A Monograph Case Study

The Journey from Private Bank to Independent Advisor

The case study presented within is only current as of the date delivered, and it is provided for illustrative and informational purposes only. It is not intended to nor should be construed as a guarantee or assurance of future financial outcomes. Each client’s individual circumstances are unique, and outcomes will vary. Past performance is not indicative of future results; projections have inherent limitations and may not come to fruition. The statements contained herein do not constitute nor should be construed as personal financial, tax, or legal advice, nor a solicitation of any type. Each client's situation is unique and thus requires individualized financial, tax, and legal advice from a qualified financial professional, CPA, and attorney, respectively.  The client situation discussed within reflects that of a current client; such client did not receive any cash or non-cash compensation  in relation to this case study. The firm’s disclosures are available here or upon request.

“To understand the whole, study the parts. To understand the parts, study the whole.”

— Johann Wolfgang von Goethe

Foreword

What follows is a story of a client who entered sight unseen into a wealth management and investment advising relationship with a big private bank. It is a narrative of an industry that primarily makes its money by the sale of consumer or investment banking products and services, not fees for managing wealth or investments.* However, this client discovered a paradigm shift by engaging in a wealth experience premised around planning and a holistic perspective of household wealth and objectives. This is the story of that evolution.

The Outline - The Client and The Challenge

The client’s private banking experience began during the early stages of the family business, which the client had inherited from the previous generation and significantly amplified. After selling the business, the client defaulted to using the business’s bank for wealth management and investment advising capabilities to steward the post-transaction liquidity.

The shortfalls in this experience were soon noticed by the client. No planning was involved in portfolio implementation or general financial affairs. The portfolio itself was composed of dozens of positions, including proprietary bank investments, most of which were high turnover, high-fee products, with a significant allocation to illiquid alternatives, despite a large allocation of “rollover” private equity on the client’s broader balance sheet.

A significant uninvested cash position was accruing an increasing opportunity cost, and it was earning well-below-market cash yield. 

Rollover: The interest in a company the seller retains to benefit from potential future growth.

Turnover: The rate at which securities are bought and sold in a portfolio. Higher turnover can increase both transaction costs and taxes.

Despite the branding of private bank experience, the portfolio was constructed using a standardized model based on a plain vanilla questionnaire assessment of risk appetite.  No substantive tax mitigation activity was pursued, such as tax loss harvesting, despite clear opportunities to do so.

The client perceived no planning related to their personal objectives or off-portfolio balance sheet. The client received no inquiries related to financial goals. There was limited evidence in the experience to evoke a sense of tailoring to the client’s unique needs or situation.

The Draft - Discerning Solutions

The client first engaged Monograph after reading another case study covering managed complexity for C-Suite Executives. The difference was immediately apparent, beginning with the Monograph emphasis on planning.

Planning with Perspective

As the custom tailor begins with measurements, Monograph began by developing an understanding and comprehensive inventory of the client’s total resources. This catalogue aggregated a variety of legacy accounts and positions into the following framework:

  • Current resources: these included cash, bonds, stocks,
    real estate, business interests, alternatives (private funds, direct business investments), personal homes, cars, and art. 

  • Future resources: present value of expected future
    earnings from work, social security, pensions, inheritance,
    and expected life insurance death benefits.

  • All items were treated as after-tax values, if tax was expected.

This was the first time the client had a complete perspective on their wealth structure outside of just a portfolio. Monograph’s platform incorporated all aspects of the wealth structure, present and expected, with insights into fees, taxes, and potential vulnerabilities, such as illiquidity.

Monograph also empowered the client to define and apply a cost to individual and household intentions for their wealth, with relative importance applied to each objective.

  • Personal: desired minimum spending level; home improvements or purchases; high-quality travel; personal investments and collectibles; new business ventures. 

  • Family: education; first vehicles; weddings; parental support; family entrepreneurship; future second home purchases.

  • Social: philanthropy; political; alma mater.

By anchoring the start of their Monograph wealth experience in planning and perspective, Monograph illuminated several hallmarks related to their wealth structure:

  • The client had more resources than they expected to consume over their lifetime. Indeed, they had enough liquid resources to cover lifetime objectives. 

  • However, the client had too much cash accruing opportunity cost, not interest, due to the lack of planning or comprehensive insight by their current advisor.
    More poignantly, the client was forgoing interest in a higher rate environment.

  • The client also had substantial future estate tax exposure, which would only grow over time if unaddressed.

  • The client had a clear charitable intent, opening the
    way to philanthropic strategies which would enable significant tax offsets.

  • Finally, the client could immediately address allocating resources to the next generation’s education funding.

Harnessing Monograph’s platform, technology, and experience, Monograph provided the client with a clear picture of what their wealth could accomplish.

Investing with Intent

Limited by an inability to directly map the client’s ambitions to their wealth and investment set, the private bank offered a model-based portfolio filled with expensive, inefficient positions, including alternatives, that may have provided the perception of complexity and sophistication.

