The rich have habits
Never pay bills or taxes
Then make excuses
Showing posts with label rich. Show all posts
Showing posts with label rich. Show all posts
Saturday, August 31, 2024
Wednesday, March 16, 2016
Removing All Mystery From Modern Wealth Management Performance
Stock brokerage was a middle class career path in America after World War II, thanks to brokerages that hired military veterans to staff branch offices across the country. The sector morphed into financial advisory and became a playground for the spoiled kids of rich families. It happened gradually, then suddenly, much like the way spendthrift households go bankrupt.
Legions of stock brokers built their books of business with long hours of cold-calling complete strangers. Federal legislation behind the National Do Not Call Registry removed millions of potential wealth management prospects from the financial sector's reach. The USA PATRIOT ACT further required financial institutions to thoroughly know their potential customers, in the expectation that familiarity kept terrorists out of finance. Brokerages in the early 2000s knew these legal changes would quickly make mass cold-calling an obsolete way to attract new business. They needed some new juice.
Demographics answered the brokerages' growth dilemma. Some market researchers figured out in the 1990s that wealthy people increasingly preferred doing business with other people who were just like them. Being rich was the surest sign of trustworthiness. Everybody was getting rich in the 1990s from the dot-com bubble, so it all seemed so easy without any work ethic or basic financial competence.
Leading brokerages hired consulting firms after the 2001 dot-com crash to redesign their new broker employment pipelines, compensation plans, and even their branding and cultures. The result was a collection of top-tier brokerage firms that defined success as walking in the door with enough money to instantly produce high six-figure revenue. Most firms would put this figure at a minimum $10M book of business. The only people who could pull this off were the trust fund kids born into serious wealth. Mom and dad hand over the family fortune to Junior, who takes a wealth management job to fulfill some stipulation in their multigenerational trust fund. Meanwhile, the brokerage's branch manager acts in loco parentis to ensure Junior sticks around during market hours. It all makes being rich look so easy, and that's enough to fool newly rich clients.
It's easy to become a top-performing wealth manager today. Just walk in the door with your family's $10M and do absolutely nothing. Anyone else hired in a wealth management branch who walks in with less money will be fired in a few months, because their expected production after half a year will curve up by the amount of revenue they would have made if they had walked in with $10M. In other words, wealth management firms employ the hard-working poor to generate qualified leads that their rich peers will collect after they are fired.
I have no empirical research to support my observations above. Chalk it all up to what I have personally witnessed since earning my MBA. Investors have every right to know what their hired financial professionals do with client money. In almost all cases, the hired pros do somewhere between nothing and less than nothing.
Legions of stock brokers built their books of business with long hours of cold-calling complete strangers. Federal legislation behind the National Do Not Call Registry removed millions of potential wealth management prospects from the financial sector's reach. The USA PATRIOT ACT further required financial institutions to thoroughly know their potential customers, in the expectation that familiarity kept terrorists out of finance. Brokerages in the early 2000s knew these legal changes would quickly make mass cold-calling an obsolete way to attract new business. They needed some new juice.
Demographics answered the brokerages' growth dilemma. Some market researchers figured out in the 1990s that wealthy people increasingly preferred doing business with other people who were just like them. Being rich was the surest sign of trustworthiness. Everybody was getting rich in the 1990s from the dot-com bubble, so it all seemed so easy without any work ethic or basic financial competence.
Leading brokerages hired consulting firms after the 2001 dot-com crash to redesign their new broker employment pipelines, compensation plans, and even their branding and cultures. The result was a collection of top-tier brokerage firms that defined success as walking in the door with enough money to instantly produce high six-figure revenue. Most firms would put this figure at a minimum $10M book of business. The only people who could pull this off were the trust fund kids born into serious wealth. Mom and dad hand over the family fortune to Junior, who takes a wealth management job to fulfill some stipulation in their multigenerational trust fund. Meanwhile, the brokerage's branch manager acts in loco parentis to ensure Junior sticks around during market hours. It all makes being rich look so easy, and that's enough to fool newly rich clients.
