HOUSTON – 21 Aug, 2017 – The rapid depletion and dropping prices of oil in South Texas’ Eagle Ford shale formation oil patch, reinforce the wisdom of considering a sudden windfall as manna, rather than as a dependable future income stream.
“This experience has been a life-changing event for many property owners who went from living in a small, South Texas sleepy town to a sudden boomtown and back,” says Gil Baumgarten, president of Houston-based Segment Wealth Management and whose family is originally from the area. “Since the beginning of the boom, I’ve seen land-rich families who were scratching out a good living with hard work, suddenly, and for the first time, receive the kind of money in royalty checks that should last for generations.”
The problem for families who suddenly find themselves with a large fortune is knowing whom to trust when planning for financial unknowns, like the semi-bust of the Eagle Ford. And, as expected, the Wall Street salespeople who entered the scene and sold many annuities when all this started, have found new and better sites, adds Baumgarten.
“A financial advisor who is a fiduciary – a person or organization that owes to another the duties of good faith and trust – is normally a better source of investment information than the sales force,” says Baumgarten. “Fiduciaries are bound legally and ethically to a higher level of responsibility and to always look out for their client’s best interest.”
Baumgarten gives a few warnings when considering financial investments:
- Beware of storytelling where only positive attributes are illustrated. Everything has a downside. Those representatives who don’t really disclose the negatives aren’t really telling the truth, even when everything they say is factual. It’s what they leave out that’s important.
- Beware of get-rich-quick-schemes and brother-in-law deals. The struggling brother-in-law is likely not struggling for lack of good opportunity. Behavior and choices dictate outcomes. Helping him with his get-rich-quick scheme in which he owns all the upside if it works, and you own the downside if it does not, is generally a terrible idea, and it makes Thanksgiving terribly awkward.
- Beware of concepts involving trading or speculating. This could be day trading, commodity trading, hedge funds, or betting on the newest biotech drug that purportedly does wonders. The music may stop with you.
- Beware of pitches for high-commission products. This is often a seemingly “no-lose” annuity pitch or life insurance, or indexed annuity concept. These are typically high-commission products which normally pay the representative generously up front. These get even more expensive when you try to unwind them, often triggering taxes and/or large penalties. The tax deferral offered is rarely as magical as it originally sounded. Additionally, loans on insurance cash value can be made to seem miraculous, but may create a hellish scenario when one lives longer than expected.
“The reality is that for investors with large portfolios, there are few investments worse than an annuity,” says Baumgarten. “Estate taxes on annuities can be particularly awful when couples have more than $11 million in joint assets. However, each investor’s situation is different and this overview may not apply to everyone. Seek wise counsel.”
Segment Wealth Management is Houston’s seventh largest wealth manager with more than $1 million investment minimum according to the February 2017 Houston Business Journal. Gil Baumgarten has been named by Barron’s magazine as one of the 50 best advisors in Texas and most recently as one of America’s top 1200 Financial Advisors, while the Financial Times has named him one of the 300 best advisors in America. Segment is located at 3040 Post Oak Blvd., Ste. 1725. For more information, please call 713.800.7150.
Company Name: Segment Wealth Management
Contact Person: Jana Stafford
Country: United States