Practical analysis for investment professionals
30 March 2015

Book Review: Wealth Management Unwrapped

Wealth Management Unwrapped: Unwrap What You Need to Know and Enjoy the Present. 2014. Charlotte B. Beyer.

Charlotte B. Beyer continues her influential and innovative thinking in Wealth Management Unwrapped: Unwrap What You Need to Know and Enjoy the Present. Her work in the area of wealth management advisories spans decades: she inaugurated the Institute for Private Investors (IPI) in 1991 and her AIMR (now CFA Institute) presentations in the early 1990s. She also collaborated with the Wharton School of the University of Pennsylvania to create the first private wealth curriculum in the country and continues to serve on its faculty. Wealth Management Unwrapped condenses years of thinking into precious pages of readable and immensely useful chapters.

On the strength of its timeliness and clarity, Wealth Management Unwrapped joins the ranks of distinguished writing on private wealth. Beyer adopts both the client’s perspective and the adviser’s perspective. Although the book is intended primarily for people of means and family foundations, it should be mandatory reading for wealth advisers who seek to grow their businesses while developing trusted relationships with clients.

The book “unwraps” deep issues that affect capital preservation and growth. Do not be fooled: these issues are presented in simple terms but will profoundly change your thinking. Covering a wide range of issues — from the intensely revealing “What kind of investor am I?” to “What do I want from an adviser?” — Beyer makes a compelling case for even do-it-yourself (possibly cheap) investors to heed the advice of a trusted adviser dedicated to their interests. A special, possibly unintended use of her book is to enable advisers and clients to discuss individual chapters on such topics as conflicts of interest, thereby creating a vital dialogue and cementing a trusted advisory relationship.

Beyer poses a question in Chapter 1’s title that defines the book’s purpose: “Who’s in Charge of My Wealth, Inc.?” The investor is the CEO of My Wealth, Inc. The adviser helps the investor discern the best course of action and provides a sense that the investor’s interests are not being handled on an assembly line or plugged into a template. Even if responsibility for wealth management is delegated to an expert, investors are solely responsible for determining the purpose of their wealth. Reflexive thoughts of its being “someone else’s problem” have no place in Beyer’s thinking.

Beyer addresses 20 soul-searching questions at the outset. Some, such as those concerning fees and conflicts of interest, can be considered compulsory parts of the due diligence process. Other questions are more fundamental yet are often overlooked, such as determining what kind of investor the person or the family is and the impact of personality on the choice of adviser.

The “five Ps” — people, philosophy, process, performance, and “phees” — guide the investor in the adviser selection process. Beyer suggests that the investor weight each factor. An overweighted “P” suggests that the investor may have a blind spot and may thus overlook a key component. For those considering managing their investments themselves rather than delegating the process to others, Beyer offers a self-assessment process. Desire for control emerges as the dominant motive for forgoing an adviser. Beyer then questions whether clear-minded investing is possible without discipline and reinforcement — two key qualities that a great adviser brings to the process.

One of the most eye-opening sections is in the chapter “Transparency, or How I Learned to Love Conflicts of Interest.” Numerous firms tout open architecture (i.e., wide access to funds not managed by the adviser) as a conflict-free solution to investing, yet it may involve conflicts that are subtle and easy to miss. The firm may receive an incentive for selecting particular funds. Even if no payment is involved, the adviser must still be able to defend the selection of managers. There can be significant problems in this area, with portfolio managers being at a loss to explain their continued use of certain funds in the face of major sector and security overweights at the worst possible times.

This frank discussion provides an excellent segue into an exploration of the investment policy statement (IPS), a document that addresses selection of benchmarks, expectations, and performance. Instead of using a boilerplate IPS, Beyer offers as an example a detailed letter summarizing a family’s strategic allocations, a practical communication strategy, a rebalancing plan, and several other factors. This approach integrates a family’s style with the substance of its investments.

Beyer concludes the book with “The 10 Principles of Principal” for clients and “The Corollaries of the 10 Principles” for advisers. The give-and-take of a relationship; the definition of expectations, goals, and immediate needs; and the practice of consistent, authentic communications should all free the investor to pursue and enjoy other activities while the adviser monitors the investments. An effective partnership requires a never-ending balancing act that is based on trust.

Although not specifically discussed in the book, the rising use of “robo-advisers,” despite its reduction of the human element, calls for reliance on Beyer’s analysis and discernment. I look forward to seeing how she will address such investment advisory choices in the future.

More book reviews are available on the CFA Institute website or in the Financial Analysts Journal.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

About the Author(s)
Janet J. Mangano

Janet J. Mangano, formerly a senior portfolio manager with PNC Wealth, is in Short Hills, New Jersey.

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