It's easy to become a top-performing wealth manager today. Just walk in the door with your family's $10M and do absolutely nothing. Anyone else hired in a wealth management branch who walks in with less money will be fired in a few months, because their expected production after half a year will curve up by the amount of revenue they would have made if they had walked in with $10M. In other words, wealth management firms employ the hard-working poor to generate qualified leads that their rich peers will collect after they are fired.
I have no empirical research to support my observations above. Chalk it all up to what I have personally witnessed since earning my MBA. Investors have every right to know what their hired financial professionals do with client money. In almost all cases, the hired pros do somewhere between nothing and less than nothing.
Wednesday, October 07, 2015
Innovate Your State Moves Beyond Six Californias Plan
Famed venture capitalist Tim Draper wants more innovation in government. He created Innovate Your State and its Fix California Challenge to bring Silicon Valley's innovative spirit into the Golden State's messed up system. We have no time to waste. California ranks poorly on Forbes' list of the best states for business. Better governance will be good for business.
The venture capital community worries about more than just California's business climate. Tim Draper's plan for Six Californias did not qualify for the state ballot. The proto-state of Silicon Valley would have been the wealthiest and most educated of the six states. That plan reminds me of Tom Perkins' remarks at the Commonwealth Club about the rich getting one vote per dollar of wealth. Wealthy VCs would not mind if Silicon Valley became one giant gated community. I would not mind it so much myself if it meant new states in Southern California had to pay full market price for their water.
The Tim Draper philosophy of "venture governance" crowdsourced from highly motivated citizens allows good ideas to get traction. Like every new venture, opportunity also brings risk. Ideas like allowing constituents to simulate votes on Congressional or Legislative bills will probably force more real-time accountability between elections. It also risks annulling the electoral process if lawmakers start slavishly following the popular will instead of voting their conscience or brokering compromises. Too much innovation brings the kind of direct democracy the Founders wanted to avoid by designing a republic.
I don't see how digitizing democracy will bypass special interests. Well-funded lobbies can still run compelling social media campaigns, and those campaigns can decisively influence crowdsourced projects. The Founders warned about "factions" in the Federalist Papers. Placing governance into the hands of a wise elite whose wealth insulated them from outside pressure was the Founders' solution to factionalism. Lobbies targeting single issues make representative governance more difficult.
Devolving governance into crowdsourcing works best if it improves the machinery of government, like speeding the passage of bills or making regulatory compliance easier. The good news in venture governance is that bad policies can be undone when they lose public support. Markets work that way.
The venture capital community worries about more than just California's business climate. Tim Draper's plan for Six Californias did not qualify for the state ballot. The proto-state of Silicon Valley would have been the wealthiest and most educated of the six states. That plan reminds me of Tom Perkins' remarks at the Commonwealth Club about the rich getting one vote per dollar of wealth. Wealthy VCs would not mind if Silicon Valley became one giant gated community. I would not mind it so much myself if it meant new states in Southern California had to pay full market price for their water.
The Tim Draper philosophy of "venture governance" crowdsourced from highly motivated citizens allows good ideas to get traction. Like every new venture, opportunity also brings risk. Ideas like allowing constituents to simulate votes on Congressional or Legislative bills will probably force more real-time accountability between elections. It also risks annulling the electoral process if lawmakers start slavishly following the popular will instead of voting their conscience or brokering compromises. Too much innovation brings the kind of direct democracy the Founders wanted to avoid by designing a republic.
I don't see how digitizing democracy will bypass special interests. Well-funded lobbies can still run compelling social media campaigns, and those campaigns can decisively influence crowdsourced projects. The Founders warned about "factions" in the Federalist Papers. Placing governance into the hands of a wise elite whose wealth insulated them from outside pressure was the Founders' solution to factionalism. Lobbies targeting single issues make representative governance more difficult.
Devolving governance into crowdsourcing works best if it improves the machinery of government, like speeding the passage of bills or making regulatory compliance easier. The good news in venture governance is that bad policies can be undone when they lose public support. Markets work that way.
