Rich Millennial Managing their own money…

Sub-header from article: Wealthy young investors don't see much use for the wealth-management firms their parents rely on. They would rather pick their own stocks or plow their money into crypto.

Wondering if anyone in asset management is seeing this. Also, what do you think the fallout will be?

Article talks about how an individual received a windfall from selling his company (~$10M), and is investing in crypto, "undervalued" real estate, NFTS and such on his own. 

Do you think its more of a generational thing, an advisor thing, a "stonks only go up" thing?

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Comments (40)

Nov 10, 2021 - 7:30am

There have always been and will always be people like this. Do it yourselfers. Add Crypto and social media to the mix and it's just cool (so they think). Most will fail, but I guess that depends on how you define "fail". Most, just like the rest of the population, don't have the stomach and / or knowledge to be long term successful. They are too influenced by hype. Many, if not most, wealthy people hire advisors to handle this as they are far better suited to ID opportunities (investment, tax, etc.) They also have better access to pricing.

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Nov 10, 2021 - 9:19am

Fair points. 

Most of us on this site have the financial knowledge. I'm not a financial advisor, but I do stuff in "finance" as they say. Always seems funny or ironic how people thing they can do their own thing in finance, but not in many other fields. If you are not a doctor, you would never try your own surgery, or negotiate a legal contract on your own if you're not a lawyer. 

I'll give an example, my cousin works with horses, was an equestrian major in college. She knows a lot about horses, but she doesn't perform surgery on horses. However, I know nothing about horses; if I was forced to do surgery on a horse, I'd at least call for my cousins opinion. Same thing whenever I go to a party or an event with friends/family, not saying I know everything, but the amount of stuff people talk about doing financial, you'd think I'd get a couple questions about my opinion. I never get any. 

I think some people look at financial advising as just a person who says "no". If the guy in the article went to a financial advisor, I'm sure the advisor would have a completely different portfolio then the guy has now (article stated its basically cars, NFTs, crypto). 

Article also says how people want "fun" investments, might not be what your advisor puts you in. But if thats how you want to invest, go with it I guess. 

Nov 10, 2021 - 9:57am

I think its fine to self manage if you're interested in it, can spend the time and understand the risks of what you're doing. But at a certain point of wealth, tax/estate/ insurance/pledged asset lines etc  def start to become important and its time to involve professionals. 

This isn't terribly hard as you'll probably be part of a private client/bank by that time. No need to pay 1% of assets annually.. pay for what you need. 

If people YOLO all their net worth on crypto and NFTS, they get what they get. For better or worse. Its a free country. 

Im happy with the hybrid approach.. and 5% in crypto.. don't want to miss out on all the "fun."

Nov 10, 2021 - 10:42am

For those that buy in (literally and figuratively) to the hype (NFTs, Crypto, etc.) we generally leave them 5%-10% of their investable net worth to play with on their own. For the real money, we manage in a well diversified portfolio based on actual fundamentals and with a long term view.

Someone recently asked me about BITO (bitcoin EFT based on futures contracts). I asked them three questions. 1. Are you well versed in Crypto? 2 Are you well versed in futures contracts? 3 Are you well versed in crypto futures contracts? If the answer to any of these is "no", then why the hell would you want to invest in them.

Big difference between investing and gambling. Either is fine, but know what you're doing. Most are gambling but think they're investing. No idea what they're doing. Just get caught up in the hype and need to get in. Zero discipline. Dangerous unless you can afford to lose it all without effecting your lifestyle.

Nov 11, 2021 - 2:33am

Love the way you phrased your questions and candidly I'm going to steal that. So many people I have kept in touch with who aren't friends but know I work in finance ask me asinine questions about crypto and whether they should invest. I always say I don't know about the space and therefore won't give them a recommendation even as a friend but I feel like the three questions you ask are such a good mental barrier to entry.

