Welcome to Nordhavn.com - Power Thats Oceans Apart
February 2, 2012
Financial considerations when
the Nordhavn lifestyle
By Jeff Merrill
The purchase of a Nordhavn trawler takes careful thought and
planning. Defining your cruising goals and timing your life phase to determine
when you can take off are primary concerns. Getting into a financial position
to make your move typically requires years of planning. You probably wouldn’t
buy a house without a realtor and you most likely won’t enter into a contract
to purchase a trawler without the guidance of an experienced yacht broker.
Similarly, as you prepare to purchase your own boat you need to have your
financial house in order and an organized plan with the help of a trusted
wealth manager should also be part of your overall strategy to fit the cruising
lifestyle into your life game plan.
I get to meet a lot of interesting people as a Nordhavn
broker and I’ve learned a lot from others who have different professions and
skills. One future Nordhavn buyer is Todd Yannuzzi who is an Executive
Director with Morgan Stanley Smith Barney in New York. Todd and I have had
several discussions about how people can benefit from the knowledge a qualified
wealth advisor can share and I felt his insights would provide an informative
review for readers of this website. What follows is the summary of an interview
I did with Todd that we both hope you will find informative.
Jeff: Many people
who come to me have long been planning for the day when they can finally buy
their Nordhavn and cast off on life’s next adventure. With a particular boat
selected, invariably the conversation progresses to the dual financial aspects
of ownership: Expense Outlay and Meeting the Expense. What are the key points
that a Nordhavn buyer should be thinking about?
Todd: From my
perspective there are numerous approaches and considerations that each
potential buyer must address, but if I can distill them into a brief summary
covering costs to buy a Nordhavn and then describe some means to provide cash
flow to cover cruising expenses I would break it down like this:
These are the costs of buying, equipping, decorating, owning
and operating an ocean crossing capable vessel. What does it cost for docking,
insurance, maintenance, fuel, potential crew, depreciation, etc? The answers
to those questions are as varied as the people who ask them and, of course, how
they use their boats. There are many articles and blogs that quantify these
variables. You can also gain valuable insight from your Nordhavn sales contact.
Jeff: Let’s say
we have established a budget that will allow for the initial purchase and a
second budget to provide for all of the intended operating
costs expected for a couple years of cruising. How should a Nordhavn owner
implement a financial strategy?
Todd: This is a
great question which brings up some important topics. Firstly, it’s an immense
accomplishment to be able to reach the realization of a dream – no one I
know has ever regretted following through with a passion, while too many people
who get caught up in the day to day rat race end up delaying their goals! Any
lifestyle evolution requires a thorough portfolio review with a financial
planner. For over 20 years I’ve been working in high net worth wealth
management and I can’t underscore the importance of teaming with an appropriate
dedicated professional to provide sound financial advice - expert opinion is
crucial no matter what life-changing decision you are making. Given the goal of
organizing an investment portfolio prior to a yacht purchase, there are several
particular topics I would advise your clients to address:
Meeting the Expense:
Efficient Debt Structure
Will you be borrowing at all to purchase the boat? If so, are you getting the
lowest borrowing rate possible? For example, a boat loan may be at a higher
rate than tapping a home equity loan or securities based lending? Your clients
need to realize that a 2.5% portfolio loan vs. a 5.5% boat loan would save
$30,000 a year in interest per million dollars borrowed.
Diversified, Income Producing Portfolios
Are portfolios stable, diversified and generating income that is both significant
and predictable? Nothing beats steady income in addressing regular expenses.
In today’s markets with fixed income yields at or near historic lows, people
are increasingly looking at high dividend blue chip companies paying 3-4% even
5%, with appreciation potential. Some clients also complement traditional
bonds with life income annuities to enhance cash flow. Bottom line, even with
interest rates generally low, there are a number of ways to create desired
income levels that will support the cruising lifestyle while also preserving
wealth at home while they are at sea.
If the client were to have a meaningful foreign currency exposure –
perhaps they were planning to live and cruise in Australia for a year –
we would quantify the amount of Australian dollars they expect to need over
that period. Then to address that need we could buy local currency (Australian
Dollar) fixed income. In many Foreign Countries, Australia included, this
could actually increase portfolio return since highly rated bonds pay
significantly higher yields there - ranging from 6% to as much as 8%.
Converting from US dollars to Aussie bonds could allow you to both cover your
currency need and earn a high yield at the same time – a win, win
Any time primary residence changes, you need to fully vet potential tax
ramifications. For example, if the client is moving from a high Income Tax
State to a lower (or no) Income Tax State, then the relative value of owning
tax free municipal bonds needs to be reviewed.
If your lifestyle poses communication challenges you definitely need a
Financial Advisor and Firm that is flexible in contact methods. Do they have:
a global 800 number? State of the art on-line access? An ability to exercise
discretion? Global debit card and wire capability? Foreign exchange services?
Local offices throughout the world? Is your coverage Team responsive to
e-mail? Thankfully, with technology what it is today, several big firms can competently
address these needs.
Trust and Experience
This last point is the most important. The more reliant one is, the more
important the relationship with a trusted advisor becomes. Family dynasties
are often built through hard work, concentration of risk and superior returns.
The next phase of living off wealth and growing it for the next generation is
typically achieved through diversification, hedging and consistent returns.
Navigating this progression takes great care and attention. My job is to be
that trusted financial advisor and impart all my company’s experience,
stewardship and resources toward those goals.
One last thought – before you cast off , ensure that
your portfolios are in a “safe harbor,” ready to weather any storm and that you
have the right captain and crew at the helm of your investments!
My sincere thanks to Todd for synopsizing a crucial part of
the boat buying process. His comments are just scratching the surface, but they
provide a great overview of important financial considerations every future
Nordhavn owner should review.
If you would like to contact Todd directly he can be reached
by phone at (212) 296-1051 or email Todd.Yannuzzi@mssb.com.
He would be happy to discuss your financial planning so that you can not only
prepare to buy your Nordhavn, but enjoy it with confidence in knowing your
portfolios are working while you are out playing – especially if you
invite him on board for a visit!
does not have a business relationship with Todd Yannuzzi (but we’re hoping he
does get his own Nordhavn someday soon!) or with Morgan Stanley Smith Barney.
I’m sure the usual fine print disclosures that this interview is not a
solicitation to purchase or sell investments and that there is always a
potential to lose money when you invest apply, but I hope this brings to your
attention some very important considerations and thank Todd for sharing his