Friday, September 25, 2015
The Haiku of Finance for 09/25/15
High-end private taste
Pour out the richest fluid
Drink to perfection
Pour out the richest fluid
Drink to perfection
Tuesday, September 01, 2015
Saturday, July 04, 2015
Epigenetic Elitism In The Near Future
Civilizations are never trapped in amber. They change as their ruling classes change priorities and tastes. Two recent news items point the way to our civilization's next incarnation.
First, Stanford will grant free tuition to some capable middle-class students. The ruling elite's noblesse oblige sensibility has been dormant for at least a generation, so this may be an attempted restoration. The policy is less useful as a marketing ploy for low-income social groups whose children lack Stanford's prerequisites. Second, significant life experiences cause epigenetic changes in brain chemistry that subsequent generations inherit. Good experiences like occupational achievement, successful romantic conquests, and wealth-enhancing choices thus increase genetic quality. Bad experiences for less fortunate people (like stress from child abuse or abandonment) decrease inclusive fitness.
The connection between the two items deserves explanation. Upper-class citizens tend to have above average life experiences. They obtain high-quality social goods like education, jobs, and romantic relationships with greater ease and frequency than lower-class people. These kinds of people comprise the vast majority of the student body at Stanford and other top schools that won't need a tuition waiver. They will not willingly associate with anyone from the free-riding minority who do not inherit robust epigenetic markers.
The children from rich families who have to pay for college usually refuse to socialize with anyone getting a free education. I have experienced this phenomenon personally at both the undergraduate and graduate levels. Economically disadvantaged students cannot fully benefit from a Stanford education if elite students shun them from their networks. Children of rich families at elite schools query each other's backgrounds all the time. They also consider visual markers like brand-name clothing and cars. It is easy for them to pick out the lower-class students and label them as undesirable. Their parents raised them to behave that way to preserve their family's way of life.
Elite families have long obsessed over perpetuating their bloodlines. Science now has proof that humans can self-select for genetic quality. Good epigenetic effects among the elite class will keep them well-suited for handling the stresses of high-powered occupations. Success begets success, and successful people will mate with each other to perpetuate ruling class solidarity. Wealthy people can afford trichostatin A treatments to wipe their mental slates clean and raise the epigenetic responses they will pass to their progeny. The poor may not have such an option; I can see the Affordable Care Act's controls ruling trichostatin A an elective treatment not covered by the generous taxpayer. University tuition waivers for the poor will probably not include hormone treatments to wipe away bad genetics.
Stanford and other schools can afford to throw table scraps to the lower classes while the Federal Reserve inflates asset markets. That luxury will evaporate with the next market crash. University endowment growth after the 2008 financial crisis is entirely a function of central bank monetary stimulus. The American variant of Western civilization will still have the Horatio Alger legend and other such useful myths in its future. It will have less interaction between social classes as the epigenetically fit offspring of elite families avoid their less fit fellow students at top universities.
First, Stanford will grant free tuition to some capable middle-class students. The ruling elite's noblesse oblige sensibility has been dormant for at least a generation, so this may be an attempted restoration. The policy is less useful as a marketing ploy for low-income social groups whose children lack Stanford's prerequisites. Second, significant life experiences cause epigenetic changes in brain chemistry that subsequent generations inherit. Good experiences like occupational achievement, successful romantic conquests, and wealth-enhancing choices thus increase genetic quality. Bad experiences for less fortunate people (like stress from child abuse or abandonment) decrease inclusive fitness.
The connection between the two items deserves explanation. Upper-class citizens tend to have above average life experiences. They obtain high-quality social goods like education, jobs, and romantic relationships with greater ease and frequency than lower-class people. These kinds of people comprise the vast majority of the student body at Stanford and other top schools that won't need a tuition waiver. They will not willingly associate with anyone from the free-riding minority who do not inherit robust epigenetic markers.
The children from rich families who have to pay for college usually refuse to socialize with anyone getting a free education. I have experienced this phenomenon personally at both the undergraduate and graduate levels. Economically disadvantaged students cannot fully benefit from a Stanford education if elite students shun them from their networks. Children of rich families at elite schools query each other's backgrounds all the time. They also consider visual markers like brand-name clothing and cars. It is easy for them to pick out the lower-class students and label them as undesirable. Their parents raised them to behave that way to preserve their family's way of life.
