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High Net Worth Planning Case Study


The case study series provide hypothetical financial planning scenarios. While no actual client information is used for privacy reasons, this case study is a realistic reflection of a planning scenario a high-net-worth focused advisor like Invariant encounters.

High Net Worth Family Case Study 1:

The Williams’ family wealth is concentrated in a family business where the father John serves as the CEO. His income is enough to cover expenses and be a net saver, and the equity ownership in the business is conservatively valued at $8m. Along with the family business, they have a liquid investable portfolio of $5m. Lastly, they have equity ownership of a real estate property that is leased back to the family business valued at approximately $1m. The family business is cyclical and growing via acquisition when the opportunity presents itself, which occasionally requires John to put up additional equity capital – generally in the $500,000-$1,000,000 range.

The family’s goal is to continue to grow wealth via the family business as they view it as the highest potential return on incremental investment. As the business grows, they hope to use the cash flows the business generates to diversify exposure into other publicly traded holdings.

The Williams family came to Invariant to formulate and implement a wealth management strategy. That strategy would incorporate a holistic view of their entire financial situation and include an investment portfolio that worked in tandem with their family business to achieve their long-term goals.

The Solution

Since growing wealth in real terms is a primary goal, the overall asset allocation (including the family business as an equity holding) needs to be tilted toward risk assets. This is virtually a requirement regardless as the value of the business holding is more than the liquid investable assets, but it helps to begin thinking about the asset allocation in a holistic sense. Because the returns necessary to create and preserve generational wealth are high, an 80% target allocation to risk assets was decided on. A 20% allocation to cash and fixed income would provide a sufficient buffer in portfolio drawdowns and ensure that ample liquidity was available if needed for business acquisitions.

An 80% target allocation mathematically means the liquid investable portfolio will have an ~50% allocation to risk assets. This allows for sufficient liquidity to meet needs for potential acquisitions even in times of stress. Additionally, this lower risk allocation likely means the size of the portfolio drawdowns are smaller in times of stress, while still having the prospect of moderate growth over the long run. Within the equity allocation, a slight tilt towards non-cyclical sectors was implemented to reduce correlation with the performance of the family business.

This allocation was stress tested to ensure that potential “worst-case” outcomes were acceptable to the family. Though it was not known at the time, this would become relevant analysis as the Covid-19 crisis was a few years away.

The Outcome

The plan was implemented, and shortly thereafter during the short-lived equity market selloff in December 2018, the family business completed a bolt-on acquisition. Had the portfolio been more aggressively invested in risk assets, they may have had to sell equities at unfavorable prices to generate liquidity for the deal. The deal ended up being a successful acquisition for the family business, increasing long term earnings power - aligning with their goal of using it as a vehicle for generating high returns on capital. Incremental cash flows from the business and portfolio were then used to “re-build” the cash/fixed income allocation back towards target.

Fast-forward two years to the Covid-19 crisis. The family business was hit hard, and to help with liquidity ratios John took a significant temporary cut to his pay. Because of the lower risk allocation, he was able to make up for reduced salary out of the investment portfolio without having to sell at unfavorable prices. While equity markets have since recovered and then some, the lower risk allocation helped John “sleep at night” during an extremely difficult period for the family business, but not so low risk that the portfolio did not participate in the appreciation of the equity market since coming to Invariant. Though a difficult period, the family was prepared as their portfolio drawdown was within the previously conducted stress test outcomes. Later in the year as the economy stabilized, the family business would pursue another acquisition.

The Williams’ family scenario, though hypothetical, is just one example of how unique a planning scenario can be. Through working with an advisor, a strategy can be crafted to meet your unique circumstances and allow to achieve your long-term financial goals.


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