Chapter 5. Investor Allocation

This chapter is dedicated to Charlotte Beyer, founder of the Institute for Private Investors, who is successfully educating families on their roles as investors.

Investor allocation is a powerful tool on the revenue side of a family's financial balance sheet. This chapter assumes that the older generation is anxious to increase the financial wealth of the younger generation—a goal not universally held by American families. Many of America's greatest modern wealth creators, men like Warren Buffett and Bill Gates, have said publicly that they intend to leave the bulk of their fortunes to philanthropy while leaving only modest sums to their children. These wealth creators believe that unearned wealth risks corrupting the individuals receiving it by depriving them of the dignity of work and by interfering with the creative life choices later generations of the family would make if they were not burdened by wealth they did not create. These wealth creators believe long-term family wealth preservation lies in each generation's being the first generation of wealth creators, within the individual capabilities of each member to create his or her own wealth.

This is the same idea I discussed in Chapter 1 as a foundation principle for successful long-term wealth preservation. However, I do not fully agree with the views and methodologies of these wealth creators. I represent children and grandchildren of wealth creators who practice this philosophy, and often these ...

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