Elite families have long obsessed over perpetuating their bloodlines. Science now has proof that humans can self-select for genetic quality. Good epigenetic effects among the elite class will keep them well-suited for handling the stresses of high-powered occupations. Success begets success, and successful people will mate with each other to perpetuate ruling class solidarity. Wealthy people can afford trichostatin A treatments to wipe their mental slates clean and raise the epigenetic responses they will pass to their progeny. The poor may not have such an option; I can see the Affordable Care Act's controls ruling trichostatin A an elective treatment not covered by the generous taxpayer. University tuition waivers for the poor will probably not include hormone treatments to wipe away bad genetics.
Stanford and other schools can afford to throw table scraps to the lower classes while the Federal Reserve inflates asset markets. That luxury will evaporate with the next market crash. University endowment growth after the 2008 financial crisis is entirely a function of central bank monetary stimulus. The American variant of Western civilization will still have the Horatio Alger legend and other such useful myths in its future. It will have less interaction between social classes as the epigenetically fit offspring of elite families avoid their less fit fellow students at top universities.
Saturday, August 16, 2014
The Haiku of Finance for 08/16/14
Finer things in life
Only wealth can afford them
Start saving up now
Only wealth can afford them
Start saving up now
Sunday, July 27, 2014
Living and Giving Among San Francisco's Nouveau Riche
I have been a San Franciscan for just over a decade. There are times when I am tempted to believe that is one decade too long. I never give in to this temptation because I am destined to show San Franciscans the path to enlightenment. The local nouveau riche class is still finding its way to acceptance.
The New Yorker article "California Screaming" is the East Coast Establishment's way of looking down its nose at San Francisco's newly rich. That magazine's circulation base is mostly old money trust fund babies who turn into full-time salon intellectuals, plus the libraries and medical offices serving a pretentious crowd. No self-respecting East Coast WASP would ever agonize about how to bring public policy innovation to the lower classes. Such trite notions are beneath them. They would simply write a check to their favorite charity and get back to shopping in the Hamptons. The Bay Area fetish for "getting involved" in solving poor people's problems must amuse the monied elites to no end at the other end of our continent.
We do things differently out here in the Bay Area. I have observed the One Percent of this nine-county MSA long enough to understand that their social cognizance is precisely calculated. The lyrics are a bit different out here but the song remains the same. The social climbers on the East Coast would recognize the tune even if they deign not to hum along. The "do something" impulse in the Bay Area means the nouveau riche tech elite translates its skill set into charitable outreach that . . . further enhances its skill set.
Full Circle Fund is the leading exhibit for the Bay Area elite's attitude toward charity. Its members pay a premium for the privilege of helping accelerate local charities' tech adoption curves. That effort, plus some high-end socializing, is a big career enhancer for mid-level corporate project managers in greater San Francisco. I have nothing against Full Circle Fund, and I would probably join them if I thought my skills fit their needs. The fund and its non-profit clients need well-pedigreed managers whose social connections translate into donations and prestigious board memberships. They probably have no use for a sarcastic financial analyst, like yours truly. I would just get in the way of their latest dynamic change initiatives.
The local social climbers who are not techies have their own philanthropic settings, aping the best salons on the East Coast. I am a longtime member of BRAVO!, Symphonix, and ENCORE! where San Francisco's most pretentious yuppies cultivate a very selective meat market. Quite a few of these people have blood connections to their fellow snobs on the Atlantic seaboard. Some members of those organizations have asked me to leave over the years because they disapprove of my social class origins. I refuse to leave, and that is my declaration of moral superiority over nouveau riche class condescension. They need me around more than they will ever know.
San Francisco's socioeconomic elite has always ranked as the younger sibling to the New York and Boston elites whose ancestors gave the United States of America its founding mythos. The locals are good at copying the East's social rituals but a copy never has the fidelity of the original. Tech-oriented philanthropy is The City's native elite language. Local branches of Eastern families will never grok the tech elite's culture or allow its practitioners to penetrate their hallowed drawing rooms. That's too bad. They're missing a decent sales pitch for the latest gadgetry.
