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Off-Balance Sheet: The Burden of Sudden Wealth

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What do you do when wealth suddenly comes your way?

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Relax, it's only money. Here in the 'Ville we like to keep things smart, but we also love to laugh. All work and no play...you know how it goes. With that in mind we give you The "Off-Balance Sheet," a place where Minyans can experience humorous takes on the world of finance, personal stories from our Professors and Minyans and all the other stuff that makes life worth living. So take a break from the flickering ticks and dive in.


I ran across an advertisement for Morgan Stanley (MS) the other day.

It featured a bespectacled fop in a black suit and ecru turtleneck, a perfectly-sculpted salt-and-pepper goatee, and a very expensive-looking haircut. He was standing next to a silver Maserati (FIA), arms folded, looking directly at the camera.


A Maserati like the one in the Morgan Stanley ad

The copy asked: "What do you do when wealth suddenly comes your way?"

Fair enough. What do you do?

It then went on to assure the reader that Morgan Stanley can help people "deal with the consequences of a sudden increase in personal wealth."

"Deal with the consequences of a sudden increase in personal wealth"-sounds frightening. "Consequences" usually refer to penalties related to something one has done wrong. The consequences of driving under the influence. The consequences of committing armed robbery. But the consequences of getting rich quick?

It must be terrible. Just think of the horror, the misery, the awfulness that must accompany an unanticipated windfall.

The fellow in the ad looked as though he was dealing with his sudden wealth relatively well, thanks to Morgan Stanley. However, what if one didn't have the help of an $80 billion dollar company to guide them through the dark days of a skyrocketing net worth?

My first stop was Rocinha, a favela, or shantytown, in Rio de Janeiro controlled by a notorious drug gang called "Amigos dos Amigos" and inhabited by a population subsisting on just over $100 per month.


Rocinha


Inside Rocinha

I stumbled upon a girl named Iracema, who was helping her mother collect scraps of aluminum foil to sell to recyclers.


Iracema

Through my translator, I asked Iracema's mom what she would do if she suddenly came upon a tremendous amount of money and how she would deal with the consequences. She shuddered before responding.

"Oh my god, that would be horrible. Especially if it were multiple millions of dollars. What a nightmare-I can't even imagine how awful it would be if I became rich overnight, particularly if I didn't have a wealth management advisor to guide me."

To get another perspective, I headed to a refugee camp in eastern Chad, where I met up with Bakhid Idris, a Sudanese man waiting on an hours-long line for water.


A refugee camp in eastern Chad

The aid worker I was with offered to ask Bakhid how he and his family would deal with the consequences of a sudden increase in wealth.

"I can't even think about something so dreadful. Sure, this place is a living hell, but I'm not sure I could even face the consequences of sudden wealth after what I've been through already," he replied.

For more on dealing with the consequences of sudden wealth, I turned once again to Minyanville's resident sudden wealth expert, Kevin Depew:

Justin, the consequences of sudden wealth can be ghastly.

How so?

Can you imagine going to the Lamborghini dealership for that Diablo you've always wanted and having them tell you there's a six-month waiting list? Huh? Can you imagine coping with that?

Well, I don't know if that really seems so bad-

Exactly. Y'know, as much as I hate to talk out of school, I gotta admit that this is really a load of crap. C'mon, having money is so hard? Ridiculous. I'll tell you what's hard-having to choose between lunch and dinner as the one meal you eat that day. Or how to get a child into school when you don't have a permanent address. That's hard.

You're right. So, why does Morgan Stanley seem to think the consequences of a sudden increase in personal wealth are such a crucial issue?

400,000 dead in Darfur-a crucial issue. Trying to decide which antique Italian tile looks best in the guesthouse bathroom? Trivial issue. Sure, wealth comes with a host of its own complexities. Things like portfolio allocation. Estate planning. Tax reduction strategies. All good problems to have. I'll take problems like that anyday.

Great point.

Yeah, well…just one more thing.

What's that?

Don't believe everything you read.
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