> Let's assume the asset appreciates at an annual rate of 8 percent.
Easy peasy. You going to the asset shop and buying there a brand new shiny asset, which will appreciate 8 percent for the next 30-40 years. This is a great plan. Swiss watch.
Yes, it does matter: The entire reason this scheme is supposed to work is the gap between the % in asset value gains over time and the % interest rate charged by these supposed bankers to the ultra-wealthy over the same time.
If those are equal, this scheme is a terrible idea. You’d be much better off selling some % of the assets and paying LTCG as a fraction of the gains than paying all of the gains in interest.
So now the question is simple: If you can “buy” a risk-free 8%-earning asset, so can your friend the banker. But you can’t. You can buy a risky asset and hope it does better than the interest rate long-term, so your banker doesn’t invoke his rights to a lower yield but safer investment, which involve being able to seize your asset if its price declines.
If the rich could buy a risk-free 8% asset and borrow against its value with a 4% loan, they’d have a perpetual money machine. No such magic exists.
Even if the difference is zero between the two . The rich would still save capital gain and estate tax on the initial amount .
Rate only matters if you still worried about asset growth. At 300M+ net worth you are more worried about securing the wealth for generations to come rather than focusing on growth.
If you are investing majority of your wealth in anything risky enough to depreciate, this model of wealth management is not suited for that? That doesn't mean no risks should be taken, this step comes after that. Lets say you found a unicorn startup, you would do just before being bought out.
These products are niche for a reason, there are only few with the kind of generational wealth to structure their assets in this way.
The author puts it at 300M+ net worth, I cannot attest to that, but I expect it the costs associated and starting conditions needed of how much of your portfolio is in extremely low risk assets to make this worth while, so only sensible for the ultra rich.
Easy peasy. You going to the asset shop and buying there a brand new shiny asset, which will appreciate 8 percent for the next 30-40 years. This is a great plan. Swiss watch.