My Client Lost $145 Million in 5 years... Here's What Happened

Two brothers sat across from me after their mother passed away and they had $5 million left and they had no idea what to do with it. So as we talked though, the real number came out. 5 years earlier, that family had been worth $150 million. I mean, they literally lost $145 million in 5 years. I mean, think about the math behind that. $150 million at 5% would generate $7.5 million a year. That's over $600,000 a month without touching the principal. To lose what they lost. Something had to go catastrophically, systematically wrong. And it did. This is Building Your Money Machine, where we help you master your money, eliminate financial stress, and live a life by choice. And I'm your host, Mel Abraham. And after 30 years, I have never seen a story that teaches you more about what actually destroys wealth than this one. And today I'm going to walk you through the 4 mistakes that wiped out $145 million. And the 5 rules that turn the $5 million into multimillions. All right? The numbers are big, but the mistakes are not. And you're gonna recognize every single one of 'em. Let's do this. Having money and knowing how to steward the money are 2 completely different skills, okay? I'm gonna keep the details of the clients anonymous. Their story tell, not mine. But what happened to them is not unique to them. This family went from $150 million to $5 million in 5 years, not because of a market crash, not because of some catastrophic external event, but because of a set of entirely preventable, deeply human, incredibly common mistakes. So here's the setup. Dad passes away and the family's worth $150 million. Mom with the sons take over the portfolio of $150 million. 5 years later, Mom passes away too. And that's when the boys came to see me. They sat across from me and they said, "We don't know what we're doing, buddy. We're not even sure how to handle this." And I said, "Tell me more." And that's when they told me that they started out at $150 million and now they ended up at $5 million. And like I said, the math is crazy here that you have to try really hard to make that happen. You don't accidentally lose that. And so this is where I was aghast, but I was also sad for these two grown men sitting back saying, I don't know what to do. Well, the first thing that I realized is this, how does something like this happen? And the first thing to understand is there's an element that I call money maturity. This concept actually explains everything when you start to understand it. The concept is the entire story. In my book, I called it Skill Sets Before Assets. I had a chapter about it because we spent so much energy focused on accumulation, on earning more, on getting more, on building bigger, and, and, Very little time do we ever spend the time understanding how to develop the stewardship skills to match what we're accumulating. And without those skills, what we build and what we're given literally has an expiration date. So there are two sets of skills that they need to develop. One is how do we acquire it, accumulate and build it? But the other is how do we steward it? And money maturity isn't about how much you have, it's about how you engage and how engaged you are with what you have. It's the difference between sitting in the passenger seat and trusting whoever's driving or having your hands on the steering wheel. Not because you know every road, but because you're actually present. You're asking questions. You have a set of rules that protect you when your trust, when your generosity or your emotions seem to get ahead of your judgment. That's the game. I mean, think about this for a second. Most of us will spend more time researching a $600 TV than we spend understanding where our life savings is actually sitting. We read the reviews, we find the Reddit threads from 2019, the one guy who knows everything about OLED screens, and then we hand someone our retirement account and say, "Eh, you got it, right? Great." That right there, that's the gap. That's the money maturity in reverse. See, I said something like this to my own mother when she was still with us. All right, she would meet with her financial advisors, which happened to be the same as mine, and she would ask me, she goes, "Why do you need to meet with them?" She goes, "I have you." And I said to Mom, I looked at her and I remember her look on her face. I said, "Mom, don't trust me." She goes, "But you're my son." I said, "It doesn't matter who I am. All I'm asking you to do is to check the math. Here's what you started the quarter with. Here's what came in. Here's what went out. And here's where you ended up. Does it make sense? I'm not asking you to be an investment analyst. I am asking you to be engaged." in your financial journey. See, these brothers, they were never taught how to do that. They had the knowledge gap that kept them away from it. That was a gap that cost them $145 million. See, I found 4 specific mistakes that created this disaster. As I walk through each one, I want you to watch for the version of it that may be showing up in your financial life right now. I guarantee you at least one of these, maybe more, is there. Let's go through the autopsy of what's happened. Mistake number 1 is this: blind trust without engagement. This is huge. Let me ask you something. When was the last time you looked at your investment statements and actually understood what you were looking at? Not the total at the bottom of the page, but the actual breakdown. What's in there, why it's in there, and how the person managing is getting paid for putting it all there. See, these brothers, they had an advisory team. They trusted the advisory team completely. And because they trusted them completely, they never asked questions that would've changed everything. And see, when I dug into what this advisory team was actually doing, here's what I found. There are two standards in the financial advisory world. The fiduciary standard, which