Ultra Tidbits

*Edgerin James, a running back for the AZ Cardinals decided to reward himself while in Tampa for Superbowl XLIII: he purchased a brand new Lamborghini (Galardo, I think), and paid CASH. I'm sure his accountant wasn't happy. Asked if he rented it, he allegedly said " I only rent tents and bouncehouses". Way to go buddy!

*Kelly Rowland from Destiny's child just dropped the selling price of her Miami Beach condo at the Bath Club by $500K. It's a clear sign of the distressed real estate market down there and that she is serious about unloading it, not necessarily an indication that she's going broke as several sources mentioned. She's Europe bound, so that makes sense.

*A new W hotel opened recently in Buckhead here in Atlanta, and although we missed the opening party, we had the opportunity to spend a couple of nights there. Great location for shopping or business, and even though the decor looks puzzling at first, its eclectic mix works in the end. It exudes a sense of bohemian/Georgian chic that is a departure from the contemporary flair of the Midtown location. The service is as always top-notch, and the Whatever/Whenever service truly delivered. The rooftop lounge is typical a la Randy Gerber. Check this property out.

*According to Forbes, the top 400 richest Americans collectively paid a measly 17% in income taxes in 2006 ($18 billions out of $105 billions). It turns out, most of their income (63% or $66 billions) comes in the form of capital gains which is taxed at a 15% versus 35% for the top rate on ordinary incomes. Compare that to the affluents in the top 5% (Gross Income of $153,500 or more) who pay an average of 21% in taxes. They make more money and pay less taxes: so much for the tax cuts for the wealthy!!!! As you can see, there is an incentive to accumulate appreciating assets that you can depend upon over the long-term. Not only does it provide you with a stream of income later on, it in effect lowers your tax rate. Have you filed your taxes yet???

A new management approach for the Affluent

Family offices are teams of professionals, including tax specialists, administrative staff and lawyers, who service the wealth management and lifestyle needs of a specific wealthy family. The typical wealth requirement to launch one is $100 million and up.
For that reasons, Multi-Family offices were created to service the needs of several affluent individuals under the same roof. At that level, the minimum requirement stands at $20 million and up, per family.

Just recently, yet another model was developed. They are structured as Financial Intermediary Offices (FIOs) providing similar services to Affluent family below the $20 million range, and starting as low as $2 to $3million in assets. They coordinate everything from estate planning to helping transport yachts and horses around the country. Typical services consist in having someone acting as a trusted adviser that pays bills, hires domestic help, works on pre-nuptials or divorces, manages assets, moves assets, works out mortgages, shops for insurance to make sure you're getting the best deal. They operate using an open-architecture model, allowing them to work with your existing advisers or to readily refer professionals from their network. These Intermediary Offices have managed to provide High Net-Worth families with comprehensive financial management and lifestyle services while offering the confidentiality available from larger multi-family offices. While all the benefits of FIOs are not yet evident, families who participate find they have most of the advantages of dedicated offices.

These FIOs are using partnerships with concierge services companies and the use of technology to streamline operations and thus offer competitive pricing without sacrificing quality. For example, our firm here in Atlanta uses a technology platform with a dedicated client page where their financial information is updated overnight, and featuring an online safety vault (i.e. an online safe-deposit box), as well as various add-ons such as calendar alerts for important meetings, up-to-date net-worth statements, and collaborative tools allowing other accountants, attorneys and investment advisors to upload relevant information available to the clients. The page is also conveniently PDA accessible from Palm, Blackberrys and the likes, keeping the information at the clients’ fingertips wherever they may be.


So far, here is what we have observed:

· Participating families have access to a wide network of professionals under the coordination of a centralized intermediary.
· They benefit from a menu of services that are not collectively offered anywhere else.
· Families participate in the cost savings and the benefits of group purchasing power.
· These families find they maintain more direct family control over financial matters thanks to the overall centralization.
· They have the assurance of confidentiality in the management of financial and personal affairs.
· They have the satisfaction of affiliating with an organization whose size is better aligned with the attention required by their family.