The New Yorker article "California Screaming" is the East Coast Establishment's way of looking down its nose at San Francisco's newly rich. That magazine's circulation base is mostly old money trust fund babies who turn into full-time salon intellectuals, plus the libraries and medical offices serving a pretentious crowd. No self-respecting East Coast WASP would ever agonize about how to bring public policy innovation to the lower classes. Such trite notions are beneath them. They would simply write a check to their favorite charity and get back to shopping in the Hamptons. The Bay Area fetish for "getting involved" in solving poor people's problems must amuse the monied elites to no end at the other end of our continent.
We do things differently out here in the Bay Area. I have observed the One Percent of this nine-county MSA long enough to understand that their social cognizance is precisely calculated. The lyrics are a bit different out here but the song remains the same. The social climbers on the East Coast would recognize the tune even if they deign not to hum along. The "do something" impulse in the Bay Area means the nouveau riche tech elite translates its skill set into charitable outreach that . . . further enhances its skill set.
Full Circle Fund is the leading exhibit for the Bay Area elite's attitude toward charity. Its members pay a premium for the privilege of helping accelerate local charities' tech adoption curves. That effort, plus some high-end socializing, is a big career enhancer for mid-level corporate project managers in greater San Francisco. I have nothing against Full Circle Fund, and I would probably join them if I thought my skills fit their needs. The fund and its non-profit clients need well-pedigreed managers whose social connections translate into donations and prestigious board memberships. They probably have no use for a sarcastic financial analyst, like yours truly. I would just get in the way of their latest dynamic change initiatives.
The local social climbers who are not techies have their own philanthropic settings, aping the best salons on the East Coast. I am a longtime member of BRAVO!, Symphonix, and ENCORE! where San Francisco's most pretentious yuppies cultivate a very selective meat market. Quite a few of these people have blood connections to their fellow snobs on the Atlantic seaboard. Some members of those organizations have asked me to leave over the years because they disapprove of my social class origins. I refuse to leave, and that is my declaration of moral superiority over nouveau riche class condescension. They need me around more than they will ever know.
San Francisco's socioeconomic elite has always ranked as the younger sibling to the New York and Boston elites whose ancestors gave the United States of America its founding mythos. The locals are good at copying the East's social rituals but a copy never has the fidelity of the original. Tech-oriented philanthropy is The City's native elite language. Local branches of Eastern families will never grok the tech elite's culture or allow its practitioners to penetrate their hallowed drawing rooms. That's too bad. They're missing a decent sales pitch for the latest gadgetry.
Friday, May 16, 2014
The Haiku of Finance for 05/16/14
Trust fund broker kid
Parents hand over millions
Firm thinks it's genius
Parents hand over millions
Firm thinks it's genius
Thursday, February 20, 2014
Friday, February 14, 2014
The Haiku of Finance for 02/14/14
The rich love to vote
They want to buy even more
Republic for sale
They want to buy even more
Republic for sale
Wednesday, November 20, 2013
Saturday, September 21, 2013
The Haiku of Finance for 09/21/13
Intern at big bank
Learn how to lie like the best
Rich dad pulled a string
Learn how to lie like the best
Rich dad pulled a string
Friday, September 13, 2013
The Haiku of Finance for 09/13/13
Rich country system
Rule of law is paramount
Right way for success
Rule of law is paramount
Right way for success
Saturday, January 05, 2013
Friday, December 21, 2012
Monday, October 01, 2012
Financial Sarcasm Roundup for 10/01/12
September flew by with no market crash, no default from Greece (or Spain, or Italy), no eurozone breakup, and no U.S. hyperinflation. I'm disappointed. I'll have to find more things to get sarcastic about.
The head of the SF Fed defends QE3 in his own words. I get the argument for a natural unemployment rate of 6% but it needs to be defined as primarily for those in transition from one job to another. I don't get the claim that real unemployment is only 8.1%. The Fed folks are glad U-6 isn't published anymore because they know it would embarrass them with a high double-digit unemployment rate. This guy also trots out the deliberate underestimation of inflation at under 2%. *Sigh.* He needs to do more of his own grocery shopping so he can see the price of canned tuna is over $1.00 a can. I remember when it was $0.45 per can a decade ago when I was in graduate school. Nowhere in the speech does he specify just how monetary stimulus will reduce unemployment. That sleight-of-hand trick won't fool markets for much longer.
