Wealth: The Private CEO

Apply corporate management principles to your personal finances.

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Building a successful company requires savvy money management skills. Transferring those skills to personal wealth management, however, can present its own set of challenges. “My business life and personal life are inseparable,” says Peter Solomon, chairman of Regency Homes, one of the Coachella Valley’s leading builders. “In any financial transaction I’m involved with, I look closely at the value I’m getting and not necessarily what I’m paying.” 

Ask yourself if you have not only the requisite knowledge, but also the time to manage your own money.

Consider that you may well know your own industry and the specific economics pertaining to it yet lack the overview necessary for broad portfolio management. Just as you delegate responsibilities within your company by hiring employees with specialized expertise, you may choose to hire a professional to manage your personal wealth.

“Running a successful company means recognizing your expertise and limitations in certain areas,” says Jim Estes, assistant professor of finance at California State University, San Bernardino. “Entrepreneurs are used to making decisions, and many like to make their own investment decisions.”

If you decide to hire someone for this slot — a stockbroker, certified financial planner, or private banker — interview them as if you were filling a senior management position within your company. Determine how much decision-making autonomy and authority you’re comfortable giving them.

As you would with a new corporate finance hire, evaluate their work closely until you’re confident and trust their decision-making abilities; then periodically review their decisions. Money management is clearly about results, so it won’t take long to know if you made the right choice. 

Palm Springs interior designer George Mansfield, who owned two exclusive home furnishing and decorating shops in San Francisco and a wholesale furniture showroom, turned over his personal wealth management to others. “In business, I always relied on professional contractors, painters, and plumbers, he says. “When it came to my money, I did the same thing and hired a professional.”

“You need a good understanding of your investment income stream and what could possibly disrupt that,” cautions Randy Miller, president of Palm Desert National Bank. Successful companies use operating and capital budgets, relying on long-range projections to measure success and shortcomings. Individuals should do the same by setting deadline-orientated investment goals and objectives.

“Look at your personal income stream. Figure out how much is needed to cover fixed expenses and then how much is available for discretionary uses,” Miller says. It’s similar to a manufacturing company president forgoing a forklift for much-needed sales and marketing materials. Operating income may not support both.

Economic conditions dictate how you run your business. They should also determine how you manage your personal assets, whether in real estate, cash, securities, or a combination thereof.

“When markets are growing rapidly, you focus on managing your business as quickly and aggressively as possible,” says Barbara Rosenblum, CEO of San Francisco-based Rosenblum Silverman Sutton, who has 31 years of experience managing her clients’ money. “When markets stagnate, you cut costs and maximize margins,” she adds.  Stick by those rules through good and bad times for the best long-term results. 

Exit strategies in business are key to success. It’s the same with your personal finances and estate. When you retire, don’t make the mistake of over-managing your portfolio because you have too much time. Continue to think of your investment assets just as you did with your business assets.
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