Rich in America: Secrets to Creating and Preserving Wealth

Rating:
Summary: Personal Finance Ideas For The Wealthy
Review: "Rich In America: Secrets To Creating and Preserving Wealth" by Jeffrey S. Maurer studies clients of U.S. Trust to learn about wealthy Americans.

"Rich In America" focuses upon the top 1% of Americans based upon net worth ($3.75 million) or income ($300,000 per year).

We learn that about a third of these wealthy people earned their money through lucrative corporate jobs; about a third earned their money through private businesses; and about a third earned their money from professional practices.

Most of the affluent attributed their financial success to hard work. Time was also a factor. Only 7% worked ten years or less to obtain their financial status, while the average time worked to obtain their status was 21 years. About a quarter of the wealthy needed 30 years to attain their success. Today, the average, wealthy person still works 48 hours per week. So, I guess, the first "secret" to creating wealth is to work hard for a long time.

Most respondents said they felt they gave up time with family, friends, and hobbies to obtain their current financial success. We also learn other interesting statistics, such as 7.1 million households (6.6% of the population) have a net worth above $1 million. And, throughout the last 20 years, the largest gains in income and wealth have predominantly gone to the richest 1% of the population.

Maurer points out that creating wealth and preserving it are two different things. He writes: "There is an old saying: Concentrate to become rich, and diversify to remain rich."

While Maurer argues that saving (the average respondent saved 23% of his/her income) and compounding help build wealth, he says "...you can forget the notion that investing alone will make you wealthy. ... All those books that say you can make millions in real estate or the stock market overnight are not accurate, but you probably knew that already."

"Rich In America" goes on to argue against simple buy-and-hold investing (which I like). He says you need professional financial advisors today. He also argues that a private banker is nice. At this point, for awhile, the book reads like a promotion for the financial planning services industry, with a special focus on the advantages of U.S. Trust.

Maurer likes hedge funds. (Incidentally, if you read the current 2004 issue of Forbes, which features the richest 400 people, there is a good demonstration of just how rich many hedge fund managers are. Partially due to the excessive fees, I'd argue hedge funds should be avoided by the average investor, even the average, wealthy investor.)

After the promotional digression, the book returns to surveying core topics, such as:

-Taxes ("Do not let the tax tail wag the investment dog[,]" writes Maurer.
-AMT
-Estimated Tax Payments (with which nearly every businessperson quickly becomes familiar)
-Stock Options
-Insurance
-Retirement Planning
-Estate Planning

"Rich In America" does a good job covering some topics not covered in basic financial planning books--topics wealthy people might find especially interesting. For example, in addition to learning the basics of life insurance, we learn about directors' insurance (in case you're on a board of directors) and kidnap insurance (before taking that trip to scenic Baghdad). We also learn that U.S. Trust typically recommends at least $10 million in liability insurance for its clients worth more than $5 million dollars. We learn about starting your own foundation.

My favorite section of "Rich In America" deals with concentrated stock positions and how to diversify such a position. Topics covered include:

-Zero-Premium Equity Collars (huh?)

-Varying Forward Contract (You agree to deliver some of your shares in the future and you receive cash today, locking in some present value, which sounds like it could have been handy if you have billions of dollars in hot IPO Internet stock headed for a correction. There is no discussion about how this relates to restricted IPO stock, where you're locked in from selling before a certain date.)

-Tax-Efficient Diversification through Indexing and Loss Harvesting (You start off with your concentrated stock, you wind up with a diversified portfolio, and apparently no capital gains taxes are due. Sounds like a tax evasion scheme to me. Before I'd try something like this, I'd find out what the IRS says about it!)

-Charitable Remainder Unitrust (CRUT. You probably never knew you needed one.)

Of course, if you think one of these is handy, you need professional advice. But, I'd be careful. Don't assume that just because a plan is pushed by a big, respected firm that it's deemed OK by the IRS. PBS Frontline had a nice feature about tax shelters (search google for "tax shelters Frontline" and you'll probably find it), where entrepreneurs who sold firms for millions and who should have paid millions in capital gains taxes were sold tax shelters by KPMG where apparently no capital gains tax was due. The IRS disagreed. It was kind of humorous watching these entrepreneurs whine and say they trusted the big firm.

As Maurer writes: "There are many truisms to live by in the world of investing. Probably the most important is simply to be sensible. Anything that seems too good to be true probably is. There are no real shortcuts. When some salesperson appears on television and promises that he or she can quadruple any investment in 30 days, the only person whose wealth is truly going to quadruple is that of the salesperson."

Overall, "Rich In America: Secrets To Creating and Preserving Wealth" is an informative book that helps us understand many aspects of financial planning as they relate to the affluent.

Peter Hupalo,
Author of
"Becoming An Investor"

Rating:
Summary: It's About Time
Review: Finally, a book that speaks the truth about building real wealth and financial independence. It takes time (a lifetime even), discipline, and hard work to not only become wealthy, but hang onto hard-earned assets for your retirement, your children and your grandchildren. If you're looking for an intelligent, thoughtful read to help you navigate through the complexities of amassing wealth, this is the book. Whether or not you aspire to be rich, the insights on smarter financial planning are important for anyone trying to make the most of their money. And, who better to learn from than someone who spent his career giving financial advice to the rich?