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Nov 10, 2021 - 2:18pm

Financial advising is by far one of the biggest scams in America. The barrier to becoming a financial advisor is incredibly low. Ive seen several people from my local community college at Merrill lynch try to pitch my parents their services. Most of the advisors have little to no qualification or knowledge base and rely on cookie cutter portfolios created by their companies. The performance of those portfolios are nothing special and Once you add in fees you're actually underperforming the s&p index. My immigrant parents with no college education are smart enough to stick their savings in stocks and bonds in their Roth account rather than rely on some 3.0 gpa former fraternity bro to manage it.

Nov 10, 2021 - 2:59pm

dirty little secret in PWM - nobody "needs" a financial advisor. like all service businesses, you can do what we do for yourself. tax laws are public record, you can do your own trading for zero cost, nobody "needs" private investments that have PWM firms as gatekeepers, you can do a general contractor approach with legal, tax, and insurance work, and so on. I like the fact that it's a very democratic process, where we're not gatekeepers to financial products, and investors have choice.

at some point it just becomes a question of how you value your time. for many, their time and their peace of mind is worth more than the fees they pay. for others, it never will be. not my decision to make.

I wish these folks well. some will continue to self manage, others will offload to a FA either because they YOLOd too much and got smoked, or maybe the idea of managing their finances gives them HBP, maybe they just don't have the time and would rather pay someone to do it and get back to living their lives, who knows. their success does not take away from mine, good luck dudes and dudettes.

Nov 11, 2021 - 12:11pm

Friend of mine who's an advisor has a client with a $MM position in Tesla (large percentage of net worth). As expected a ton of unrealized cap gains. The client has wanted to diversify for a long time but doesn't want to take the tax hit.

They're implementing an option overlay strategy, an exchange fund, stock loan, and a charitable giving trust for the client. Could said client do this all themselves? Sure.. maybe. But that's a lot to teach yourself about when you have a full time job and it's serious money.

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Nov 11, 2021 - 3:07pm

Some people say it's better to hire a financial advisor when your asset hits a certain level. 

Is 15M that level? 5M more is coming in within the next 4 years.

My husband and I are both immigrants, came to this country empty handed. 

Now we are in mid 50s and planning to retire in a couple of years. 

I am wondering if I am missing something that can minimize taxes. Or some complex investment vehicles like hard money loans and private equity. What would be the amount of $$  for the competent and knowledgeable financial advisors (doing above and beyond what the software their company provides) to get interested in?

Thank you for reading my post.

Nov 11, 2021 - 4:06pm

congratulations on your success, you are what makes america great. I love immigrant success stories!

yes, hiring an advisor when your assets get over $5mm will get you the attention of many great teams throughout the country. if you will have investable assets of $15-20 million, you will be an in-demand client for everybody but goldman sachs PWM (where you'll be bottom of the barrel). even if out of that $15-20mm, $10mm is in real estate, you'll still be very interesting to many top advisory teams (mine included, though I cannot consider myself a top advisor given my self deprecating nature).

on taxes, there's very little a financial advisor can do other than philanthropic management, some asset location stuff (e.g. leveraged loans in an IRA instead of in an UTMA account), be smart about realizing capital gains, maybe use direct indexing instead of SPY, things like that, but all major firms have those tools and quite frankly they're available online for the DIY'er

on complex things, all major firms will have access to those. jpmorgan, morgan stanley, and goldman have the best alternative investment platforms, followed by ubs and merrill, the smaller guys not so much.

first, I'd ask myself some questions

  1. do I enjoy managing my assets myself or would I value hiring somebody to handle this for me?
  2. how would I define success in an advisory relationship?
  3. what's more important, peace of mind or minimizing cost? obviously both are, but picking one will guide you in the next step
  4. do I need to have somebody local? I've heard arguments that it's good to have someone out of town so your neighbors don't know your business, and others prefer to be able to pop into their advisor's office. EDIT: if you don't care about local, ask about your advisors' travel plans. do they travel to see clients in person? if so, how frequently? do they already have clients in your area? if not, are you large enough to warrant your own trip at least every other year?
  5. what's my investor personality? this is VERY VERY VERY important, if you're a family steward or independent (my specialty), even if you hire the best FA your area, if he specializes in moguls and accumulators, you will be very disappointed
  6. do I want ongoing advice or more piecemeal like an attorney? if ongoing, stick with major firms like merrill, morgan, UBS, etc., if piecemeal, look for fee only planners ONLY who will work on a contractual basis (e.g. $20k for this year's financial plan, and then you go back to vanguard or wherever)

