Family Inc. Using Business Principles to Maximize Your Family's Wealth

Family Inc. is a roadmap to financial security for the family CFO. Too much personal wealth management advice essentially boils down to goal-setting, which isn't helpful or effective in terms of overall financial planning. This book takes a different track, giving you a crash course in corporate finance and the tools to apply the field's proven, time-tested principles in the context of your family's financial situation. You'll learn the key principles of wealth creation and management, and learn how to make your intellectual and real capital work for you. Your family situation is unique, and your principles must sometimes differ from the standard financial advice—and that's okay. Life is not a template, and even the best strategy must be able to adapt to real-life situations. You'll learn to chart your own path to financial security, utilizing the author's own tools that he developed over 15 years as an active board member, chairman of the board, or chief financial officer of multiple companies.

Oversimplified wealth management advice does not leave you equipped to manage your real-world finances. This guide is written with intellectual rigor, but in the language of family discussion, to give you a real, practical guide to being an effective family CFO.

• Create your own financial prosperity and security
• Align financial acumen with your family's specific situation
• Adapt to real-world situations and make your financial advisor work for you
• Utilize powerful financial tools to help you build financial independence

Every family needs a CFO to manage wealth, and the principles of corporate finance apply from the boardroom to the living room. Family Inc. delivers actionable advice in the form of CFO training to help you plot a real-world family financial plan.

DOUGLAS P. MCCORMICK has a lifetime of experiences that provide the foundation for the framework, principles, and tools in Family Inc. As a professional investor, he has spent two decades managing money for institutional clients such as insurance companies, pension funds, entrepreneurs, and high net worth families. Unlike Wall Street money managers who seek to generate paper profits through passive investing, Doug partners with families and entrepreneurs to build and grow their businesses to create sustainable value. Holder of a BS in Economics from West Point and an MBA from Harvard, he is a cofounder and a Managing Partner at HCI Equity Partners. His motivation for writing this book started with his own challenges finding good personal finance advice as a young adult and his belief that financial literacy is one of the largest problems facing Americans today. He is optimistic this problem can be solved through awareness, education, and hard work.

Foreword ix

Acknowledgments xiii

With Appreciation for America’s Armed

Forces Service Members xv

Introduction xvii

Section I Every Family Needs a Chief Financial Officer 1

Chapter 1 Why Do I Need a CFO? I Don’t Even Own a Business 3

Section II Maximize the Value of Your Single Biggest Asset—Your Labor 17

Chapter 2 Double the Value of Y our Labor through Education 19

Chapter 3 Make Career Choices That Extend Your Possibilities 29

Chapter 4 Think Like an Investor When Making Career Decisions 33

Chapter 5 Don’t Overlook Retirement Benefits Just Because They’re Not Imminent 45

Chapter 6 Complement Your Career Decisions with Insurance 49

Section III Manage Your Assets Like a CFO Manages a Business 55

Chapter 7 Your Financial Assets Serve Many Functions in Your Family Business 57

Chapter 8 Diversify Your Family Business with the Right Investments 61

Chapter 9 Define the Right Goals for Your Asset Management Business 75

Chapter 10 Use History to Make Reasonable Investment Assumptions 81

Chapter 11 Safeguard Your Assets from the Main Risks 97

Chapter 12 Not All Debt Is Bad! Use Debt to Purchase Assets and Maximize Your Liquidity 101

Chapter 13 Which Is Better, Active or Passive Investment Management? It Depends. . . . 105

Chapter 14 Use Indexing for Your Low-Cost Investment Portfolio 113

Chapter 15 Understand When It Makes Sense to Pick Individual Stocks and Managers 117

Chapter 16 The CFO’s Step-by-Step Guide to Building the Family Investment Program 125

Chapter 17 Know Yourself—Understand the Psychological Factors That Can Torpedo Your Goals 131

Chapter 18 Don’t Sweat the Details of Your Asset Management Business 135

Section IV Family Inc. Does Not Manage Itself 139

Chapter 19 Create Tools and a Reporting Dashboard for Managing Family Inc. 141

Section V Manage Your Family Endowment in Retirement 165

Chapter 20 Understand How Your Family Business Changes in Retirement 167

Chapter 21 Sleep Well—Protect Your Retirement through Insurance 169

Chapter 22 What’s Your Number? Determine When and How Much You Can Afford to Spend in Retirement 179

Section VI Avoid the Rat Race—Change the Game by Changing the Rules 201

Chapter 23 Pay Yourself What You’re Worth through Entrepreneurship 203

Chapter 24 Jump-Start Your Heirs’ Financial Security 209

Chapter 25 Develop a Succession Plan to Groom Your Replacement(s) 213

Chapter 26 Develop and Manage Your Estate or Uncle Sam Will 217

Chapter 27 Maximize Your Charitable Legacy 221

Section VII A Call to Action 225

Chapter 28 “But It’s Different This Time. . . .” 227

Chapter 29 Put Down the Book—Just Do It! 229

Appendix: How to Calculate Expected Lifetime Labor Value 231

Glossary 233

Notes 237

Index 243

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