Do high-net worth clients, and their advisors, really get ‘wealth-weighted’ return?
WALNUT CREEK, CA–(Marketwired – March 25, 2016) – Pillar Wealth Management, LLC, a private wealth management firm to affluent families — some of whom attained wealth reaching $400 million — is warning ultra-high net worth investors in a new blog post about a financial pitfall that, amazingly, most wealth and money managers do not understand: the importance of wealth-weighted return vs. time-weighted return.
The new article cites investment scenarios from the firm’s principals’ newly published book “The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million” to demonstrate that while time-weighted average returns are being used by ultra-high net worth investors and a majority of their professional advisors to measure successful investing, it can actually be misleading and a poor measure of wealth accumulation!
Clients are ill-served by normal performance measures
“Imagine someone offering a weighted average return of 8.3 percent vs. 7.4 percent,” asked the book’s co-author Chris Snyder. “The choice seems obvious, but the truth could turn out to be that there is more wealth accumulation via the 7.4 percent return vs. the 8.3 percent return! There are no tricks here, and we show the math to prove it.”
“The reason we drive this point home in our latest blog and new book, is because ultra-high net worth families are ill-served by the normal industry performance measure,” noted Pillar Wealth Management’s CEO and the book’s co-author Haitham “Hutch” Ashoo. “We demonstrate in our book and within our article how to best measure success of wealth accumulation.”
Pillar Wealth Management’s new blog post also warns ultra-high net worth investors from buying into the notion that today’s successful money managers and hedge funds will be able to reproduce their performance in the future.
“According to Morningstar, at the end of the last decade 72 percent of all mutual funds’ deposits, or about $2 trillion, was flowing into 4 and 5-star funds,” added Ashoo. “And yet about 98 percent of money managers and hedge funds under-perform the market over ten years! That means ultra-high net worth investors have a high chance of underperforming.
In our opinion the best way to avoid both of these traps is to insist on seeing an evaluation of wealth-weighted returns after taxes and fees — not time-weighed returns. Wealth-weighted return is the true measure of a family’s investing and financial success!”
As noted above, the newly published book features investment scenarios to help readers improve their knowledge, and protect their wealth and investments.
“The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million” is available from Amazon.com at.
About Pillar Wealth Management, LLC
Haitham “Hutch” Ashoo and Christopher Snyder are privileged to have worked with ultra-high net worth families, some of whom attained wealth reaching $400 million, helping them achieve a positive change in their lives and finances. They co-founded Pillar Wealth Management, LLC, an independent, fee based, private wealth management firm. As their clients’ go-to advisors, they are brought in to help with investment management, strategic planning, asset allocation, risk control, and tracking of their clients’ progress towards life-goals. Their services are provided to a limited number of clients. They only accept a new client when they have determined that there is mutual admiration and respect and only if they can add substantial value to the client’s financial life. Learn more at http://pillarwm.com. You can reach us at PWM@PillarWM.com