once you've answered those, begin your search

  1. get names. ask colleagues/business partners who you know have similar levels of success, ask your CPA and attorney, if you're on a board and there's a good board member who's in the business, ask them. beyond that, I would look up various advisors at the major firms in your area. many of their websites have ways for you to search within a 10, 50, 500 mile radius of you and will show you who works there. this is ONLY helpful if someone has a unique qualification (language, for example) that isn't commonplace. 
  2. make some initial phone calls, maybe 5-10. see what sort of response you get. do you get a call back right away? how organized are they with followup? I'd schedule a few 15-30 minute sessions with various advisors to see
    1. ask them about their practice. what types of clients do they work with, what types of investor personalities do they work with, where are their clients, etc.
    2. ask them more specifics. how many advisors do you have on the team, who will the client hear from, how many clients do you have, how much AUM do you have, years of experience, etc
      1. mind the number of clients they work with. if someone is part of a 3 person team and they have 1,000 households, you will not get any attention. I don't care how highly ranked this person is in barron's, they have too many clients and you will get shit for service. an average of <200 per advisor is ideal, <150 is even better. I'm tooting my own horn here because we average 100 per advisor
      2. if they don't have a good answer for who you'll hear from, assume they don't have an organized client contact system and you'll be called when your advisor thinks about you. bullshit, they need to have a process
      3. if you speak with an advisor who's your age, ask about succession planning. if you don't get a well thought out answer, conversation over. in our case, it's obvious, we have an advisor in his 60s, one early 50s, one almost 40, and me in my 30s. clients can visually see continuity, and the last thing you want to do is have to start all over just when you're thinking about retirement
      4. find out if they've moved firms or had compliance issues (google "their name" + brokercheck). this is a potentially bad sign if they've moved firms more than 1 or 2x. FAs get paid big bucks to switch firms rather than their clients getting big improvements. now sure, if they left wells fargo for a better firm because of the wachovia debacle, that's excusable, but far too often I see people go from prudential to ameriprise to ubs to morgan to merrill back to pru to stifel and it's basically a way for them to enrich themselves and purge their client base every so often. no good
      5. ask average client size and how many clients they have with your level of assets. just like you don't want to be some rookie's first client over $5mm, you don't want to work with someone whose average client has 2x what you have
    3. ask them what the next steps would be. if they don't have a well articulated client onboarding process/intake process, that's a bad sign. it really doesn't matter how impressive it is or not, just that it's organized
    4. notice if they ask about you. if they care, they'll probe a bit, let them probe as much or as little as you want, but if they don't probe, they don't get into the mix
  3. narrow the list down to 2 or 3 teams, and go through a full discovery and proposal process with them. once you've made a selection, you could just go with one if there's a standout but if there's not, give one half and the other the other half. in 5 years when you retire, consolidate to one, and I wouldn't necessarily evaluate on performance because one of them could've just gotten lucky by taking more risk, evaluate them on service, process, and how well your personalities mesh

and lest I end this without a shameless plug, you can always contact me via PM and we can see if I'm in a position to help

Nov 10, 2021 - 3:50pm

Makes zero sense unless your net worth exceeds a certain threshold and you can gain access to truly great advisors. One of my mentors sold a co for ~$100m and his team is amazing. You could not get the same team with NW of $10m because the math doesn't make sense.

If you're in finance, in an investing role, you should be investing your own money and utilizing a great suite of advisors. Most PE funds offer their employee no-fee co-investment opportunities, and once you factor in no frees + leverage that they also's usually a great deal. Especially in LMM and MM where returns are usually quite high. I know of a few MM delivering ~25% - 30% IRR and even more once you factor in no fees for employees + the leverage...