Value Added by Financial Intermediary Office Concept

· Financial quarterback supported by specialists in each field
· Teams of qualified professionals who can collaborate
· Continuity of service if quarterback leaves
· Elimination of the need for a personal assistant in certain cases
· Better risk management policies and procedures
· More comprehensive information systems
· Relationship pricing for inter-disciplinary services
· Reduction of overlaps and redundancy in advisory practices

FIOs are mostly fee-based in order to maintain their impartiality and refrain from selling you products. The reality is that a person with $5 million in assets may very well have a busier lifestyle than one with $20 million. FIOs thus operate with client activity volume in mind, which is ultimately a fairer assessment. Under a percentage model, the $20 million client is charged a higher fee just for being wealthier. I strongly encourage you to take a look at this model, especially in an era where the Bernie Maddoffs of the world abound. Having an added layer of oversight will definitely help you sleep better at night.

Missed opportunity

While surfing the Forbes Magazine webpage, I came across a feature covering some of the richest people Americans never heard of. This gentleman here is from Nigeria and his bio is as follows, I quote:

"Aliko Dangote
Net worth: $3.3 billion
Residence: Lagos, Nigeria
Nigeria's first billionaire hit the jackpot when his sugar-production company listed on the Nigerian stock exchange last year. Meanwhile, proposed initial public offerings of his flour and cement companies have stalled. Began career as a trader at 21 with a loan from his uncle; built his Dangote Group into conglomerate with interests in sugar, flour milling, salt processing, cement manufacturing, textiles, real estate, haulage and oil and gas. Closely linked to Nigeria's former president Olusegun Obasanjo".

Forbes

Strangely enough, this man is NOT the richest one in Africa. Thanks to globalization, affluent households of are sprouting all over Africa, and several hundred thousands of them have net-worths exceeding a million dollars. Many of them visit the US frequently as they may have children enrolled in universities here, own real estate, etc.... US-based luxury marketers generally ignore this population and they are an under-served segment.

European companies have been feasting on this well-kept secret for years, so it is time for US companies to join the fray.

Just something to think about...

Traveling Pretty Part II

Once at their destination, the entertainers may or may not need to hit the town. When traveling for business, a car service or a limousine company is usually called in to chauffeur the celebrity around. This is usually done in a “charter” mode, meaning that the car and drivers are at the celebrity’s service for hours on end (8 or more). Again, the cost of this service increases when there is an entourage in tow, which creates a need for additional charters. At a cost of $80 per hour and per vehicles, a typical invoice can reach $2000 or $3000 by the end of the trip. The problem is that the clients are usually invoiced later, which leads them to over-indulge. I remember this client who asked us to hold off payment to a reputable limousine company as they were still extending him credit despite his outstanding balance. We had to pull the plug once the bill reached $20,000 within a span of 2 months and force the client to address the issue and authorize payment.
However, if traveling for personal purposes or even while on vacation, an entertainer may decide to rent out a luxury vehicle for the length of the stay. I am talking Ferrari, Lamborghini or Maseratti from specialized shops in LA, Miami or NYC or whatever hot spot they are visiting. This can be an exhilarating and exciting option, for about the same cost as the charter (about $1000 and more per day). Unfortunately, the worse offenders rarely stop at one car as the entourage often get their own as well, resulting in a higher bill than expected. In a world of excess and opulence, I have become accustomed to rental bills higher than the price of a small car.

When it comes to accommodation, entertainers know only one word: luxury. Having experienced those types of hotels thanks to my association with my clients, I can understand the addictive nature of a luxury hotel. It is a world where well known luxury brands such as Four Seasons®, St Regis® and Ritz-Carlton® are as familiar to its members as Mandarin Oriental®, Mondrian®, Parker Meridien® and W®. For all their hard work, entertainers deserve such pampering and the perks associated with those hotels. It offers them well needed privacy and the opportunity to rub shoulders with their peers. As with everything, some clients tend to overdo it. Keep in mind that the starting rate for such hotels is over $300 a night for a standard room. It would be too easy if most clients wanted a room, but they all want a suite. We are talking at least $700 a night or more in some hotels and even several thousands in others. So after a few days in such hotels, factoring in incidentals and the additional rooms for the entourage, we are talking $10,000 or more per stay. If things were not bad enough, some hotels are now catering to the ultra-wealthy. Such a hotel in a major city in the Southeast offers suites starting at $2500. This is where I draw the line for entry-level and mid-level entertainers: proceed at your own risks. A 7 day stay at this hotel came up to over $20,000 for an entertainer and his girlfriend. That included a $2500 room service bill. And it was in a regular suite. A 5 minutes drive from his primary residence. He checked himself out immediately after being notified of his tab.