Rating:
Summary: Enlightening Book On Wealthy Americans
Review: Maurer, provides basic information on seven topics: financial and estate planning, investing, retirement, insurance, taxes, and how to choose a financial advisor. The author presents the material in a logical, clearly written manner, and uses exhibits, as needed, to explain key financial concepts. Also included in various chapters are key findings of the U.S. Trust Survey of Affluent Americans. The survey focused on individuals with gross income of $300,000 and a net worth of $3.75 million. You will find the survey findings to be eye opening. The appendix contains a sample of nine financial planning schedules.

The author indicates that the purpose of investing is to protect your wealth against inflation, and to preserve these invested assets. Mastering the investment scene is not easy, and it takes years of studying, perseverance and a non-emotional approach. Most individuals do not have sufficient time or skill to devote to their financial affairs. Therefore, they should try to find a knowledgeable and TRUSTWORTHY advisor who can work with them to manage their wealth. Having an advisor is especially important in the difficult periodic down markets, assuming the advisor knows how to protect your portfolio.

Maurer points out that an investor parking his/her funds in cash and not investing the funds is being too conservative and thus earning less than the rate of inflation. Therefore, he suggests an investing plan be developed, tracked, and revised as necessary.

As in any field of endeavor, knowledge is power. Without knowing the basics of the topics covered in this book, a person would be at a potential disadvantage, education-wise, in dealing with an advisor. After reading this book, you will be able to more intelligently work with an advisor and understand how a successful relationship is supposed to work.

Any affluent individual should read this book before hiring a financial advisor/planner. It provides down-to-earth, practical information that will be useful when discussing your personal financial situation, goals, and needs with potential advisors.

Rating:
Summary: Enlightening Book On Wealthy Americans
Review: Maurer, provides basic information on seven topics: financial and estate planning, investing, retirement, insurance, taxes, and how to choose a financial advisor. The author presents the material in a logical, clearly written manner, and uses exhibits, as needed, to explain key financial concepts. Also included in various chapters are key findings of the U.S. Trust Survey of Affluent Americans. The survey focused on individuals with gross income of $300,000 and a net worth of $3.75 million. You will find the survey findings to be eye opening. The appendix contains a sample of nine financial planning schedules.

The author indicates that the purpose of investing is to protect your wealth against inflation, and to preserve these invested assets. Mastering the investment scene is not easy, and it takes years of studying, perseverance and a non-emotional approach. Most individuals do not have sufficient time or skill to devote to their financial affairs. Therefore, they should try to find a knowledgeable and TRUSTWORTHY advisor who can work with them to manage their wealth. Having an advisor is especially important in the difficult periodic down markets, assuming the advisor knows how to protect your portfolio.

Maurer points out that an investor parking his/her funds in cash and not investing the funds is being too conservative and thus earning less than the rate of inflation. Therefore, he suggests an investing plan be developed, tracked, and revised as necessary.

As in any field of endeavor, knowledge is power. Without knowing the basics of the topics covered in this book, a person would be at a potential disadvantage, education-wise, in dealing with an advisor. After reading this book, you will be able to more intelligently work with an advisor and understand how a successful relationship is supposed to work.

Any affluent individual should read this book before hiring a financial advisor/planner. It provides down-to-earth, practical information that will be useful when discussing your personal financial situation, goals, and needs with potential advisors.

Rating:
Summary: The Real Inside Story
Review: Other books speculate about why the rich are "rich." This book tells the real story.

Jeff Maurer has counseled rich people for decades. He knows what he's talking about. And if "lay people" really want to learn how the rich do it, they need look no further than this primer.

Other books speak anecdotally about "rich people next door" or "how I became a millionaire." They're of little instructive value. This book, by contrast, presents the areas of focus and tactics of wealth building that can actually help an ordinary person get there.

Sure some of these estate planning and tax planning and investment planning suggestions may take some thought to understand. But who ever said getting rich is easy? If it was, there'd be a lot more "millionaires next door."

The real answer to getting rich is exactly as author Maurer poses it. It takes work. It takes study. It takes focus. And it takes a strategy.

After reading this book, you'll finally understand how rich folks do it. The rest is up to you.

Rating:
Summary: Rich in America by Maurer
Review: This work is replete with comparative statistics on how the
wealthy obtained their position in life. The author makes a
point of the fact that only 4% of the wealthy come from a
preferred social class. The remainder earned their wealth
through hard work and sensible investments. Portfolios
should have both balance and diversity. Investors should not
get too greedy. Lastly, an estate needs to preserve wealth
through careful planning. This book is aimed at investors
who are self-employed or earn a living through a private
employer. The presentation would be helpful for anyone
crafting a personal financial plan for the intermediate to
long term future.

Rating:
Summary: The man knows whereof he speaks
Review: What impressed me most about this book is how directly useful and applicable it is, and not just for people who have bags and bags of money. Clearly, Mr. Maurer has a lifetime of experience working with very rich people and families whose affairs are very complex. But, if you have any significant property of any kind, the odds are that you fall into the same basket as many others--paying insufficient attention to making sure it works for you and that it gets into the hands you want (e.g., family and friends) rather than the hands you don't want (e.g., Uncle Sam and probate attorneys). This book feels like it's written by an expert, but written for everyone in this situation. I think it's first rate.