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Nov 11, 2021 - 8:27am

To echo thebrofessor, like most things, you could do X yourself. You could change your oil. You could fix your AC / dishwasher. Gets a little more complicated (but you still could) handle things that involve electric or gas around your house. Some do. My father-in-law used to do all that stuff. He also built a deck on his home. The point is, do you want to and is it worth your time? 

Regarding how anyone could / should beat the markets, that really isn't the point. That takes a very narrow view on the role of investing. Someone who is nearing retirement isn't trying to beat the market. They're trying to create an income to replace their salary as retirement is essentially the longest period of unemployment in their life. Maybe someone who is just starting out should simply purchase a few index EFTs (and I recommend that all the time) to cover certain asset classes but beyond that, beating the market is just part of the story.

That said, you'd be amazed by all these people who should / could do it themselves (vast range of intelligence, education, and profession including MDs, big law, CPAs, consultant, small business owners, teachers, police officers, firemen, and "regular Joe's") who don't, don't know how, aren't interested in becoming conversant, and just want someone taking care of this for them or at least helping them make decisions. You'd also be surprised by some of the crazy ideas they bring to the table. As an example, very close friend / senior exec has a beautiful paid for house worth $1M+. Wants to refi it and take out 500k and put in to crypto. He literally said "in a yr I could turn that 500k into a few mil, cash it in, pay off the note, and be way up." Yeah maybe. Maybe not. But right now you have no debt and no need for the additional money (has plenty). What's the point of risking your home? What if the RE market goes down? What happens if the crypto goes to zero or has major losses and all you've accomplished is adding debt to your balance sheet

This crap happens all the time! Don't forget the "A" in FA is Advice. That's what they want. The "F" part is easy. Just basic math. The A merges math with the human condition which makes it pretty complex.

Nov 11, 2021 - 9:19am


Regarding how anyone could / should beat the markets, that really isn't the point. That takes a very narrow view on the role of investing. Someone who is nearing retirement isn't trying to beat the market. They're trying to create an income to replace their salary as retirement is essentially the longest period of unemployment in their life. Maybe someone who is just starting out should simply purchase a few index EFTs (and I recommend that all the time) to cover certain asset classes but beyond that, beating the market is just part of the story.

I agree with your points. However, I think the people in the article are young enough where they want to be beating the market. In a lot of ways, its always been just return for people. But now, I think we're seeing more return and how you get there; almost, younger people would rathe make 9% a year in an asset that moves a lot, vs an asse that makes 10% but isn't as exciting. But as they say, you only need to get rich once. Its like a football game, when its 0-0 in the beginning, you're going to throw the ball down field, but in the 4th quarter when you're up 35-7, you do less risky plays. 

Second part, which I didn't quote, just because people are capable doesn't mean they will do it all the time. A lot of people could build their own house, few do. Also, people successful in one area tend to become over confident in others, hence the person trying to HELCO their house and buy crypto. I think that happens to athletes when they retire a lot of times. 

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Nov 10, 2021 - 8:07pm

M1 Finance has been the game changer for the DIY investor.  Probably the biggest risk to WM industry imo.  Things like EDGR + a M1 account basically give you a free (aside from the trade front run) fund. 

Nov 10, 2021 - 8:23pm

responses you get from people on this site will be heavily skewed. Just by having an account on WSO, there is a high likelihood you are more financially literate than 99% of Americans. Or atleast, people in your age demographic. 

Will comment that I find it absurd how reckless people are with their life investments. I don't have a problem with investing in crypto or options, but the fact that you would allocate >50% into crypto seems asinine at best & I hope people are prepared if/when we go into a bear market. 

Nov 10, 2021 - 8:47pm

As they say, "there are risks with investments."

You're better off the safer path then to think one would be an expert knowledge on financial products and services. I like to consult people in the industry (different and such), as I am not an expert or subject knowledge specialist in particular things - finance/law/medicine, etc.

If the kids think they can do better and manage their cash, let them. If they gain, great. If they lose (which a majority do), they will cry foul and blame the system is corrupt/rigged.

