Mindles for the Financial Planning Client
Harry Markowitz recently told me that most investors can’t relate to the STANDARD DEVIATION of a portfolio and need some more accessible explanation of risk, such as the output of a simulation. Here is how two financial advisory firms address this issue: Bessemer Trust and Financial Engines. The firms are at opposite ends of the spectrum, in that Bessemer manages money for high-net-worth individuals, whereas Bill Sharpe’s Financial Engines has been designed to reach more of a mass market.
In 1901, Henry Phipps and his childhood friend Andrew Carnegie sold their steel company to J. P. Morgan to form U.S. Steel. Phipps set aside some of the proceeds in a family fund that he called Bessemer Trust, in honor of the British inventor, Sir Henry Bessemer, who had invented the steel-making technology that had generated the wealth. By the 1970s the trust began managing the holdings of those outside the family, and today it oversees more than $50 billion. Before rushing to the phone to have them manage your money, however, you should be advised there is a $10 million minimum.
In Bessemer’s wood-paneled reception area of its offices in Manhattan, oil paintings from the early 1900s celebrate the Industrial Revolution with scenes depicting steel mills and long freight trains full of coal—a reminder that this country’s great wealth was not forged in a smoke-free environment.
Andy Parker is Bessemer’s director of quantitative ...