It's one thing to spend a million dollars on a boat. It's another to buy it and then realize you don't even like it. Patrick Astre, a financial planner in Shoreham, N.Y., says he had a client who purchased a 55-foot boat. Several months later, he spent another half a million dollars on new motors, Astre says.
"Basically, the boat didn't go fast enough," Astre says. "I thought it was fine."
Initially, the client, who manufactures equipment for the military, wanted to just sell the boat and buy a new one. But Astre told him that would be difficult. In order to avoid a luxury tax on items that cost more than $100,000, Astre had created a Bermuda corporation that purchased the boat and then leased it back to the client. With that structure already in place, it was no longer easy to sell it.
The client opted to work with the boat he had. Astre found an engineer out on Greenport, Long Island, to take it out for a ride. He was told the torque of the engine wasn't powerful enough to lift the hull of the boat high enough out of the water to achieve a higher speed. The solution was to purchase new motors.
As the wealth management sector becomes more crowded, advisors to the ultra-wealthy are helping their clients do everything-from helping plan for million-dollar weddings to finding them new airports for their private jets. While some advisors farm these jobs out to concierge firms, others have begun taking a more active role with the hope that helping clients fulfill all of their desires-and not just their financial ones-will help cement the relationship.
Massimo Magliari, a senior financial advisor with American Express Financial Advisors, for instance, says his firm recently helped a client who was disabled in a car accident to negotiate a lease on a new car that she could drive with her condition.
or 10 years ago, these might have been strange requests. Today, it's
something we welcome as value-added service," Magliari says.
Clients turn to their advisors not necessarily for advice on how to find a car or a boat but because they need to know how to fund the purchase. Advisors say they're not just getting an education in things like boat motors and bar mitzvah venues. They're also getting a window into the spending habits of the rich and famous. And high on the list of their desires these days are small planes. Many don't want to have to deal with the long security lines at airports, the crowds and the timetable. They like the convenience of being able to fly from a local airport on their own schedule.
Others will go on vacation, and they'll like the place so much, they want to own a piece of it. Astre says he had a client who took a trip to Hawaii, and he loved it so much he decided to buy a huge tract of land there, on which he built himself a large house. In fact, there was so much land left over, the client built town houses on it that he sold and wound up making a profit of almost $10 million.
"He recouped the money he spent on his own house," Astre says.
That's the best-case scenario. But more times than not, advisors will see their clients spend money on mountain ranches or beach houses that they use only three or four weeks out of the year, and yet they'll pay enormous amounts of money on the upkeep. They can afford to do that, but some advisors look at it and think, it would be more economical to rent.