Former Uber CEO Travis Kalanick is 'cash rich' with $1.4 billion, and he'll need a team of advisers to protect it
- Former Uber CEO Travis Kalanick recently received a payout of $1.4 billion, making him cash rich.
- Kalanick has said he plans to set up a charitable foundation, but it's unclear what his philanthropic focus will be.
- Protecting and maximizing that much cash is complicated, requiring a team of financial advisers, attorneys, and accountants.
Earlier this year, former Uber CEO Travis Kalanick became an actual billionaire - with a check worth $1.4 billion to prove it.
While the definition of what it takes to be rich varies in the US, there's no denying Kalanick has officially joined the ranks of the richest people in the world. With the massive payout in hand, Kalanick now faces a new task: how to protect and maximize his newfound wealth.
It's not as simple as putting the money into a bank account. Financial planner Eric Roberge says there is such a thing as having "too much cash."
"While I don't expect the US to go economically belly up anytime soon, the fact is that FDIC insurance only guarantees that sums up to $250,000 are protected. Anything over that, and you could lose your money if something happens to your bank," Roberge said.
That means Kalanick needs a plan for his money sooner rather than later. Business Insider's Julie Bort reported that Kalanick plans on setting up a charitable foundation, though it's unclear what philanthropic causes he will focus on.
But first, Kalanick needs to hire a handful of advisers, preferably a "team of professionals which would at a minimum include an estate planning attorney, certified public accountant, and insurance professional," financial planner Aaron Hattenbach - who founded Rapport Financial - told Business Insider. That's in addition to a financial planner or investment adviser who would serve as his "quarterback," helping to coordinate across all of the advisers.
Once a team of professionals is in place, Hattenbach expects they "would have a conversation about the client's estate, desires, and goals." Together, they would work through separate complexities for the client, including "asset protection, insurance, charitable giving, wealth transfer, taxes, and investments," he said.
It's normal for today's billionaires to prioritize philanthropy and big ideas, such as Amazon CEO Jeff Bezos' focus on space travel with his company Blue Origin.
"As billionaires' wealth grows, so too does their sense of responsibility and their ambition. Stopping climate change, improving public education, alleviating poverty, eradicating malaria, finding a cure for Alzheimer's and so on," wrote John Mathews, head of private wealth management and ultra high net worth at UBS.
Kalanick would have to be upfront with his advisers about his goals, so they can help establish an organization and find the proper routes to transfer and protect his money for charitable giving.
Tax planning will also come into play with such a large influx of cash. Hattenbach would delegate the estate planning attorney to "reduce and eliminate potential gift and estate taxes" by "utilizing revocable and irrevocable trusts, charitable trusts, and foundations." At this stage, the estate planner would also create an exhaustive inventory of all the client's assets, in case something happened to the client.
Not everything is different for a billionaire than an average client, however. Hattenbach said that his last move for any client would be to produce "a customized investment policy statement, a business plan for their investments."
Due to the large amount cash that Kalanick has just come into, it can take a while for all of the above actions to unfold. Hattenbach says that to get everything right, the process shouldn't be rushed and can take months.
In the mean time, Hattenbach generally recommends that clients maintain "purchasing power by investing in short term treasury bills, short term municipal bonds ... and other low risk investments that limit interest rate and credit risk."