As a probate attorney, I’ve seen court cases where people are treated differently because they’re perceived as being “wealthy”.
You would think that people (wealthy or not) would be treated equally, but that’s not the case, that’s just not the world we live in.
In my experience, court cases that involve wealthy people tend to drag on and on as all the lawyers rack up huge legal bills. I’m talking about millions of dollars eaten up in legal fees when it doesn’t have to be.
I’ve been people who have worked their entire life to build wealth become impoverished during their final years.
All because they didn’t put the proper structure in place for themselves — the structure that is created when you have a family office working for you and protecting your interests.
In today’s episode, I share a case study of Roy M. Speer co-founder of the Home Shopping Network. You’ll hear what happened to their money that caused his spouse, Lynnda Speer, to file a claim against the people who supposedly had their best interest at heart… and how much money she actually got out of it.
After Speer’s death in 2012, his wife Lynnda brought a claim against Morgan Stanley Smith Barney LLC, financial advisor Ami Forte, and branch manager Terry McCoy, alleging mismanagement of her husband’s estate and foundation funds.
She claimed that Morgan Stanley and Forte had engaged in excessive trading, unauthorized use of discretion and abused their fiduciary duty.
Lynnda Speer said in a statement that Morgan Stanley, Forte, and McCoy had…
“breached their fiduciary duties to Roy and his foundation and exploited him during a time of his continuing mental and physical decline.”
Depending on the stock market’s value, Speer’s accounts managed by Morgan Stanley and Forte ranged between $150 million-$200 million. It is worth noting that Forte and Speer had been in a relationship prior to his death.
Morgan Stanley put through around 12,000 unauthorized trades, generating approximately $40 million in commission for the firm. According to Lynnda’s lawyer:
“During the last several years of his life, Roy Speer suffered from significant diminished mental capacity, as well as from substantial physical infirmities, he was wheelchair bound and diapered, could not drive and was attended to daily by a full-time caregiver.”
The arbitration panel agreed with Lynnda’s claims and found that Morgan Stanley, Ami Forte and Terry McCoy were guilty of:
“unauthorized trading, churning, breach of fiduciary duty/constructive fraud, negligence, negligent supervision … and unjust enrichment.”
$34 million was awarded to the estate of Roy M. Speer by an arbitration panel in a case that lasted from January 2015 to February 2016, with over 140 hearing sessions and 35 witnesses.
The fact is that rich people are just as vulnerable to financial exploitation as anyone else. In fact, their immense wealth can make them even more susceptible.
How could this have been avoided?
First, Mr. Speer could have had a trust with the trustee being an independent trust company. Most trust companies would have the ability to supervise Mr. Speer’s financial affairs and investments. But there would need to be a separation between the oversight role and the investment role.
There are 2 problems with this approach:
Problem #1: Most trust companies will only take on a client if they are actually managing the money themselves (because they want to make the higher income that comes from managing the money). There are smaller fiduciary companies, but they don’t usually have the expertise to be able to detect investment or financial fraud.
Problem #2: Most trust companies are very limited in the types of assets they manage and the types of investments they offer.
The other solution would be to have a properly functioning family office, complete with a board of directors that included at least one disinterested, outside person with the expertise to be able to detect financial mismanagement.
You would set up the management of that family office to automatically take over when you and your spouse are no longer able to manage things.
Done properly, this would avoid your assets ever getting dragged through court when you become incapacitated.
Why didn’t Mr. Speer have a family office? I suspect because he wanted to completely delegate the management of his money. And most people – even wealthy people – don’t know what a family office is.
But you’re in luck because I will be telling you more about family offices over the coming episodes.