Without a clear relationship between objectives and investments, the client’s private bank portfolio suffered from the following shortcomings:

  • A tactical view of financial markets, and a lack of comprehensive strategy for the portfolio or wealth structure, led to unnecessarily high, unproductive cash balances and more in fixed income than was needed. Without the information provided by an analysis of household objectives, these sums could not be informedly allocated in an expanding equity environment, which could result in lost opportunities.

  • The portfolio included a substantial allocation to costly, illiquid private investments.

Equipped with a detailed picture of the client’s goals and an outcomes-oriented view of risk, Monograph generated a target asset allocation based on intent. To begin the transition between the client’s legacy portfolio and objectives-informed portfolio, Monograph performed a breakeven analysis to define the costs and time required to reach that target allocation. This more deliberate approach to investing empowered the following:

  • Monograph was able to restructure the portfolio at a net capital loss, offsetting the relatively minor gains from the client’s private placements.

  • The client was able to transition to an investment set with significantly lower fees, enhanced tax management, greater transparency, and lower administrative overhead.  The resulting structure was less costly to the sum of hundreds of thousands of dollars per year. ** 

  • A complete view of the client’s goals enabled a more appropriate asset location among household entities. For example, the previous advisor had invested the client’s IRA in a balanced portfolio of stocks and bonds despite the client still being in their prime working years and decades before needing to take distributions from the account. Monograph pivoted inaccessible resources, such as those in the IRA, to growth assets, while repositioning accessible resources to assets such as high-quality fixed income.

Coordination with Clarity

Estate Planning: The client was still of prime working age and already in possession of a taxable estate value more than the lifetime exemption. Relative to enumerated needs and goals, the client had more resources than would be needed during their lifetime, opening avenues for tax and estate management. These included the following:

  • Grantor Retained Annuity Trust (GRAT): Monograph is working with the client and estate attorney to establish a GRAT – a form of irrevocable trust – which allows the growth of resources to efficiently pass out of the estate. For the term of the trust, the principle and a defined interest rate would return to the client as annuity payments while any excess growth passes to the next generation without estate tax.

  • 529 Plan Funding: Though the client had young children, they had not started planning for or funding college education. Monograph coordinated the establishment of 529 education accounts and with “super-funding” these accounts (i.e. frontloading five years of tax-excluded gifts). This would allow larger dollars to experience compound growth for longer while further reducing the client’s taxable estate.

Monograph’s open architecture allowed the client to integrate a suite of family office services and wealth applications. By building a totalizing wealth strategy around the cornerstone of planning, family office services and planning opportunities were revealed and pursued. The following initiatives were implemented because of the insights gained through the planning process:

Strategic Philanthropy: The client illustrated a clear philanthropic intent as part of the inventory of objectives. After engaging Monograph, the client had a large earnout year related to the family business sale. By developing a fulsome understanding of the client’s resources and priorities, Monograph advised a low basis stock donation to fund a donor advised fund, which provided a large income tax deduction in a high-income year.

Year-End Tax Planning Coordination:
As is typical with Monograph clients, the client and advisory team held a year end planning call in December with the client’s accountant.  The call sought to ensure that all tax opportunities were optimized prior to the end of the year and all elements of estate planning, gifting, and charitable planning were considered.  Additionally, recent new regulatory requirements for the business were discussed.

As a result of the meeting:

  • There was clarity on the client’s income and capital gain position;

  • The client opened and funded their charitable donor-advised fund (DAF) for charitable and income tax deduction purposes; and

  • All were well prepared for upcoming estimated tax payments, now mitigated because of additional charitable giving prior to year-end.

The Publication - Ongoing Service

Planning does not just catalogue steps and goals – it aligns purpose with perspective. Monograph’s capabilities enabled this client to cultivate a deep understanding of the components of their wealth and apply them to their ambitions for their life.

This discernment became the basis of an experience with wealth contoured to the client’s needs, desires, and resources.

As these continue to evolve over a lifetime, the client’s household strategy evolves in harmony with them.

As with many publications, the client’s Financial Monograph continues to be refined with new editions as their life progresses, accomplishments realized, capital markets evolve, and new resources and opportunities manifest.

Important action items for the client in the near term are ensuring the next generation embraces the same value set as the prior in conjunction with wealth; finding ways to continue to give back to society and important causes; and continuing to address the estate tax puzzle via advanced planning strategies.

Endnotes

*We define industry by sampling the six largest U.S. banks by assets under management (AUM). Of the six, five earned the most revenue from their business segments other than asset or wealth management in 2024: Citigroup (91%), JPMorgan Chase (87%), Wells Fargo (81%), Bank of America (including Merrill Lynch) (73%), and Goldman Sachs (70%). Only Morgan Stanley earned more from its wealth and investment management segment but still derived 45% of its revenue from investment banking products and services.

**Monograph estimated the client was paying ~150 basis points (not including management fees) in product expenses on a $17MM portfolio composed of both public and private equity and fixed income positions, accounting fees, taxes, and turnover frictions. Monograph estimated that a transition to more efficient and cost-sensitive vehicles would reduce the aggregate investment costs for an estimated cumulative annual savings of roughly $200,000 based on the portfolio size at the time of analysis.