Managing wealth can be as tricky as the path taken to accumulate it. If you’re a high-net-worth individual, you know the stakes are particularly high. With as many challenges as there are opportunities, what is the best way to safeguard your assets, achieve your financial goals, and secure your legacy?
This guide dives into the world of high-net-worth management, uncovering strategies to protect and grow your wealth.
What Is a High-Net-Worth Individual?
You’re generally considered a high-net-worth individual if you have $1 million in liquid assets (also known as investable assets). This wealth not only brings exclusive opportunities but unique obstacles, including tax liabilities and considerable exposure to market risk. To navigate these challenges, specialized financial strategies are a necessity.
Protecting Your Assets
Prioritize Tax Planning
High-net-worth individuals often deal with intricate tax scenarios, especially when filing yearly tax returns. In addition to staying up-to-date with the latest tax regulations, HNW individuals can (and should) employ various tax strategies. These strategies might include switching to tax-advantaged investment accounts, considering tax-free bonds, or utilizing trusts. Many HNWIs refer to tax experts or financial advisors to help ensure their wealth is preserved and grows tax-efficiently.
Explore Various Legal Options
A cornerstone of estate planning, trusts can be a valuable asset protection strategy. While revocable trusts offer flexibility and allow for eventual changes, irrevocable trusts often provide better asset protection and tax benefits. The philanthropically inclined might also consider charitable trusts, which let you give back to the community while obtaining various tax advantages.
Other legal options can also play a role in safeguarding your wealth. For example, establishing a limited liability company (LLC) creates a distinction between personal and business assets, keeping your personal assets safe from potential business creditors.
Create an Insurance Strategy
The diverse assets of HNWIs call for tailored insurance strategies.
Deposit insurance: The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per member bank, per ownership category. So, for example, you could secure $1 million at the same bank if the money is divided into several types of accounts.
Securities insurance: The Securities Investor Protection Corporation (SIPC) secures up to $500,000 in cash and securities that are housed in member brokerage firms.
Personal insurance: Helping protect HNWIs against costly lawsuits, umbrella insurance offers liability coverage that extends beyond standard policies’ limits. For those in high-stakes professions, professional liability insurance can protect personal wealth against claims of professional error, negligence, or other disputes.
Growing Your Wealth
Examine Your Portfolio Structure
As a high-net-worth investor, you want your asset allocation to maximize returns and minimize potential losses while reflecting your financial situation, risk tolerance, and future aspirations. Regular review and analysis allow you to identify areas that may not be performing well, paving the way for strategic shifts. Given the magnitude of HNW portfolios, even minor allocation shifts can have huge implications, making periodic rebalancing an essential exercise.
Consider Alternative Investments
Alternative investing strategies are increasingly popular among HNWIs. For example, direct investments in burgeoning companies through private equity and venture capital potentially offer higher returns. Tangible assets, like luxury real estate, art, or collectibles, diversify a portfolio and can appreciate significantly over time.
However, it’s essential to understand that while alternative investments can be lucrative, they come with their own set of risks. Knowing your risk tolerance is critical for making judicious investment decisions.
Don’t Neglect Financial Education
From political shifts to tech innovations, various issues can impact your financial assets, so staying informed is not just beneficial; it’s imperative. Reading industry-leading publications, attending financial seminars, and participating in workshops are a few ways you can deepen your financial knowledge and adapt to an evolving landscape.
However you prefer to stay updated, collaborating with a wealth management firm is always a good idea. A qualified financial advisor gives you instant access to industry expertise and guides you through the complexities of high-net-worth wealth management.
Don’t leave your legacy to chance. With decades of experience serving high-net-worth clients, we’re here to help ensure your wealth is protected, optimized, and poised for growth. Reach out today for comprehensive financial planning services that support your needs and ambitions.
