Speaking as someone who has worked in this industry, you appear somewhat misinformed about how high net worth individual (HNWI) typically invest. Large multi-family office firms pool investments from multiple wealthy individuals (usually investable assets of at least $5M or more) and can access private equity, real-estate deals, commercial mortgages and more. These firms manage multiple billions of dollars, which doesn't make them huge by any measurement, but they are more than large enough to access investment opportunities like these as well as create sufficient liquidity for their clients.

Wealthy individuals have access to investment strategies that resemble far more the philosophy of large pension funds than that of robo-advisors. (You can also check out Tiger 21, a sort of investment club for Wealthy people, they post their recommended asset allocations on a regular basis.) They also tend to be more focused on capital preservation and minimizing volatility than strictly beating the market. Their portfolios are typically highly diversified outside of publicly traded assets to accomplish that.

Finally, the firms that work with them offer significantly more for their money. Detailed estate planning and legacy planning, tax planning, corporate tax planning, and advice on charitable foundations and more.

While I do agree with some of what you are saying about how "advice" is priced, particularly when it comes to the mass market, there is definitely a point in the wealth of an individual where there couldn't be more points of difference between what people get in terms of financial advice.

Source: I've worked at a wealth management firm that dealt with HNWI for quite some time.

Edit: Just to add a bit on the different this makes for HNWIs

At the firm I worked at their client's biggest losses throughout 2008 were no more than 6-7% (after fees were considered), while at the same time being invested in assets that yielded nearly that much in cash flow through dividends, interest, etc. that same year. Since a portion of the portfolio was also invested in public equities (around 30%) and because these client's could easily stomach the markets considering their personal performance they were able to ride it back up without fleeing to cash like so many others did.

One of the problem smaller investors face is that in major market crisis situations almost all publicly traded assets take a hit as the mass market migrates to cash. If you follow the herd (as most obviously do or they wouldn't be the herd) you regularly miss out on the benefits of these market movements.

> Wealthy individuals have access to investment strategies resemble far more the philosophy of large pension funds than robo-advisors.

I know these are naive questions, but here goes: do those pension funds differ greatly from large university endowments? How do those differ from what one can achieve using a combination of cheap index funds? Ramit Sethi famously recommended an allocation based on David Swensen's experience managing the Yale endowment. You can find index funds to match that reasonably well. How different will that be from what Yale or a pension fund actually does?

They have similar goals, capital preservation, consistent cash-flow so they don't deplete the principal. I'm in Canada so examples we often cite are the Canadian Pension Plan (CPP), Ontario Teacher Pension Plan (OTPP) and the Ontario Municipal Employees Retirement System (OMERS). All of these do a lot of private equity investing and OMERS in particular has invested in a number of Canadian tech companies and IPOs, incuding recently Shopify and Hootsuite. All of them have had quite impressive and consistent results as well.

The problem with using public index funds to mimic these managers asset allocations is the higher volatility of publicly traded assets. For example in 2008 widespread panic caused people to sell their mutual funds and flee to cash which widely hold a variety of assets, so all of them suffered. This included publicly traded Real Estate Investment Trusts (REITs). At one point they were selling for 80% of their on paper asset value, which was entirely irrational. Many money managers that typically invested privately in commercial real estate because of that volatility took that opportunity to buy public REITs at a discount.

That being said, you can definitely do a decent job of adding asset class diversification with modern ETFs (and the market for these keeps growing). There are now infrastructure ETFs, REITs (Vanguard's REIT is really well priced), covered call ETFs, etc. Just don't expect to get exactly the same results of these managers and expect to have to handle larger volatility.

That being said, if you can weather these market movements, and you are saving regularly, volatility can be a good thing, if you can take advantage of lower asset prices with ongoing contribution then that is great.

Taking advantage of big market crashes is difficult when your whole portfolio tanks. I've been wondering about keeping ~10% of my funds in reserver in safe cash-like assets in order to be able to move in when the whole market tanks.

That still counts as timing the market and is Known to be ineffective. What if the market doesn't tank and you sit in cash for a long time? If it does tank, how will you know when is the true bottom for you to invest your last 10% in? Etc.

Generally speaking, when stocks fall bond prices rise. In this regime. So if you have a mixed portfolio of assets and bonds, in your scenario you can sell treasury bonds for a profit, and use the proceeds to buy up stocks. If you automate this transaction when your portfolio deviates from a target mix, you will automate a 'sell high, buy low' strategy.

Thanks for the details!

30% of the overall portfolio was invested in equities in 2008, and losses were no more than 7% including fees when the market (S&P 500) lost 50% of its overall value? That's some extremely impressive diversification, especially considering how many asset classes in the world lost value in the 2007-2008 due to their correlation with the real estate/equity markets.

Or just buy into the investment companies that invest in that area. The Rothschild have a publicly traded mutual that anyone can invest in.

And you can get aces to property by inversing in REIT's