The Ultimate Liquid Investment or just an Extravagant Lifestyle Expense
For those seeking to elevate their wealth to the next level and enjoy greater prosperity, it's only reasonable to occasionally question the economics of conventional yacht ownership: the cost of buying a yacht and the expense of the yachting lifestyle.
Does anyone really “need” a yacht?
Can I cut my costs of yacht ownership?
Is there a way to reduce yacht expenses?
Is buying a yacht ever a good investment?
Can owning a yacht ever make economic sense?
Is owning a yacht ever a prudent use of resources?
Will owning a yacht ultimately make me more prosperous?
Are there alternative economic strategies that make yacht ownership profitable?
For many, after a thorough and comprehensive cost / benefit and risk / reward analysis, the surprising conclusion often seems to be a resounding and unequivocal YES!
Clearly boating, and specifically yacht ownership is not for everyone. But for those with the calling; the interest, the passion and the financial resources, owning a yacht – if properly structured and managed – can be one of the most rewarding of all investments in both the short and long term.
The bad news.
Very few yachting investments are properly structured and managed – largely because otherwise trusted advisors; yacht brokers, CPAs, attorneys, wealth managers, etc. don't consider yacht ownership as an "investment" but an extravagant lifestyle expense, they have little if any experience in profitable yacht ownership, and in fact may even be professionally prohibited from any such discussions.
As a consequence yacht owners are subject to unnecessary risk resulting in needless economic loss.
Many yacht owners and those that would invest in yachts otherwise are unfortunately denied the rewards of the yachting lifestyle often by well meaning – if not misinformed advisors and other “experts”. Thus not only are many high net worth individuals “missing the boat” to greater prosperity - literally and figuratively, but so are their loved ones, and society as a whole is less prosperous than it should be.
Why? How can this be, with all the financial resources and business acumen of yacht owners?
The conventional wisdom of most “advisors” - tax, legal, financial as well as traditional “wealth managers” (and even many yacht owners) is that the purchase of a yacht is not really an investment at all - but rather a luxurious extravagance – a lavish “lifestyle expenditure”.
Invest: to put, employ, or devote resources or assets (money, property, time, talent, etc.) usually by purchase, contribution, or other types of commitment or expenditures, into something or someone for a period of time with the expectation of producing, accumulating or achieving something of greater value in the future such as potential profitable returns, interest, dividends, rents, and other forms of income, as well as other means of appreciation in asset value.
Offering a yacht for charter hoping to mitigate some expenses is not an investment strategy or a business with a profit motive. Yet that is all most have to offer.
Thus most advisors offer little assistance or encouragement. Many actively attempt to dissuade their clients from any consideration of such and are quick to point out that yachts are depreciating assets and often quite expensive to maintain.
It is true that yachts depreciate. But that’s not the whole truth for everyone.
Or it doesn’t have to be any more. Upon closer analysis, such conventional thinking seems to be short sighted; an impediment to maximum prosperity, and frankly, too often a convenient excuse for those that simply don’t know how, or for some other reason can’t, harvest sufficient value from yacht purchases or related yachting investments.
Real estate rental properties – houses, condos, office buildings, etc. are also depreciating assets but if managed properly can be very profitable. Oil and gas wells are depreciating / depleting assets and yet, if purchased and operated properly can also be very lucrative.
The value of real estate and oil and gas investments can vary substantially depending on how they are structured and managed. Some are profitable – some are not. Successful investors often rely on skillful professionals able to extract maximum value from assets that far exceed the depreciation / depletion - making for a profitable investment.
Thus, when considering investments in the yachting lifestyle, or investments in alternative assets of any kind, it’s wise to retain advisors with expertise in that specific asset class.
Even better if their long term economic interests are tied to yours.
Advisors that don't just "sell" advice or an alternative asset and take a commission up front leaving you with the consequences - like any broker, but whose financial interests depend on your long term success.
Frankly, most traditional advisors and wealth managers have little – if any - experience with profitable yacht ownership. Few know how to make yacht ownership profitable or have any incentive to learn. In fact many advisors see it as a threat and most are actually prohibited from even expressing an opinion on any alternative investment – especially yachts.
Best practices prohibits most financial advisors from even expressing opinions on “investments” not offered, approved, or sanctioned by their company. As a general rule, financial advisors are not allowed to suggest or even opine on investments not offered through their company.
The public line is this practice “protects” the public from rogue advisors and investments that have not been properly vetted and approved by the company.
The more skeptical recognize that it can be self-serving and to the detriment of the client since it also prevents current and future assets under company management from which the company derives its fees from being diverted to other assets where the advisory company will not be compensated.
A financial advisor that suggested or even agreed with a client to convert current or future assets under management- where the company is compensated into an investment such as a yacht purchase where the company is not compensated- would probably not be employed by that company for long – no matter how good the yacht investment was for the client.
Likewise attorneys are trained legal advisors and CPAs tax advisors. Disciplines that demand their full attention to remain competent leave little time to develop other business or investment acumen. Thus very few are qualified to express opinions on such business and investment matters involving yachts.
Most professional malpractice insurance policies expressly prohibit or limit the providing of business advice or advice on alternative investments – and certainly in areas of no demonstrated expertise.
Accordingly, it is highly unlikely a wise CPA or attorney would ever advise a client to buy a yacht or express any opinion on such a marine investment – no matter how good it would be for the client. Absent any expertise in profitable yachting investments, the legitimate concern that the client might in the future become dissatisfied with the yachting “investment advice” and file a malpractice claim against the CPA or attorney is simply too great.
For most traditional advisors, helping a client to invest in a yacht would conflict with their own personal interests. The only advice they can safely provide for any yacht investment is to advise against it since the litigation risk for them is much less than for negative advice.
Consequently many advisors offer little encouragement or guidance for those considering a yacht purchase of any kind, even though for the right individual, under the right circumstances, it can be a very rewarding, and even prudent investment.
This pretty much leaves prospective yacht investors on their own – or at the mercy of those in the business of selling yachts whose long term interests may not always be aligned with the yacht purchaser.
How do you know if a yacht investment might be right for you? If so, which yacht investment? How much should you invest?
Unfortunately, those interested in exploring the opportunities of yachting investments, are for the most part on their own until they can retain the appropriate specialized asset advisor to assist them.
Until then, the burden largely rests with each individual to determine the optimal strategies and asset allocation to yacht investments necessary to maximize both their short term wealth and long term prosperity.
That if your current advisors knew, surely they'd have told you already- wouldn't they?