In April 2021, Forbes reported that billionaires’ wealth increased by 35% (or $1.2 trillion) since January 1st, 2020. Now compare that with the significant hardship and income loss that non-billionaire Americans have faced since the start of COVID-19. For example, in June 2021, Jeff Bezos blasted off into space with his own rocket, despite criticism about underpaying his own workers.
Chuck Collins’ The Wealth Hoarders explores how people like Bezos and his fellow billionaires are using wealth management (or what Collins calls the Wealth Defense Industry) to avoid paying their fair share of taxes. His work is a stunning indictment of the wealth management system including the wealth managers, lawyers, real estate sellers, and more who help the Ultra High Net Worth (UHNW), which Collins defines as having over $30M in financial wealth, protect their wealth from taxes and debtors.
Even more striking, Collins makes the case that the US, not Cook Island or the Bahamas, is the biggest tax haven in the world right now.
Who Should Read This Book?
Prospect researchers are always trying to understand how people think about wealth and how they hold it. As researchers, we probably have come across some of the tactics that Collins talks about, such as finding property held by LLCs or discovering businesses incorporated in Delaware.
This book helps us better understand how the UHNW manage their assets and house their wealth.
The book provides a useful breakdown of the different ways of holding and hiding wealth. We’ve heard about the Panama Papers and the more recent Pandora Papers that told us what we already knew – that what we can see from publicly available sources is only the tip of the iceberg.
But what I found most impressive was his discussion about family offices in chapter 4. The “All in the Family Office” chapter does a deep dive into family offices, which are a way for families with over $100M or $150M manage their wealth. It’s not something we stumble upon frequently in our work but obviously, it’s a major wealth indicator. Experts estimate there are between 7K-10K family offices around the world with a good chunk originating in Boston, MA. I also found it fascinating to learn that families with $25M may participate in multi-family offices!
What was most stark and useful for the prospect researcher is an exploration of the attitudes that the UHNW have about their wealth. At the beginning of the book, Collins explains that he comes from a privileged background as an heir to a Midwest meat packaging company. He talked about attending an event for people like him to better understand how to manage their wealth. When he poses the question about the discomfort of having all this wealth, he is quickly advised that it would be class suicide to touch the principal of his fortune. Giving away to charity from your income is fine, but it would be selfish to touch the principle, he’s advised by his friend Dee, a very wealthy woman with her own family office.
This friendship with Dee in particular is quite striking. Collins may be young and idealistic, but he’s uncomfortable with the status quo. Dee, on the other hand, is quite philanthropic and has done her bit to “give back,” but assured with her place in the world and the right of wealthy people to keep their money. Their arguments about wealth and keeping it provide a starting point for Collins’ entire book.
Where Does It Take You?
He divides the book into 12 sections – three preludes, an introduction, seven chapters, and an epilogue. The first prelude explores his “origin story” where he is at a weekend conference put on by a local foundation and family office to discuss wealth. He also explores his relationship with a woman who has her own family office who tries to convince him that touching his principle is a big mistake.
The second prelude explores the Blue Hippo Swindle where CEO Joseph Resnin swindled low-income people out of a lot of money, was successfully prosecuted, but not a dime was paid out to his victims or the government because of his success in hiding his assets. The third prelude is an example of how Isabel del Santo, a wealthy Angolan, managed to extract millions of dollars from her country and squirreled it away, thanks to the Wealth Defense Industry.
The first chapter explores the cost of wealth hoarding, including the threat to democracy, shifting tax burden onto everyone else, and more. The second chapter then looks at the people who make up the wealth management including insights from Brooke Harrington, author of Capital without Borders, and a former attorney in the industry who is working to challenge their practices.
Chapter three looks at the “tools of the trade,” talking about shell companies and trusts with special consideration of Delaware and South Dakota.
Chapter 4 looks at family offices as discussed above. In Chapter 5, titled “The Wealth Hiding in your Neighborhood,” he explores other vehicles for housing wealth – specifically art and property. I watched this play out in the recent documentary about the recent Leonardo Da Vinci painting “Salvator Mundi,” where the painting was stored in one of these storage facilities. Storing art in a Free Trade Zone allows the wealthy to store their wealth in different assets and avoid having to pay duty taxes.
He also does a deep dive into the buying of real estate as a place to store wealth, rather than wealth generating (like renting them out or flipping them). He even explores how this practice erodes communities and city centers, drives prices up, reduces available affordable real estate, and hollows out neighborhoods.
Chapter 6 looks at the justifications that people make about these practices. Collins focuses on the excuse that many people make that these practices are legal, but points out that these same people are influencing the laws. The second justification is that the wealth industry is merely giving customers what they want. Collins argues that there is an interest in doing what is best for society as a whole, and not just a tiny portion of the populace.
Chapter 7 concludes with recommendations of the policy changes that end these practices and increase transparency. The epilogue is an appeal to people not to work in wealth management.
Is It Worth the Purchase Price?
At $21.99, this book is worth the price. Even if you may disagree with many of Collins’ points about the sources and causes of wealth inequality — the book has a blurb from Senator Bernie Sanders — the book provides some valuable insights into how the wealthy keep and hold their wealth as well as their thoughts about it. For me, the chapters on family offices and different ways of keeping wealth were well worth the price all by themselves.
The book also helps prospect researchers understand a little bit more about what we are seeing when looking at sometimes confusing property records or company incorporation documents. Sometimes the information is missing…on purpose.
It also made me realize that people who work in wealth management are worth a second look at themselves when we do profiles for our organizations. While they may not command the same amounts of money as their clients, they work in a lucrative industry and may be open to philanthropic giving.
Ultimately, the book is a welcome successor to Brooke Harrington’s Capital without Borders and well worth a read by anyone thinking about wealth in the United States.
Additional Resources
Authored by Wealth-X, a provider of global wealth intelligence, this report relies on 2017 data to analyze the ultra high net worth (UHNW) population and its share of global wealth. The report comments on the development of the ultra-wealthy segment and examines political and market drivers, regional trends, and wealth distribution. It further illuminates asset holdings, sources of wealth, and philanthropic interests. Wealth-X defines UNHW individuals as those with a net worth of $30MM or more, who represent 1.1% of the total world population.
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