Can't make everyone happy, right?

Nov 11, 2021 - 1:39pm

Personally I would love to speak to a financial advisor but it's the same story as if I need to speak to a tax advisor. I do not need to speak to them unless I am earning over a certain level of earnings. Also there's an issue regarding disclosure. Such as how do I know how much of a level of taxation and or financial advisory the advisor has regarding any of my information? There's supposed to be levels. Any person with a bit of money could setup an offshore bank account and or company. The only thing I would need a financial advisor for is choosing countries and or citizenship which blends into immigration attorneys. The only other thing I need a financial advisor for is if I have extra money like millions of dollars which is not invested which I don't, which is not connected to a primary household which I don't, is to then invest that in Cryptocurrency, nft's, stocks, etfs. Even then if I send the money through to the finance company to invest even with their financial authorization codes they could just as easily and more likely get just as much burnt on the trades and transfers as me if I did it myself. So if someone could explain what the financial advisor is for that would be great, because I don't like disclosing financial information. If it was a real estate deal I could just phone the realtor directly. The brokerage and registrations are all available and possible to self administor. At this point the only thing I need a financial advisor for is to transfer me finance however they all say I have to return the money plus interest. How is that a financial investment? There's just loan deviations and then I just sit and watch all the overseas startups and funds getting launched with there millions and billions in investment capital and 10s to 1000s of employees. How does that work? Because to get anywhere near listing a business on any of the stock exchanges which have a few 1000 companies on, the annual revenue requirement is 10's of millions of dollars and hundreds of millions in other currencies. That type of business model requires fair amounts of market capital to get going and all the large firms and corporations literally own the entire planet and every conceivable financial market. It seems quite a tight market for the little millionaires. That's before you even look outside at the people and or the other countries.

Nov 11, 2021 - 7:33pm

As much talk as there is about crypto and NFTs here, the real flow is going to the roboadvisory space.  Young people look at the fees they are paying to FAs and don't see any real value to it.  When you consider many of them are straddled with massive student loan debt the reality quickly sets in that the 1% some advisor is getting to put them in to high cost funds bomes a terrible idea. I for one think this is good for 90% of the population.  There is little to no value for them.  I know this is focused on "rich" millennials but let's be real.  Unless they are in the top 3% of their age they don't really need most of this stuff now.

Nov 11, 2021 - 8:51pm

Well, we haven't had a bear market that lasted longer than ~a month since early 2009… coming up on 13 years? That is a very long time. Even the average mid career millennial is probably like 33 now, so he was a junior in college at that time…with little or no assets.

Basically, an entire generation (myself included) has not experienced prolonged pain in the market. Sitting on big paper losses for 1-2 years or longer and having discipline to stay the course/throw more money into a pit that keeps bleeding. Of course everyone is confident in this environment now. But sooner or later the growth cycle will stop and there will be some prolonged pain. It will be interesting to see how this generation handles being punched in the mouth for the first time and if they will still be as confident then as they are now. 

Nov 13, 2021 - 9:40am

To your point, a decade was wasted immediately following the tech bubble. It took 10 yrs for the nasdaq to fully revover from 2000 - 2010. Most of the WSOers. You'd have to be 40ish to have any experience with that and more realistically 50 to be working with someone's money (or your own). The RE crash of 07/08 lasted (market dependent) for about 12 yrs. Gone crazy (bubble perhaps) for the past two yrs. I live in an upscale neighborhood  and the majority of comps (not embellishing) in our neighborhood for several yrs were short sales mixed / foreclosures. Didn't need to but couldn't refi my home because of the comps (equity to value ratio). It finally got back to normal in 2019.

During booms, a monkey can manage money as rising tides raise everything. That has very little to do with planning.

Nov 12, 2021 - 8:49pm

The article seems to fit into the "millenials are killing X" trope.  Frankly, I don't think any millennial is going to be day trading on Robinhood and Binance for 65 years until they die.  It's just too much work all day every day to stay ahead of the markets; most of the day traders I know quit after a few months.

Nov 16, 2021 - 12:44pm

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