Downton Abbey $ Lessons
Tuesday, February 5, 2013 • 6:58am
Like millions of Americans, I’m hooked on Downton Abbey...both for sheer entertainment value and also for financial crises.
If you’ve somehow missed this sensational TV phenomenon, Downton Abbey chronicles the wealthy Crawley family and their estate in 1910-1920s England. Lord and Lady Grantham head up the large, affluent Crawley household teeming with family and servants. There is plenty of room for intrigue and social mobility (sometimes up, sometimes down). However, the driver for much of the plot is money.
The story opens with news about the Titanic sinking in 1912. We’re introduced to Lord and Lady Grantham, who married some 25 years earlier. Lord Grantham, now in his 40s, married for money: an affluent American who shores up the estate with an infusin of funds. This phenomenon of British upper-class men marrying affluent American wives appealed both side sof the Atlantic: she got a title and he got money.
Against this backdrop, Downton Abbey plots involve twists and turns around money: who has it, who doesn’t, how to manage it, who inherit it, who may lose it. Being British, the Crawleys often turn their noses up at Americans for being so unrefined and frank about money –but the Crawleys are just as driven and obsessed by money and inheritance. The difference is just the British way they express it.
What are some obvious money messages in Downtown Abbey? Here are at least 2 issues that threaten to upend the Crawley family: 1) potential financial ruin from investments gone bad and 2) possible mismanagement of the “business” of managing a large estate.
Investments Behaving Badly:
From the very first episode we understand the glory (and expense) of Downton Abbey draws on the ample funds Lady Grantham brought to the marriage. She is now in her 40s and their have 3 grown daughters. England still retains the same inheritance traditions so evident in Pride and Prejudice, for example. A daughter cannot inherit in her own right – her family’s estate (home, property) passes to the closest living heir if there are no sons. Affluent Americans, on the other hand, often divided property amongst both sons and daughters ; Lady Grantham brought a large fortune with her when she married Lord Grantham.
But all is not as it seems. We’re not even up to the stock market crash of 1929 when Lord Grantham is summoned to London to hear his investment advisor tell him that most of his fortune has been lost. The reason: too much money sunk into a Canadian railroad scheme that went bankrupt. .Lord Grantham is stunned and demands to know how a solid, promising investment (trans-Canadian railroads) could fail since “everyone” knew this was a “surefire” investment. His advisor quietly tells him the Canadian firm management was incapable and most of Lady Grantham’s fortune was concentrated in this one holding. Lord Grantham becomes agitated – flushed with panic, he asks his advisor why so much was put into one single investment? The advisor soberly reminds Lord Grantham that he was the one who cajoled his advisors to concentrate their wealth largely in a single investment.
Once the news breaks out, this becomes a hushed subject of discussion by Crawley family – and some of the servants begin to get wind of the fact of problems.
Lord Grantham’s concentrated portfolio was not diversified…a recurring problem with many investments. He risked his entire fortune on a “sure bet.” We’ve seen it all before: the Dutch tulip craze, the South Sea bubble, Enron, the dot.com crash…
The investment world calls “diversification” the only “free lunch” accessible to all investors. Returns are smoothed and volatility (risk) declines when a portfolio is diversified. Everyone is different in terms of the right mix of income-generating and growth investments. Even if it’s a little harder to diversify than it used to be (increasing correlation amongst assets), the benefits of diversification pay off over time.
The business of managing a large estate:
The Crawleys are reeling from the Canadian railroad bankruptcy, but this family and the marvelous Downton Abbey estate miraculously may be rescued by an inexpected inheritance from the new son-in-law, Matthew Crawley. He “invests” his unexpected inheritance in Downton Abbey and reluctantly begins to review the estate accounting records, at Lord Grantham’s request.
Downton Abbey is a vast estate with parcels of land and buildings it rents to farmers. Matthew quickly realizes the estate has been poorly managed and broaches the subject with Lord Grantham. The stage is now set for a possible confrontation about money and management between the older generation (Lord Grantham) and the new, hot-blooded heir apparent. Will old-fashioned management of the estate be trounced by a new generation of “modern” estate management? We don’t know how this will end –but I suspect all of this will pale in comparison with the looming 1929 Crash. Stay tuned!
Eve Kaplan is a Fee-Only (no products sold) Certified Financial Planner® Practitioner with 29+ years of investment/planning experience. Eve is proud to be a Fee-Only planner because she upholds the highest Fiduciary standards in the planning industry. Eve opened Kaplan Financial Advisors in Berkeley Heights in 2004. Prior to that, she spent 20 years working as an equities analyst and fund manager in NY, Tokyo, Singapore and Rotterdam. Kaplan Financial Advisors provides comprehensive planning/investment management services to high net worth individuals. Her firm also provides high-quality, low-cost 401(k) and 403(b) plans. Eve can be reached at 908-898-0549 or Eve@KaplanFinancialAdvisors.com. Visit her website at www.KaplanFinancialAdvisors.com
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