It is an established fact that traveling in style is a costly endeavor. I would thus discourage anyone from traveling for no other reason than to get away and with a big entourage, or at least limit such behavior. My cost saving suggestions would be as follows:
Plan ahead for those business related trips as they are usually scheduled far in advance for the most part.
Have someone keep an eye on the entourage’s incidentals to reduce waste (I have seen an entourage incur $400 each in incidentals for a one night stay)
Be aware of one’s league in the wealth spectrum as ultra-luxurious items should only be reserved for the ultra-rich
In closing, I do not suggest avoiding all those perks because they are the fruits of an artist’s labor, but it is easy getting caught up. It’s easier said than done, but balance is key! Then again, this is why they hire a business manager after all.

Traveling Pretty Part I

Traveling is an important aspect of a working entertainer’s life as their presence is solicited for performances and appearances all over the United States and abroad. This constant jet-setting raises logistical and financial challenges, which are further compounded by the size of the entertainer’s traveling party while on the road. In actuality, as their level of sophistication increases, so does the nature of their requests and the cost associated with them. After all, living in the lap of luxury at home obviously translates to the same needs while away from home: from how to get there, what to be driven in once they get there and where to stay while there. The challenge lies in returning home with their wallets intact.

An active entertainer has several transportation options ranging from a charter bus to commercial air travel and even the holly grail of travel, private aircraft. The chartered bus option is well suited for touring musicians as it allows flexibility in scheduling, especially for those overnight drives to the next city. A top of the line bus provides a rolling palace for the artist and his/her entourage from one city to the next. Dollar for dollar, the bus option is the most affordable for a traveling group. The cost of fuel, the driver and the bus rental can come up to at least $2000 per trip.
Flying commercial (First class, of course) works well for specific trips domestically and internationally. The entourage can follow in coach if needs be. This is the most common option, but it lacks privacy and offers very little in terms of flexibility: one is constrained by the airlines’ schedules. This option tends to be costly when there is a lack of planning as a same day purchase usually doubles the price of a ticket. For example, a regular first class seat from NYC to LA may cost $700 in advance and jump up to $1800 for a same day purchase. In an industry where last minute decisions are common, I am sad to admit that the same day option is typical. If there is a situation where a business trip requires the same day purchase, one can dismiss the extra money spent as a cost of business. However, when it comes to the entourage or the groupies, such largesse can become deadly over time.
Speaking of deadly, the private jet option fits the bill as only deep pocketed entertainers or athletes should consider this option. We all know of sports teams chartering or owning big jets as they tend to travel extensively and with a big group. Unfortunately, a few individuals use that option for personal purposes. In that case, a single trip from Miami to NYC in a 10-seat Gulfstream IV can come up to over $20,000 each way, as one has to pay the hourly fees for the leg of the trip when the plane is empty (either while flying to meet the client, or returning to its original destination after the trip). Less expensive options are available with smaller jets, but from my experience the Gulfstream is the aircraft of choice.

to be continued...

CHANGING THE LUXURY GAME

The incredible amount of wealth that evaporated in this economy is even affecting the higher echelons of wealth. Granted most ultra affluent Blacks still have plenty of money left despite losses in the market, and can easily ride the wave for the next couple of years. However, the game is changing when it comes to luxury spending.

We have to recognize that we are coming down from an unprecedented explosion in wealth levels, a new Gilded Age. Luxury brands had to reach down to capture those millions of aspirational African American dollars by offering entry-level items (such as wallets, key-chains and sunglasses) and ratchet up the exclusivity factor via one-of- a kind pieces in the tens of thousands (try a $200,000 Gucci trunk). Now that the entry-level segment is in essence priced-out, those that are left standing really are the truly affluent. Professional and affluent African American women represented a good share of the buyers of luxury/designer purses and shoes. The same went for luxury automobiles. The good news is that this recession is across the board and no single ethnic group is left out.

