Less than six months after hanging out a new shingle, Scott Highmark can already lay claim to $500 million in assets under management at Mosaic Family Wealth.
The money comes from clients that he and his partner, Larry Shikles, worked with at Morgan Stanley before they left in February. Our legacy business was not subject to any non-compete clauses, Highmark explains. We were able to take many, if not all, of our clients.
Their fast break was part of a long-term game plan, says Highmark, a former college basketball star. He and Shikles, a former professional baseball player, had wanted to manage their own team for years.
Operating under the aegis of a brokerage was too constraining, they believed, limiting the investment recommendations, the research and the choice of custodians that they could offer their clients.
A NEW RIA
The pair drew up a strategy, spent a few years saving seed money and launched a new registered investment advisory the day after they left Morgan Stanley. The rest of their team, including the former sports agent Jim Steiner and the former college soccer star Missy Brown, came with them.
Their lineup might lead you to believe that Mosaic is targeting a sports-planning niche. But thats only partly true.
Highmarks typical client has between $5 million and $25 million in liquid assets. While roughly 10% to 15% of these clients are athletes, coaches and sports executives, the greater number are either high-end corporate executives or entrepreneurs.
Each group has its own unique planning needs.
The challenge facing athletes is the sudden and often fleeting nature of their riches. The dozen or so sports stars that Mosaic represents are mostly young males between the ages of 20 and 30. Theyre making millions of dollars a year, but their careers are typically short-lived.
You may be playing for six or 10 years, but thats it, Highmark says. The money you earn in those years has to last a lifetime.
Many professional athletes, however, come from modest backgrounds. Not only are they tempted to spend like theres no tomorrow, they often want to lavish their wealth on less fortunate friends and family members as well.
Thats to be expected and, to some extent, appreciated, Highmark says. But without restraints, even a highly successful athlete can wind up destitute despite earning tens of millions of dollars during his career.
We have turned some athletes away because they werent willing to talk about the B word the budget, the planner says. If they arent willing to let us teach them coach them we will gracefully bow out. We dont want to be on watch when somebody blows themselves up. Thats not fun. Besides, if they dont want to be helped, they dont need us.
To be sure, Highmark says its fine to factor in some luxuries and provide economic help to friends and family members, particularly in the first year of an athletes contract. Beyond that, its all about living well below their means.
With Mosaics entrepreneur and wealthy executive clients, the issues are different. After leaving or selling their original businesses, he says, these business people often want second careers. Sometimes the next steps are obvious; other times, they need coaching.
A LIFE OF SIGNIFICANCE
Yet the starting point is always the same: Consider what it would take to feel as if youre living a life of significance.
You have a lot of money. Now what? How do you make your life meaningful in light of the wealth you have accumulated? Highmark asks them. How do you share; how do you interact; how are your relationships affected? What do you want your legacy to be?
The answers are different for every client, Highmark says. For some, these conversations have led them to finance other businesses; serve on corporate boards; mentor other entrepreneurs
Others have set up family foundations that finance charitable pursuits that fit the familys mission.
An even bigger problem facing these clients is that theyve created so much wealth that they not only dont have to continue working, but their children and possibly their grandchildren could live on their legacy too. But that, of course, could ruin the kids.
WAKING UP ON THIRD BASE
When you wake up on third base and you didnt have to hit the triple, it takes away some of the struggle and character building that made the first generation very successful, Highmark observes.
To instill the family values, work ethic and integrity in the second and third generation is a big challenge.
Communication is the key. Families that are clear about what theyre trying to accomplish for themselves and the world at large, and who are good at conveying that mission to their children, are likely to have the most success at shaping the value of the younger generation.
Highmark suggests that such families hold annual summit meetings, where the parents gather their kids together; talk about how much money they have; what their goals are and how they intend to achieve those goals.
Discussing what has changed from year to year and what hasnt can give the kids a lesson in both the risks and rewards of investing, as well as family priorities.
SPELLING OUT TERMS
Those conversations should help the kids and grandkids understand what financial help Mom and Dad will offer and what they wont. They should also spell out what will happen when the parents are gone, so the kids arent forced to guess about the parents motives when reading the will.
They might say, if you get a college degree, youll get this pile of cash; if you get a professional degree, youll get this; if you start a business, well give you this, the advisor says. You make them earn things.
Does withholding money from a child who is not meeting the familys standards cause acrimony? Sure, Highmark says.
At the same time, if the patriarch and matriarch explain to the child that they love him that in fact they love so much that theyre not going to harm him by just giving him money it can help, he says. The child may not understand when hes 18, but hopefully hell get it when hes 30 or 40.
In that respect, this younger generation has something in common with Highmarks athlete clients. While the former come from money and the latter usually do not, both groups have to come to terms with what it means to manage wealth and how those decisions can shape their future.
Kathy Kristof, a Financial Planning contributing writer in Los Angeles, also contributes to Kiplingers and CBS MoneyWatch. Follow her on Twitter at @kathykristof.
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