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BMO Harris

Diversification is for Dummies

?Diversification is for dummies,? says the wealthy Entrepreneur (with $20 million to invest) to the Private Banker.  This  woman has built a successful business by managing the risks to meet a market need and built a strong capital base through her single focus on her business niche. She is loathe to believe the Private Banker?s advice, that ?diversification is the smart thing to do.?

The successful Entrepreneur has an uncanny knack to see the truth of an opportunity in ways others don?t.  The Private Banker has his work cut out for him to convince the Entrepreneur to diversify.

Over time everyone diversifies. Even Entrepreneurs eventually have to cede control of their businesses and diversify, either in dramatic fashion by sudden death or in a planned succession. It is unlikely that the next generation will possess the same skills and motivation that made the founding Entrepreneur so successful.

So ultimately entrepreneurs will accept that diversification should be embraced.  Everyone must eventually, humbly, acknowledge what the rest of us in the investment world have known all along: at some point you have to delegate to those who can find value.

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