry on captive planning, so we’ll save this explanation for when you meet with our advanced tax planning professionals.

The concept to understand here is that assets that are held (owned) in different entities will have different tax consequences, and thus should require different types of investments and management.  In the case of investments inside of a captive insurance company, assets are deductible at the point they are contributed into the captive, but dividends, interest and capital gains are fully taxable after contribution.

So the goal for an investment manager of captive assets, in an ideal scenario, is to limit taxable dividends, interest and capital gains as much as possible, while maximizing the potential returns of the selected investments.  Growth stocks, which pay little or no dividends, are normally advantageous, as well as other investments that provide tax advantages.

Practically every traditional multi-family office derives most, if not all, of their revenue from investment management.  This is the huge drawback to the ‘bricks and mortar’ MFO advice model, because in order to obtain their other services a family must acquiesce and go along with having assets managed by the MFO, whether they want this service or not. 

We provide investment management services, but our business model does not require that a family manage their assets in order to work with us.

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