Douglas Andrew on Cornelius Vanderbilt vs Amschel Rothschild

This is a great comparison between owning and using a family banking system and NOT. You can do this also, for your own family. Ask me how!

Douglas Andrew- Traditional Estate Planning in this country seems to focus on the least important category on the family balance sheet. You go to most estate planning attorney’s and what’s the first question they ask? How much is your net worth and how many children do you have? Why do they want to know that? They want to start dividing up the family assets. They want to start focusing on the assets and dividing it up! Now wait a minute, that was the #2 rule when you wanted to destroy or conquer an enemy. United we Stand, Together we’re Better, and yet most traditional estate planners draft documents that divide up the assets.

All of a sudden it encourages extraordinary consumption, it encourages kids and family to wait around and say what do I get? It seems to take families from we to me. What’s mine, when do I get my portion? We find it seems to do more to destroy families and their assets than estate taxes could ever do.

Let me give you a few examples.

Cornelius Vanderbilt was the Bill Gates of his time. He was known affectionately as Commodore – watch video for their story.

He divided up his estate and passed it out to all his children. It was 96 years later that the descendants of Cornelius Vanderbilt, 120 of them, gathered at Vanderbilt University in 1972 for the first family reunion.

There wasn’t a millionaire left in the bunch. It was all gone. It had all been dissipated. In fact, his grandson, William K. Vanderbilt said, it has left me with nothing defininte to seek or strive for – inherited wealth has been a real hardship to my happiness. Woh, that’s pretty profound.

 

 

Now you contrast that situation with Mayer Amschel Rothschild.

 

He built a banking dynasty in Europe. He passed away in 1812. He had 5 sons. He learned and amassed wealth with conservative investments trading in coins and so-forth. He assigned each one of his sons to a capital in Europe and they used to buy and sell and communicate with homing pigeons, back and forth.

When Mayer Amschell Rothschild passed away, he left behind a 3 part system.

He had a family bank, this was a conceptual bank, not a chartered bank like you see down the street, this was a repository where he deposited the family wisdom besides the financial assets. And he had three rules:

#1 The children and grandchildren could borrow money. They loaned their heirs the money and the  loans had to be repaid. If you needed to get an education, you borrowed from the family bank. When you got your education, and started making money, you paid it back. If you wanted to develop real estate you borrowed from the family bank and you went out and developed and you paid it back. So the loans had to be repaid.

#2 The knowledge and wisdom that was gained from any venture had to be shared with other family members so you had to write down and deposit your wisdom at what you learned from your experience in the family bank – horizontally and vertically, aunts and uncles, nieces and nephews and so forth.

#3 They had to meet together at least once a year to reaffirm their virtues and intentions as a family or they were out of the loop. They couldn’t participate in the family bank.

Guess what happened to the Rothschild’s wealth? It grew and grew and flourished because of that concept.

 

Unfortunately, Douglas Andrew recommends IUL for private banking with. I just do NOT agree.

Universal Life policies are among the most disingenuous and in fact insidious financial products ever created.  That they are enjoying so much popularity is disastrous for those unsuspecting souls who purchase them.  They violate every principle we hold about wealth creation, preservation, use and transfer.    Doug Andrew is a really nice guy, great books—90% of which I agree with,  just violently disagree with his solution and especially his product and implementation.

If  clients want risk, let them buy risky products that they KNOW are risky…  banking and PLI is about mitigating that risk to as close to zero as possible.  If that isn’t important, then certainly, buy an IUL.

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April 17, 2012 · Jennifer · 2 Comments
Tags: , , ,  · Posted in: L23) Vanderbilt vs Rothschild, Vanderbilt vs Roth­schild

2 Responses

  1. George - January 4, 2017

    What do you recommend instead of a IUL for Private Family Banking?

    THANKS!

    George

  2. Jennifer - April 24, 2017

    Whole Life Insurance with a Mutual Company.

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