Regardless of one’s situation, the days of “affluenza” or conspicuous consumption are over. For the ones on shaky grounds, their money has to be allocated to more important expenses such as mortgage payments, car notes and credit card payments. They are now forced to watch their discretionary spending due to the economic uncertainty. As a community, some of us even have to provide for struggling relatives now. For those who are comfortably wealthy, the reduction in spending comes from a certain guilt associated with their status; a mild case of “survivor guilt”, if you will. They resort to discreet spending so as not to appear inappropriate in such hard times for relatives or others around them: “… there is no need to throw it in the face of someone shopping at Wal-Mart by showing off the new Louis Vuitton bag."

A suggestion for the affluent is to focus on luxury staples, items that transcend trends and can last over time. A classic Chanel suit can last a woman for years and so does a classic custom-suit by Zegna for a man. Ditto a classic Burberry trench coat or a Rolex watch. Such pieces can be accessorized with less expensive accessories over time, but their apparent quality and timeless appeal will usually overshadow the rest. This idea can be expanded to automobiles, jewelry and luxury services: practicality and quality trumps quantity.

On another note, all is not lost for the aspirational buyer. Luxury brands are beginning to feel the pinch and are “quietly” featuring-in store sales discount approaching 70-80%.That rarely happened on such a wide-spread scale before. The reality for that industry is that many brands may not be around in the next 5 years (20-30%) and competition is fierce. I would encourage all of you then to shop “wisely” this time around and stack up on those staples mentioned above. They can be blended in with clever finds from Marshalls or TJ-Maxx.

As you can see, the days of extravagant spending are now gone, but retailers and buyers have to adapt accordingly. Adopting the right outlook and a disciplined approach will guarantee that you can still maintain a healthy shopping regimen without breaking the bank or alienating your spouse.

source

The Danger of Cash Requests Part II

However, cash requests are also made for a variety of benign reasons. The funniest ones I can remember had to do with the celebrities themselves or other people in their entourage. It ranges from this performer needing tens of thousands of dollars handy at all times, kept in a backpack by one of his boys, just so he knew he had it around. There is also this generous young man who had a habit of giving $5,000 in cash to some of his conquests, as a parting gift. All these quirks arise out of the knowledge that they can be accommodated. Some people collect expensive wines, others splurge on expensive suits, activities that do not necessarily create value but please whoever partakes in them. The hip-hop celebrities just do it with cash. It should be said that the same rules do not apply to the rich. Having this much money leaves room for fun. Unfortunately, these amounts add up and can wreak havoc on the finances of these celebrities intent on living the good life. We are talking hundred of thousands a year in cash, sometimes millions when it comes to the worst offenders. The problem lies in knowing one’s limitations, especially on such a slippery slope. This is where an advisor should ring the alarm when needed. All this money spent seems like a waste, and it is to a certain extent. What most outsiders do not know is that more often than not, the money for the cash request has to be disbursed from the celebrity’s business entity. In that case, taxes have to be deducted from or are due on the disbursement. At a 45% tax rate (for simplification), it means that the net to the client would represent 55% of the withdrawal. In other words, for $10,000 in cash given to the client, $18,180 has to be disbursed and $8,180k is paid or due to the IRS. It is worth repeating: for every dollar spent, $1.81 has to be taken out and 81 cents have to be paid to the government. This is my main reason for denouncing such practices. However, I can only assume that these practices are here to stay. Although they may provide an outlet for the perpetrators to let out some steam, I believe that cash requests are to be used with moderation. That way, more money can be appropriately invested or socked away to prepare for rainy days (no pun intended). The less cash a client sees, the less he/she is bound to spend. Some people can truly afford these eccentricities, but unfortunately many copycats try and follow at their own risk. These are the ones that get indicted for tax evasion down the road. I hope you celebrity hopefuls take note.

The Dangers of Cash Requests Part I

If money could talk, the bills that go through the hands of celebrities would have many stories to tell. In theory, once you reach a certain level of wealth, people assume that cash becomes a minimal tool and that gold and platinum credit cards take over. Unfortunately, this could not be farthest from the truth. Young black celebrities actually carry more cash for diverse reasons. Those reasons are exactly why finance professionals would prefer the aforementioned card usage was the norm. You have to understand that most people operate under the assumption that if they can see it, they have to spend it. I have heard countless people mention that carrying a large amount of cash leads them to spend it frivolously. This is exactly why celebrities have business managers or financial advisers, not only to manage the money, but also to channel it productively. Unfortunately, the dreaded calls for a “cash request” cannot be avoided.

