Finances That C.E.O’s May Not Be Watching: Their Own

THE NEW YORK TIMES, THURSDAY, MARCH 24, 2011Finances That C.E.O’s May Not Be Watching: Their OwnBy PAUL SULLIVANREGINALD K. BRACK JR. graduated from Washingtonand Lee University in 1959 and headed west to St. Louis totake a job selling advertising for The Saturday Evening Post.Three years later, he was sitting on an airplane and struck upa conversation with a man who turned out to be the publisherof Time Magazine.”A lot of life is serendipity,” Mr. Brack said of that seatassignment.But then came the hard work. Mr. Brack was recruited tojoin Time a few months after that flight, and he stayed therefor the next 37 years. In 1986, he was named chief executiveof Time’s magazine division and chief executive of Time Inc.in 1990. He retired as chairman in 1997 and stayed on for twomore years as nonexecutive chairman.Mr. Brack’s rise through the corporate ranks was a classicself-made-man story – his father worked in the airlineindustry in Dallas – and it was also accompanied by greatwealth, in salary and stock. Yet even though his earningsincreased over the years, he said he paid little attention to it.Now in retirement, he is faced with some choices. As a member of Tiger 21, an elite investment club, he has atleast its minimum of $10 million – the net worth that currentlymakes a married couple subject to the federal estate tax – buthe does not want to say how much he has beyond that amount.”I don’t have near the wealth people think I do,” he said.”I’m certainly not poor, but I don’t count myself as a great,wealthy American.”Mr. Brack would rather talk about his working years thanmoney any day. He was the first person to run the companywho had not gone to an Ivy League college and also the firstchief executive who started his career in sales, not journalismor finance. He also appointed the first female publisher at anyTime magazine.But now that Mr. Brack, 73, is working less, he has time tothink about his wealth. He sits on several boards, including thatof Fieldpoint Private Bank and Trust, which he helped found,in Greenwich, Conn., where he lives. But he is less busy thanhe was in his days at Time. Financially, he thinks about hiscash-flow needs, his charity and his family; he is married withthree grown children. elf-made executives often delay wealth planning, saidSharon H. Jacquet, managing director in J. P. Morgan PrivateBank, who runs a team that works with senior executives ofpublic and private companies.”Not thinking about finances until retirement is notuncommon,” she said. “Really successful C.E.O.’s put thepriority on doing their job as a C.E.O. They have a comfortablelifestyle and adequate financial resources, and they don’t focuson it.”In his professional life, Mr. Brack said he concentrated onwork during the week and his family the rest of the time. Thishelped him be successful, but it also left him in his 70s with aseemingly diffuse financial plan.Early on, he started with an adviser in Allentown, Pa., whopersuaded him to sell some of his high concentration of TimeWarner stock ahead of his retirement. This diversificationhelped Mr. Brack, and he remains loyal to his adviser.Mr. Brack chose the Royal Bank of Canada to create hismunicipal bond portfolio after a search many years ago todetermine which firm had the top muni management team. Hecredits that part of his portfolio with helping him sleep duringthe financial crisis. “I was frightened, but I was comforted bythat muni bond portfolio,” he said.His third adviser, after the team at the Royal Bank, works forFieldpoint Private Bank and Trust and counsels him on estateissues, equities and new managers.While three advisers may seem like too many cooks in thekitchen, Ms. Jacquet said it could work if one of them had theentire financial and legal picture, even if someone else wasmanaging the assets. Mr. Brack said Fieldpoint has the fullpicture of his finances.Estate planning is crucial for Mr. Brack and his wife. Whenthey die, there will almost certainly be money left over. Butthey do not have so much that he feels comfortable takingadvantage of the generous gift tax exemption of $5 million perperson that is in effect for the next two years. (This is separatefrom the annual gift exclusion of $13,000.) “That would be aserious diminution to our lifestyle,” he said.The first time he tried to talk to his three children about theirestate it was awkward. “The boys were very interested andasked a lot of questions,” he said. “Our daughter put it back inthe envelope and said this is not going to happen.”Two years ago, he convened everyone again for a more formaldiscussion that was moderated by his adviser at Fieldpoint. “All the people who worked with us and our outside attorneywere there,” he said. “Our children had questions that werereally great.”That said, he limited the meeting to his children, leaving outhis daughter-in-law. Ms. Jacquet said this was not uncommonand was not, ultimately, harmful from a planning perspective.”The real issue is they should know what the plans providefor,” she said. “What happens in the event that he is hit by a bus?In some families there is one individual who is responsible, soit doesn’t need to be that everyone knows everything.”One of the things he and his wife have done to keep theirfamily close is set up a foundation to give to charities they likebut also to help their children and grandchildren talk openlyabout the purpose of their wealth. Family members makepitches for particular charities and they all vote on which onesto support.”Our focus is small things where a little bit of moneymatters,” he said, adding the gifts are under $10,000 and moreoften around $3,000. “We give five or six grants per year withone or two repeats.”One constant is animal welfare and a charity called AnimalAid Unlimited, which is based in Seattle and runs an animalhospital and shelter in Udaipur, India.He has also set up a charitable remainder trust and put hisremaining Time Warner stock in it. The trust essentially payshim a 5 percent annuity on the amount, and when he and hiswife die the money will go to the family foundation.”I would suggest that since he has a little more time that hemight consider sitting down with the family and framing howthey could make their giving more impactful,” Ms. Jacquetsaid. “If animal welfare is important to them, do they want tohave some permanent funding for rescuing animals that areat risk? Is there something they could really do that would betheir family legacy?”Mr. Brack said a mission statement was something his familytalked about often. They have an out-of-date one. “Whensomething comes up like Haiti or Japan, we say we want tohelp out, too,” he said.Still, Mr. Brack is better off than many retired executives. Hehas avoided the major pitfall (after divorce) that befalls manysuccessful executives – not understanding the need for liquidassets and the cash flow necessary to maintain their lifestyles.”My motto is kids first, charity second,” he said. “Our goal isto continue to be able to do the things that are important to us.”