Director's guide: personal wealth management; Tips, strategies, and tactics for directors interested in managing and growing their wealth.

• Author: Chase, Scott
• Position: DIRECTOR WEALTH MANAGEMENT GUIDE

Working with professional money managers

AFTER FINDING HIMSELF suddenly liquid after the sale of his business, a member of the Institute for Private Investors described a feeling akin to vertigo. Focused on finding one "right" adviser, he soon discovered that the volume of possibilities made the search dizzying. (The United States is home to 23,535 registered investment advisers and more than 659,000 registered stockbrokers, and virtually all are willing to provide discretionary money management.) He eventually concluded he had to learn something about investing before he could make a good decision about hiring someone to do it for him.

For many people, the challenges of managing wealth are more daunting than the challenges of creating it. "What kind of help do I need?" and "Where do I find it?" may seem like simple questions, but when applied to personal finance they can quickly become complex.

Wealthy people represent a spectrum of attitudes on managing their money. At one extreme are those who think they can do it on their own, using a broker to execute their trades. At the other are those who want no part of the details and are eager to hand over the responsibility. Success and satisfaction are most commonly found in the middle by people who achieve a proper balance of control and delegation. They set goals and monitor results but leave the execution to a well-chosen group of advisers who make decisions on their behalf.

Finding a financial adviser is a bit like finding a mate; compatibility is important, and I always advise a prenuptial agreement. It means developing specific answers to questions of expectations, income and investment needs, adviser evaluation, and ways of communicating. If you don't like the person, you are less likely to listen to the strategy or advice.

Many institutional investors employ the services of a consultant in the search process, and a parallel trend is emerging among wealthy individuals. For an institution, the consultant provides a level of scrutiny and objectivity that helps fulfill the fiduciary responsibility. For an individual, the consultant helps minimize the confusion among so many available alternatives. Hiring a consultant does not relieve investors of their ultimate responsibilities; even when a consultant agrees to monitor advisers for a fee, the investor still must monitor the consultant.

Once the hard work of setting goals, selecting advisers, and allocating assets has been completed, the investor may be tempted to view it as a self-sustaining process. Failing to monitor managers on an ongoing basis may lead to some unpleasant surprises; on the other hand, well-informed investors often enjoy long-term rewarding relationships with their money managers.

Charlotte B. Beyer is founder and CEO of the Institute for Private Investors (www.memberlink.net), a membership organization based in New York City. The Wharton Private Wealth Management Program is held twice each year in collaboration with IPI.

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CHARLOTTE B. BEYER

Institute for Private Investors

Benefiting substantially from a blind trust

DIRECTORS OF publicly traded companies have significant responsibilities related to company shareholders. One is their responsibility to refrain from trading company stock based on material, non-public information. Even the perception that a director has traded on this basis can cause negative publicity and may result in shareholder lawsuits.

In order to avoid these problems, companies institute blackout periods during which officers and directors ("insiders") are restricted from trading company stock. This often results in challenges for insiders when they need to sell shares to meet liquidity needs or to properly diversify their investment portfolio. It is especially trying when company blackouts extend for a substantial time owing to earnings blackouts and additional blackouts for other reasons (e.g., mergers and acquisitions or knowledge of material information not yet disclosed to the public).

In an attempt to provide an affirmative defense against claims of insider trading, the SEC issued rule 10b5-1 on Oct. 23, 2000. The rule, which created the vehicle called 10b5-1 Plans or "blind trusts," allows insiders to establish stock trading plans that conform to certain...