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The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors

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StewardshipofWealthIn his latest book, The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, Gregory Curtis goes beyond a traditional study on investment policy, asset selection and monitoring, and risk management of and the fiduciary issues involved in wealth management by thoroughly investigating the aspects of stewardship of the wealth of prosperous families. Curtis is the chairman and founder of Pittsburgh-based Greycourt & Co., a wealth advisory firm that serves high-net-worth families and select endowments on a global basis. This book builds on his Creative Capital: Managing Private Wealth in a Complex World. It provides a moral, ethical, economic, and investment compass for the wealthy.

The author intends the book for wealthy investors and their advisors, but its larger prospective audience includes family office executives, portfolio strategists, wealth relationship managers, and even less wealthy private investors. Although its title may cause readers to expect the book to be a “how-to,” it actually provides a philosophical yet practical approach for high-net-worth investors to become better stewards of their investments, if not better investors. At the outset, the author commits to differentiating good investors from good stewards of investments. Investing — that is, managing private capital — is central to stewardship, whereas good stewardship involves “the ongoing growth and nourishment of a family’s human capital in the broadest sense.” It is important for members of the family to gain sufficient understanding of the investment process and the capital markets in order to be astute consumers of investment services.

Part One, “The Importance of Private Capital,” could be construed as The Wealth of Stewardship rather than The Stewardship of Wealth. In it, Curtis thoughtfully reviews the benefits of wealth to society. The lure of wealth and its impact on economic vigor constitute but half the story. What becomes of private capital after it is earned? Curtis examines the gifts of such philanthropists as Andrew Carnegie, Andrew Mellon, and Bill Gates. Readers will find the story of Paul Mellon and the survival of St. John’s College especially fascinating. These examples provide inspiration not only to the very wealthy but also to those whose excess wealth is only a fraction of that of Bill Gates.

In Part Two, “The Stewardship of Wealth,” the author delves into risk, ethical behavior (with a focus on ethical failure and recommendations for fixing the financial industry), advisor selection, and the concept of open-architecture trusts. Curtis’s discussion of open-architecture trusts underscores his provocative belief that the basic problem in the trust business is that it operates entirely for the benefit of banks, rather than for the benefit of beneficiaries.

The author insightfully addresses prudence versus returns — or, said another way, process versus outcome. A realistic example titled “Dick and Jane and the Variance Drain” will remind many readers of actual client situations. Curtis also describes the outsourced CIO model, arguing that its positive aspects largely offset its drawbacks. In addition, he addresses the possibility of a permanent financial crisis, given unprecedented levels of public and private debt, and the implications of possible below-average future equity returns. Even a bull market could be considered a crisis because no one knows when or how it will end and one can only conjecture factors that might lead to its demise.

The bulk of Part Three, “The Rich Get Richer,” deals specifically with the types of investments that a wealthy family would consider. In no way is this an investment primer: Curtis explores in depth the risks and nuances of each major asset class and investment style under consideration. Part Three as a whole articulates why investment decisions should be left in the hands of a capable advisor. 

The author gives special attention to designing taxable portfolios, forecasting future values, and dealing with correlations among asset classes. He also addresses the costs associated with transactions and services. Part Three ties well into the author’s defense of private capital and creative capitalism.

How should the less wealthy or those who become stewards by living below (not just within) their means successfully manage their wealth? Readers who fit the profile described in The Millionaire Next Door may feel neglected. With more modest wealth in mind, Curtis designed the “Moneybags” application software to work hand in hand with The Stewardship of Wealth. The Moneybags app, which is optimized for the iPhone 5, shows the user how a world-class portfolio is built. The software demonstrates best investment practices that can be implemented in portfolios of almost any size. It also illustrates how to establish a risk profile, design a strategic portfolio, and adjust a portfolio tactically, among many other hands-on portfolio management topics. 

Wealthy investors, private wealth executives, wealth advisors, family office executives, portfolio strategists, and relationship managers should consider The Stewardship of Wealth an essential reference and recommend it to clients and peers. The book provokes thought and discussion on practical matters, especially on the immense value of wealth to society in general. It inspires investors and those working for them to avoid being stuck on a treadmill and to consider more macro, less temporal factors. Readers will want to sink their teeth into this book and then return to certain sections when they need validation or inspiration for their investment convictions. They will remember what they read and eagerly look forward to Curtis’s next work on stewarding wealth and the wealthy. 

Reviewed by Janet J. Mangano

Janet Mangano has held senior positions as Director of Research, Equity Analyst, and Portfolio Manager, most recently at PNC Wealth Management. She currently serves as co-chair of NYSSA’s Private Wealth Management Committee, as well as a mentor for the CFA Institute Investment Research Challenge.

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