means the advisor's legally obligated to act in your best interest. And then there's the suitability standard, which means that the advisor has to recommend something that's suitable for you, not the best for you, just suitable. And there's plenty of things that are suitable, but they're not the best. And there is a very wide gap between those. And the advisory team was operating under the suitability standard. And what they recommended were high fee, high commission products. They were suitable for them, but they were even more suitable for their pocketbook. The investments where the compensation structure for the advisors was the primary motivation. It was still suitable for the client. But that's not the goal. The goal is optimizing for the client. Was it illegal? No. Was it technically unethical? Probably not. Was it appropriate to take advantage of a widow and her two boys who blindly trusted them? Absolutely not. Okay. The suitability standard is basically the financial equivalent of the parachute that technically opened. It just didn't open great. And technically opened is a lot harder to argue, with in court. That's the challenge. And let me tell you something else. We have to look at this through a different set of eyes. When I was first diagnosed with cancer, my doctor, he had me do a CT scan. 11 days went by. I heard nothing from him. And then I come in for my scheduled appointment about the CT scan, and he told me that he wanted to put me in for a scope just to verify because the CT scan happened to show a 5-centimeter tumor in my bladder. So I do a scope. Now, this was, mind you, this was a Thursday. I do the scope and he says, yep, it's there. So we need you in on Monday to take it out. And I looked at him, I said, all right. Now, mind you, he sat on this for 11 days. And I asked him, I said, is there anything I need to be worried about? And he waved it off. He says, no, this is routine, man. I, I, this is my bread and butter. He just like flippantly threw it out there. But it wasn't routine for me. This was my life. And I didn't know what I was up against. But my wife and I walked out in that parking lot and we sat in the car and we looked at each other and we both said at the same, same time, he's not touching me. Because this man had a CT scan on his desk showing a 5-centimeter tumor and waited 11 days to call me. And he was looking at this situation through his lens, not mine. And then all of a sudden it was urgent and I had to be in surgery on Monday. See, a professional who's not seeing the importance of your situation through your eyes is the wrong professional, whether that's a doctor or a financial advisor. See, we defer to professionals because they know more than we do. They went to the schools, they got the certifications, and there's a wisdom in that. I totally get that. But that deference cannot come at the cost of your engagement. Your existence is online, your legacy, your family, and you have every right to push back. And in fact, it's your responsibility to ask the questions, to demand transparency, to ask, how are you getting paid? Why are you recommending this? And why is this the best thing for me now? See, these brothers, unfortunately, and, and their mom didn't know to do that. They thought it was disrespectful. It was the opposite of disrespectful. It was exactly what those advisors owed them. Here's the relatable version for your situation right now. You have an advisor, a 401, an insurance policy, maybe some other financial product. If I asked you, how does this person that's managing it get paid? Would you be able to answer me? Would you be able to tell me? See, if the answer's no to that, that's blind trust. And blind trust at every wealth level is expensive. Okay? So mistake 1, blind trust. Mistake 2 is directly connected to it. And this This is what made mistake 1 so much more destructive. Mistake 2 was no rules, no protection. This is what— how I got caught also in the Ponzi scheme. I ignored my rules. See, but when there are no rules, whoever is in the room makes the rules. The brothers had no framework. The mom had no framework for what they would do, what they wouldn't do with the money, with what they're doing. They had no hierarchy. They had no decision criteria. They had no guardrails. And when you have no guardrails, You're essentially outsourcing every decision to whoever is in front of you. And this advisory team had open authority. They could make decisions and execute without running those decisions past the brothers first, past the mom first. See, the captain's chair was empty and someone will always fill a vacant captain's chair. But the person that should be sitting in it is you. Think about it this way. If I handed you $5 million right now and said, go do something smart with this. What's the first decision? What do you say yes to? What do you say no to? What criteria are you using to decide? See, most people don't have clear answers to those questions. And that absence of a decision framework is not a wealth problem. It's a planning problem and it's fixable. See, here's the thing. Money sitting in a savings account earning close to nothing because you haven't made a decision about where it should go I get it. But a retirement account set up years ago with allocations that nobody's touched since? Mm, that's a challenge too. But someone pitches you on something and you don't say no, not because you think it's a great idea, but because you don't have a rule that automatically says no for you. See, all of those can have an impact. Rules, they're not restrictive. They're protective. That's the reason we have them. The absence of the rules are exactly what makes every mistake that comes Next, really possible because there was no rules to follow. See, I've seen people with more structure around their Chipotle order than they have with their entire investing strategy. They know exactly what goes in, they know exactly what it costs, they know exactly where the guacamole is worth