Here comes a book that is a must-read, an instant classic. With a sure hand and an authoritative voice, it explains why private capital is essential to American democracy-and why it is in danger.
The book is called The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, by Gregory D. Curtis, the founder of Greycourt & Co., the first open-architecture investment manager. Curtis convincingly argues that firms such as his will be the only ones standing in the not-so-distant future. Forget broker-dealers, salespeople, product pushers and all the others that sell rather than advise. They are dead meat.
The investment climate going forward doesn't look so rosy, he says. "The West has reached the end of its own socioeconomic evolution and is now faced with the gargantuan task of reinventing itself," Curtis writes. That means remaking governments, creating new cultures and governing mechanisms, as well as new theories for how government can support itself.
"Needless to say," he continues, "the investment implications of this are large and complex."
So is his book, so much so that I plan to break this discussion into two columns.
The first thing that struck me is that Curtis offers support to the much-maligned 1% of Americans who are the target of Occupy Wall Street. In part that might be because this is whom he works with. Curtis is sometimes called the "super wealth manager for high rollers." Before founding Greycourt, this Harvard Law School grad served for many years as president of a family office for the Mellon family and president of the Laurel Foundation. (He is also the author of Creative Capital: Managing Private Wealth in a Complex World, a step-by-step guide to the management of significant taxable assets.) His Greycourt clients must have at least $25 million in investable assets, and his minimum fee is $125,000.
Curtis says that the super wealthy and their use of creative capital offer the essential ingredient that makes America America. "The production of private wealth is a crucial aspect of the singular success of the American experiment," he writes. "Private capital is the most important capital in the world, and without it on a grand scale, it would be impossible to imagine America."
Curtis believes that private capital is the "continuing vigor" that drives the country. The competitive spirit, he says, "animates" the society and allows people to become rich to do things useful to the public at large.
"If that spirit were to become constrained by political or cultural mechanisms, America would rather quickly come to resemble its European cousins," he says. And to make the lure of wealth meaningful, "we must be willing to accept and tolerate the consequences of competition."
Nor is he keen on taxes and other restraints on wealth to maintain a level playing field. "Constraining the fruits of hard and smart work [has] the same effect on a society as trying to blow up a balloon that has a hole in the other end." Indeed, he writes, in many (most?) other countries, great wealth is frowned on as ostentatious and even tacky. "But private capital has made America the most vigorous, the most creative, the most diverse-in short, the most powerful society ever organized."
Curtis argues that great wealth has not created a selfish society. He gives numerous examples of how wealthy people with passion and purpose have built brilliant things, using ideas for art and education and politics to build "works of art" such as colleges, churches and charities that wouldn't otherwise be possible. "The American system of private philanthropy could not persist without the creative capital of the wealthy," he writes. Curtis estimates that almost 10% of all charitable giving comes from just 500 families.
Forgive me if I seem to be praising Curtis. I am. I've never met him, nor had I heard of him before I read the book. Even though I didn't hold the views presented in his book before I read it, I see that it was only because I was too ignorant to pull all of this together. And too lacking in objectivity. I would very much enjoy a televised debate between Curtis and whomever Occupy Wall Street would like to sponsor.
In Part I of the book, Curtis speculates about why America, more than any of the older free-market democracies, has managed to preserve its vigor. "It is crucial to manage the private capital properly in order for the society to continue to function," he writes. And that's where financial advisors come in.
If private capital is the most important capital in the world, he posits, and if the owners of that capital depend on financial advisors for success, that would make financial advising one of the most crucial jobs in America. That's why, he says, his book is "directed to both wealthy families and their advisors."
Curtis then moves on to Part II.