Vince Annable, CRPC®, is the CEO and founder of VFO Advisory Group, Wealth Strategies Advisory Group, and creator of The Household Endowment Model®. His experience in the financial services industry spans nearly 40 years. Throughout his career, Vince has worked with select individuals, families, and business owners with the ultimate goal of achieving what is most important to them by helping them optimize their financial world. His guidance aligns clients’ financial resources with their values, interests, and objectives in an effort to facilitate good decision-making.
Russ Alan Prince: What is The Household Endowment Model
Vince Annable: The Household Endowment Model is an institutional investment portfolio designed after the Yale Endowment Model but for high-net-worth and ultra-high-net-worth families. To provide a little background let me take you back to 2008-2009 when the financial world was crumbling and investment banks such as Lehman Brothers, Bear Stearns, Merrill Lynch, and others were failing or needing government bailouts. The ripple effect of this was causing investors to experience fear and panic regarding their investment and retirement portfolios thus causing a mass exodus from the public markets, causing a mass selloff of public securities and significant losses to their investment portfolios. This, after many had experienced the same type of losses during the 2000-2001 dot.com sell-off and again, significant portfolio losses and were just recovering from those losses only to be experiencing them once again.
This experience prompted me to seek a better way to invest our client’s money. In my search for a better way, I was introduced to the Yale Endowment Model, managed by David Swenson, and his investment portfolio which was made up of a predominately diversified portfolio of alternative non-publicly traded investments. These alternative investments were invested in venture capital, private equity, and debt, commodities, private real estate, and others.
This data and our research convinced me that we needed to create this type of diversified alternative investment portfolio for our clients. Thus, we created an endowment model, invested similarly which we named The Household Endowment Model for the typical high-net-worth and ultra-high-net-worth families and households we were serving. After implementing this model, I wrote a book published in 2019 titled “The Household Endowment Model” which was a #1 best seller on Amazon.
Prince: How do you find and vet these alternative investments?
Annable: We are known by many in our industry for our Household Endowment Model and use of alternative investments in our model which causes many of the alternative investment sponsors to seek us out to introduce their particular investment opportunity. We have also created relationships with some of the top alternative investment sponsors in our industry and with whom we have had very successful experiences, for both our clients and our company. These include venture capital, private equity, private credit, private real estate, and others. These sponsors and our broker-dealer and RIA partners bring us new opportunities on a weekly basis.
Our due diligence process includes meeting with the principles of each program, reviewing their history, background, etc, and the due diligence process of our broker-dealer and RIA partners which typically includes their exhaustive due diligence process including the 3rd party due diligence process of outside non-affiliated due diligence firms whose sole business is conducting 3rd party due diligence including Mick Law, Factright, Buttonwood, and others. All of our approved investment sponsors are required to go through this exhaustive due diligence process before being approved by our broker-dealer and RIA partners. Only when this is completed and approved do we bring these sponsors onto our platform for introduction to our clients and inclusion in our Household Endowment Model.
As part of our due diligence process, we conduct what we refer to as our discovery process where we spend a great deal of time learning about each client and what their fears, concerns, goals, and objectives are. Not until we know and understand each client do we make portfolio investment recommendations based on those facts. In that process, we review their tax, estate, and asset protection needs as well so that we don’t recommend strategies that may negatively affect those needs and goals.
Prince: Why and how is a model designed for institutions appropriate for high-net-worth individuals and families?
Annable: I’ll answer the “why” first. The why is that high-net-worth investors are typically accredited or qualified purchaser investors, thus they are typically sophisticated investors with net worths of over $1 million or $5 million and have the ability through experience to review these alternative investments and strategies associated with each. Most of these investments require these investors to be accredited at the accredited investor or qualified purchaser level.
And now the HOW? In early 2012 the Jumpstart Our Business Start-ups Act or The JOBS Act of 2012 was signed into law specifically designed to address the capital needs of small companies including the ability to raise capital through broker-dealers using the private placement vehicle. Utilizing the private placement vehicle for accredited and qualified purchaser investors has opened up these vehicles for investment with lower minimums, usually $100k or less thus giving investors much more access to what used to be institutional-styled investments which required $1 million to 10 million dollar minimum investments. Thus accredited investors now have access to new private investments allowing them to create an endowment-style portfolio.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.