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The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website by Gregory Curtis

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Family Investment Partnerships

Most substantial families are probably familiar with family partnerships that are designed to reduce estate taxes.16 But family partnerships can also serve investment purposes.

In a typical case, the senior living generation of a family will control most of the wealth. This generation is able to access the best managers (most of whom impose high minimum account sizes), can take advantage of fee break points, and they will also have available to themselves sophisticated investment strategies that require investors to be “accredited,” that is, to have a certain minimum income and/or net worth. Younger generations may be stuck with inferior managers or mutual fund products. But by creating family investment partnerships (or limited liability companies—LLCs) to “pool” the family's investment assets, the senior generation can significantly expand the investment opportunities available to the younger generations while simultaneously reducing investment costs.

From the point of view of money managers, the client is not the individual family units but the partnership itself. Hence, the partnership is able to meet the high minimum account sizes demanded by many of the best managers. The middle and younger generations of the family might not otherwise have access to these managers. In addition, of course, the family partnership is able to take advantage of fee break points, giving all members of the family the advantage of lower investment costs. Finally, by ...

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