or not. But their 401, eh, it's vibes and hope. And for the record, vibes and hope, not an investment strategy. All right, here's the thing. When you start to understand what you own, Now things change, but there's— sometimes people get confused with it about what accounts they're in. So I put together a guide for you that's— it's called Your Investing Accounts Demystified. It's totally free. I want to give this to you so when you look at your stuff, it'll explain when to use the accounts, how to use the accounts, what the accounts are. It'll break it all down for you. No jargon, no complexity, just clarity. Go to melabraham.com/demystified so you can grab it for free. All right, 2 mistakes down, 2 more to go. Mistake number 3, relationships over rules. Oh my gosh, this is kind of crazy, but this is something that happened to me and it's happened a number of times. This is not the first time, but this is the one that nobody wants to talk about because money and relationships are wrapped up in feelings and they don't necessarily respond to logic. You have loyalty, you have love, and you have guilt. And you have history. And when someone you care about needs help, all those feelings arrive before the judgment does. And the brothers got hit from multiple directions. First, there was personal loans to friends and family members, some closer, some more distant. Some were hardship loans, some were business deals. So people knew they had the money, so they started reaching out. And by my recollection, because it's been a number of years now, the total amount of loans that they gave out was about $2.4 million. Those loans that were given out that never came back, nor did the relationships. See, here's what happens every time in these situations. The money leaves and the person leaves with it because the relationship was transactional at its core, not genuinely relational. It was built on what could be accessed, not on real connection. And the moment the access is gone, the person disappears with it. I know this personally. I had a close friend someone I genuinely cared about, and he needed help with his business. He was starting a new business, and I invested about $45,000. So it wasn't small numbers, it wasn't huge numbers, but I did it because of who he was to me, not because of what the deal looked like on paper. And then he ghosted me, not just on the money, but on the friendship. Completely disappeared. No call, no explanation, no communication, just gone. Now, the $45,000 I can handle. That's a number. The friendship is what actually hurt. See, that $45,000 lesson is huge, which at least compared to their $2.4 million, eh, I got a bargain. But the bottom line is this one really hit 'cause it hit in the heart and the pocketbook. That's the thing. Now, the second one though hit even more expensive. A friend introduced them to an investment opportunity. This is the boys and the mom. And it came through a relationship that they trusted and it looked good. Legitimate and it had all the trappings, and it turned out to be a Ponzi scheme that wiped up out $9.8 million. They recovered nothing. Here's the thing about deals that arrive through relationships: we drop our guard because of the relationship. We stop asking the questions that we normally ask. Remember, the rules are important. We skip the due diligence that we'd normally do. This is sounding familiar, like my Ponzi scheme that I got involved with, because doing due diligence on a friend's recommendation feels like you're saying you don't trust the friend. I mean, think about it. And we don't want that. I mean, my gosh. So that logic will cost you every time. The quality of those relationships has nothing to do with the quality of the investment. Keep the two separate. They're two separate evaluations, always, no exceptions. So here's the deal. When you start to understand someone in your world, a friend, a family member, a colleague, you start to make money, they come to you with a need or an opportunity. And the primary reason you were even considered was because of that relationship, because they see that you have the funding. And if it's ever happened to you, you've been in this mistake. And this is the thing that we need to be aware of. Now, go in eyes wide open. If you want to do it, just do it smart. But I'd still separate the relationship from the money in the process. Now, 3 down, 1 to go. And this last one is the simplest mistake on the list, which is usually exactly why It does the most damage. Mistake 4 is complexity as a con. This is crazy. If you cannot explain an investment, you probably shouldn't own it. Number 1 rule for everyone is you never, ever, ever invest in something you don't understand. And that's not an advanced investor principle. This is a basic rule that would've saved these brothers tens of millions of dollars. The advisory team was recommending complex, layered financial instruments that required extensive explanation to just justify them, let alone own, understand them, which they never did because they didn't take the time to walk through it with them. And the truth is this, I've learned this over 30 years of this work, that when something requires a ton of explanation just to justify it, there's usually a reason. See, the brothers didn't understand what they owned. They didn't know the fee structures, they didn't know the liquidity terms, they didn't know the risk exposure. They just knew the advisor said it was good. And when you're in that position, when you don't understand what you own and you're entirely dependent on someone else's integrity, you have way to check, no way to catch problems early, no way to protect yourself. The Ponzi scheme that wiped out $9.8 million was sophisticated on the surface. It looked legitimate. It had documentation, it had credibility, and at least the appearance of it. But underneath all that complexity, there was nothing. See, the complexity, it's not sophistication, it's the hiding place. It's where bad fees