Q & A With Gregory Curtis: Super Wealth Manager for High Rollers Part 2

For today’s posting, we are pleased to bring you the second part of an interview with Gregory D. Curtis. Called a “super wealth manager for high rollers”, Mr. Curtis is the Managing Director and Chairman of the Pittsburgh based Greycourt and Co., a private investment firm exclusively serving clients with $25 millon or more of net worth. He is the author of “Creative Capital: Managing Private Wealth in a Complex World” and serves on several boards including those of Carnegie Mellon University and the Pittsburgh Foundation.

We reached Mr. Curtis via email (note: this is the second part of our interview with Greg).

5. Greycourt’s website mentioned that your business model involves diversifying your client’s assets. For those who don’t have as much investing experience, can you explain why and how you’re doing this? Can you share Greycourt’s investing philosophy and the rationale behind it with our readers?

Sensible diversification is simply a way to preserve wealth across many generations. Properly done (it’s harder than it looks), a well-diversified portfolio invested with the best money managers in the world and seizing opportunistic ideas as they come along will grow faster than inflation, even after taxes and investment costs, leaving the family relatively wealthier in the future than it is today. At Greycourt we use a very sophisticated, proprietary after-tax asset allocation tool (called Cassandra) to design portfolios, and we devote massive resources to identifying and getting access to the best managers and opportunities. But investors who simply diversify naively (see above regarding spreading assets across eight or more asset classes) and invest mainly in index funds will also do better than 95% of the investors in the world.

6. From what I gather, Greycourt works with affluent families to meet their financial goals. Do you find that married couples have a different dynamic when it comes to making and managing money? Generally speaking, could you offer any insight into the role family plays in wealth?

The truth is that family dynamics are far more important than financial modeling. If spouses or generations are fighting over investment decision-making or who-gets-what, there is no way even a Greycourt can keep the wealth intact. We can sometimes isolate family dynamics from the decision-making process, but it’s complicated and doesn’t always work. In our experience men and women approach money and financial decision-making somewhat differently, but I suspect that this is a function of our era and that as time goes by these differences will lessen.

7. For those people who are just getting started investing, what steps would you recommend? Do you recommend using a full service broker or more of a do it yourself approach?

There are some great full service brokers out there, but frankly they are few and far between. This is not because the rest are idiots, but because the incentives in the industry work powerfully against investors and in favor of the brokerage houses. Agency issues are everything in this business.

For most beginning investors who plan to invest for 10 years or more, a simple 70% equities, 25% bonds, 5% cash portfolio, invested in index funds and rebalanced annually, will work perfectly well. These investors could also buy something like the Vanguard STAR Fund (a fund of Vanguard funds without a fee at the fund-of-funds level), but they would be under-exposed to non-US stocks.

8. Would there be any tools or types of account infrastructures you would recommend for people who are starting out or only have a little bit of investing experience?

I would recommend the Vanguard Web site, and/or using a discount broker like Schwab for asset allocation (not mutual fund selection). Once an investor has $1 million or more liquid, the use of a fee-only financial planner becomes cost competitive. And, of course, if you get to $25 million, call me!

For part one of this interview, please see the earlier post.

For more about Greg Curtis, click here.

For his book Creative Capital, click here.

You can find Greycourts series of investment papers at their website.