Bank of America is paying off the last of the irate shareholders who didn't like getting saddled with Merrill Lynch's problems. The $2.4B bill will cause a $1.6B charge against earnings, and BAC had net income of just over $2.4B last quarter. That leaves very little cushion for any other bad news coming out of this bank. Maybe I should take out a loan from BofA just for kicks in case they can't survive. Nah, I'm not that mean and BofA isn't in that much trouble (yet). Full disclosure: No position in BAC.
China's exports are rapidly collapsing. A less intense contraction is still a contraction. I'm glad I sold the last of my China position to herald the end of the China bull story. Note that this survey of purchasing managers by a private bank is more pessimistic than the Chinese government's official survey of purchasing managers. China can no longer avoid getting caught lying about its economy. The plan to turn China into a nation of middle-class consumers hasn't come fast enough and probably never will given that country's demographics. Staying away from Chinese investments is probably the patriotic American thing to do anyway, given Beijing's increasingly bellicose attitude towards its neighbors. I expect nothing but trouble from that country for the next couple of decades.
The Financial Planning Association is in denial about the chances it can reach middle class investors. I remember the rounds of interviews I went through as an aspiring financial adviser in 2005 with branch managers who were convinced that 401(k) rollovers into IRAs would be the industry's growth story. Fast forward to today, with the average retiree having less than $30K in assets. Great job, FPA. Keep wasting time touting the middle class's nonexistent wealth so you can send people like me on wild goose chases. That's how rich people (and their financial advisers) amuse themselves.
The head of the SF Fed defends QE3 in his own words. I get the argument for a natural unemployment rate of 6% but it needs to be defined as primarily for those in transition from one job to another. I don't get the claim that real unemployment is only 8.1%. The Fed folks are glad U-6 isn't published anymore because they know it would embarrass them with a high double-digit unemployment rate. This guy also trots out the deliberate underestimation of inflation at under 2%. *Sigh.* He needs to do more of his own grocery shopping so he can see the price of canned tuna is over $1.00 a can. I remember when it was $0.45 per can a decade ago when I was in graduate school. Nowhere in the speech does he specify just how monetary stimulus will reduce unemployment. That sleight-of-hand trick won't fool markets for much longer.
Bank of America is paying off the last of the irate shareholders who didn't like getting saddled with Merrill Lynch's problems. The $2.4B bill will cause a $1.6B charge against earnings, and BAC had net income of just over $2.4B last quarter. That leaves very little cushion for any other bad news coming out of this bank. Maybe I should take out a loan from BofA just for kicks in case they can't survive. Nah, I'm not that mean and BofA isn't in that much trouble (yet). Full disclosure: No position in BAC.
China's exports are rapidly collapsing. A less intense contraction is still a contraction. I'm glad I sold the last of my China position to herald the end of the China bull story. Note that this survey of purchasing managers by a private bank is more pessimistic than the Chinese government's official survey of purchasing managers. China can no longer avoid getting caught lying about its economy. The plan to turn China into a nation of middle-class consumers hasn't come fast enough and probably never will given that country's demographics. Staying away from Chinese investments is probably the patriotic American thing to do anyway, given Beijing's increasingly bellicose attitude towards its neighbors. I expect nothing but trouble from that country for the next couple of decades.
The Financial Planning Association is in denial about the chances it can reach middle class investors. I remember the rounds of interviews I went through as an aspiring financial adviser in 2005 with branch managers who were convinced that 401(k) rollovers into IRAs would be the industry's growth story. Fast forward to today, with the average retiree having less than $30K in assets. Great job, FPA. Keep wasting time touting the middle class's nonexistent wealth so you can send people like me on wild goose chases. That's how rich people (and their financial advisers) amuse themselves.
Wednesday, September 12, 2012
Monday, July 30, 2012
Thursday, July 05, 2012
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