hide. It's where conflicts of interest hide, where the things they don't want you to notice hide. The best The best financial strategies in the world are almost always boring, simple, transparent, understandable. Simple doesn't make for an exciting pitch, but simple is what actually grows wealth over time. If your investing is an adrenaline rush, something's wrong. Something's wrong. Think about it this way. You have something in your financial life right now, an investment, a product, a policy that I bet you couldn't explain to your kid or your neighbor in plain English. That thing deserves a second look and maybe a third. That's the game. Now, after all that, $145 million lost, Ponzi scheme, broken relationships, advisors who've filled their own pockets, lies, deceit. What do you do? Well, 4 mistakes, 1 very expensive education. The good news is they paid the tuition so you don't have to. Here's what we built instead, and here's the recovery and what happened. See, I looked at these 2 grown men sitting across from me and I made them a commitment. I said, we're going to protect this $5 million. We're gonna build a real plan, and this time you're gonna understand everything we do. And we started with simple because simple was the exact opposite of everything that had gone wrong, and that made it the only place to start. So here are the 5 rules that we built together, and hear these not as rules for, for people with millions. I want you to hear them as principles for anyone who's serious about protecting and growing what they have. So the first is this. Rule number one is this: never invest in anything you don't understand. I've said that already. If you cannot explain it yourself, then it's not an investment for you. Someone else's explanation doesn't count. You have to comprehend it. You have to get it. Okay. Rule number two: complexity is not your friend. We built our entire investment base around low-cost index funds and ETFs. Diversification, liquidity, transparency, low fees. Nothing that needed a pitch deck to justify. It was easy. It was in. It was out and it's consistent. Rule 3, they followed a hierarchy. We use the wealth priority ladder that I wrote about in my book and I teach in my, in my programs to sequence every single decision. There is an order on how to put your capital, put your money to work. And when you follow the right order, you stop making reactive decisions based on whoever happens to be in the room. And rule 4, communication on your terms, decisions in your hands. So minimum quarterly reviews with the advisory team. Now, I was with them regularly, calls in between the reviews as needed. But here's the critical part. The advisor's job is to educate and inform. They present, they recommend, and then you decide. No one executes without your active knowledge or your approval. The captain's chair stays occupied by you and no one else. And then rule 5, no one touches your accounts but you. No advisor, no family member, no friend. No one has access to your accounts without you being directly involved in every single transaction, period. Those are the first set of rules that we gave them. And from there, here's the result. They started with $5 million. That $5 million is now right around $30 million. No complicated strategy, no high-risk bets, no one taking advantage, just a clear plan. A set of rules, two men that finally put their hands on the steering wheel. And here's what I need you to take from this, because it's really important to understand this. The numbers in this story, yeah, they're extraordinary, but the mistakes are not. They're ordinary, they're common, they're human. And versions of them happen every single day at every wealth level. Blind trust happens with the 401s. Missing rules happens with the savings accounts. Relationships over rules happens every time someone says yes to something because of who's asking instead of what it is. Complexity as a con happens every time a financial product comes to you that you don't fully understand. So money maturity, it's not about size of the account. It's about being the kind of person that can steward your financial life, the financial life you deserve, whether it's $5,000 or $5 million. That's the game. So here, when we start to look at this, two brothers sat across from me, $5 million with a weight of $145 million gone. What I saw in that room was not carelessness. What I saw were two people who had never been given the tools to protect what they were trusted with. And here's what I also saw: two men who were ready to learn, ready to sit in the captain's chair, ready to follow a set of rules even when those rules felt new and uncomfortable, ready to ask questions even when those questions felt intrusive. That willingness you can't inherit, you can't buy, nobody gives it to you. It has to come from inside you. It has to be the decision you make, not because someone forces you into it, but because you looked at your life and said, I am not leaving this to chance. The skill sets will come, the money will follow. It always does. And when stewardship finally catches up to the assets, wow, that's great. Because earning more doesn't make you free. A money machine does. All right. I hope that this gives you an idea I hope you start to look at the way you're doing things and really start to understand it. And if you haven't done something— done this already, do me a favor. Subscribe. Give me a thumbs up. Let me know. And if you know someone that's kind of navigating some of this, share this with them. All right. This would be amazing. If you have a question, if you have a comment, leave it below. I love having conversations with any of you until I get a chance to see you in the next one. As I always say, always, always strive to live a life that outlives you. See you in the next one. Cheers for now. And that's it for this episode of Building Your Money Machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. 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