The most obvious reason for a cash request is the need to flaunt it. We have all witnessed it: a few thousands worth in $1 bills thrown up in the air. It happens in the clubs from the balcony of the VIP area, in the strip clubs where every self-respecting rapper venture to “make it rain”, or even in videos. As is the case with the jewelry, this display of one’s liquidity is meant to express elevated status and a carefree attitude towards money. If you can afford to throw it away, you must have much more stored away, right? I always chuckle when I witness this and wonder what would happen if Bill Gates decided to challenge one of those rappers to a “raining” contest. Truth is, he wouldn’t and I do not blame him. I just think that if one wants to give away a lump sum of $25,000 to impress others and garner publicity, another tasteless but productive alternative would be to make a donation to a charity and tip off the press. At least it creates the same amount of publicity AND a tax deduction. But who am I fooling? Is it not all about street-credibility?

Cash requests are also made to support questionable purchases that even jaded business managers will disapprove. I can only speculate that providers of “party favors” do not take checks or credit cards. Even if they did, it would be hard to classify such an expense. Entertainment expense, maybe? Or research? The same goes for prostitutes and/or escorts. The list goes on and on. For those expenses relating to a person’s unmentionable activities, cash provides a welcomed anonymity during the transaction. In all fairness, these are things a client would rather not discuss with a business manager and vice-versa. After all, it is their money and we are all entitled to some privacy. It only really reveals itself as a problem when unreasonable sums are requested. Rumors were floating around concerning a certain celebrity’s $100,000-a-week need for cash. We all know that it was not for a church collection plate and the real issue eventually came out in the press. And who can forget about the infamous “client number 9”? Ask my fellow New Yorkers.

To be continued...

Tyler Perry Making Moves

Atlanta uber celebrity Tyler Perry put his suburban Atlanta mansion on the market. The palace, aptly named Avec Chateau is a sprawling estate located in Fairburn, GA. The selling price is $3,695,000.00 for anyone interested. Many of you will remember the property from Mr. Perry's feature film "Diary of a Mad Black Woman".

Even though the decor is too pretentious for my taste, I can appreciate the statement it made: I have arrived! The Chateau measures 17,252 square feet, includes 6 bedrooms and 6.5 bath ( the master suite is 4,000 square feet, thank you very much) and sits on an 11.4 acre parcel purchased in 2001 for $62,661 .

However, with constructions cost in GA averaging $150/sq ft for luxury homes, we can assume that construction alone topped $ 2.5 million. Add up all the upgrades and furnishing, and Mr. Perry is bound to make less than a million in profits.

Problem is, property records show that the estate is surrounded by much more modest homes. Not a good look for resale value as people with that much money typically want to live near their peers. Lesson to all: think about the neighborhood when building such behemoths!!!

Fortunately for Mr. Perry, Evander Hollyfield $10 million+ mansion is not too far away.

More pictures of the house here!!!

And don't cry for Tyler Perry. He is building a bigger hotel size mansion (30,000+ sq ft) that can be seen here.

Source

Here we go

[FINANCE . LIFESTYLE . BLOG.]

Plus ultra: Latin for further beyond, further yet, more beyond or yet beyond

BLACK PLUS ULTRA is a lifestyle and financial management vehicle pulling the veil back on the doings of the affluent members of the black community, the 5% of the African American population with individual annual income exceeding $100,000.
I have been looking for a venue that would marry my interest in wealth management with my epicurean side. Basically, a how-to guide for the refined and sensuous enjoyment of the finer things in life without risking bankruptcy, LOL.
It will cover a variety of topics from Real Estate dealings to entrepreneurial endeavors as well as my personal opinion on current events as they pertain to this site.
This project has been in the works for a long time and is being conceived as an Aspirational tool for those in front of the curtains hoping to make it one day, and an Informational resource for the already affluent individuals among you.

I hope you enjoy it...