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.
Chapter 5, which I found particularly meaty, examines the complex and disappointing world of finance as a business. "I come down hard on my colleagues for the conflicts of interest that pervade the financial world, for the self-interest and utter lack of concern for clients, and for the corruption that has had global consequences," Curtis writes. The only legitimate reason for a firm to exist is a sense of responsibility to its customers. "Once the customer walks-and they are walking away from the financial industry in gigantic numbers-the industry is doomed."
Chapter 6 addresses the challenge people have of finding the right financial advisor for their families. "Eventually, a tipping point will be reached when the existing customers of the old firms will suddenly see the light, demand open architecture, and abandon the old-line firms," he writes. He admonishes investors to avoid the remaining firms with closed architecture and to be skeptical of those that have either recently converted or that offer both open architecture and proprietary options. The latter firms still have an incentive to push their own higher-margin products.
"For investors willing to do their homework and conduct serious due diligence on prospective advisors, the open-architecture era offers vastly greater choice and many attractive advisory models that possess fewer conflicts of interest than traditional models."
Curtis spends a good deal of time discussing financial advisors who act as "outsourced CIOs," a rapidly growing model first adopted by pension funds and other institutional investors and then more recently by family offices and multifamily offices. The crisis of 2008 has hastened the growth of this model, Curtis says, because it's hard for advisors to make crucial investment decisions without having discretion over investments. Without discretion, advisors face a time-consuming approval process, an unacceptable option when markets are moving rapidly. What had been a steady trend toward discretionary advice "became a virtual torrent following the catastrophic market environment of mid-2007 to early 2009."
In Chapter 8, he looks at the world of private trusts. "Trusts are a prominent feature of every wealthy family," Curtis writes, "but organizing and managing trusts in sensible ways has become an increasing challenge as consolidation in the banking industry has eliminated most of the local trust banks."