Asset Management

The Complete Guide to What We Do

Financial Asset Management for Ultra-High Net Worth Households

How to Secure the Life Your Wealth Has Made Possible

Asset management is a broad term that can refer to processes within a variety of industry, investment, and business contexts. The three primary categories are financial asset management, physical asset management, and compliance asset management processes related to things like contracts and digital assets. This page will focus primarily on financial asset management because that is what you as a high or ultra-high net worth investor are looking for that brought you here. Pillar Wealth Management provides financial asset management services for United States households with $5 million to $500 million in liquid investable assets. To be sure you do everything possible to find the best financial service for you, get our free guide,The Ultimate Guide to Choosing a Financial Advisor. To talk to one of our expert asset managers today, schedule a free consultation with one of our co-founders.

In general, financial asset management is a service designed for individual investors and entities that have portfolios with large amounts of diversified assets. Most commonly, those using financial asset management services are high net worth individuals, governments, companies and corporations, and other institutions such as insurance companies, large nonprofits, and foundations. Many asset management services are not available to average investors.

Use the table of contents to skip to the sections most relevant to you, or just keep reading.

Asset Management

Definition of Asset Management

Financial asset management refers to the processes, strategies, and functions used to direct a client’s financial portfolio. This field includes working with an asset management company to create a strategic plan that continuously works to minimize costs, taxes, and fees, and helping manage your cash, bonds, stocks, and liquidity without taking on undue risks.

For high and ultra-high net worth investors, asset management can encompass other groups of assets as well. There are two broad categories of financial assets. These are:

  • Fixed assets – typically for long term use like real estate property, companies you own, and collectibles
  • Current assets – anything that can relatively quickly be converted to cash

Current assets are comparable to liquid assets. Within the current assets category there are several examples of monetary assets that can be subject to asset management. What distinguishes these is that they are static in value, unless they are held in a foreign currency, in which case they would be subject to the current exchange rates.

“Static in value” simply means that the dollar amount does not adjust based on inflation. So if you have $1 million savings in an emergency money market account, that $1 million is still worth $1 million 20 years from now in raw dollar value. But its actual purchasing power will be reduced because of inflation.

The most familiar examples of monetary current assets include:

  • Cash
  • Deposits in bank accounts, securities and brokerage accounts, and similar investment vehicles
  • Trade receivables
  • Any other receivables meant for settlement through cash
  • Lease investments
  • Investments in debt capital markets

You do not need to have investments in all of these places to take advantage of asset management services, whether from Pillar Wealth Management or any other firm.

The Importance of Financial Asset Management

Asset management has, for the great majority of high and ultra-high net worth investors in the United States, become too complex a task. And it gets more complex, not less, as you age into the retirement stage. This happens because your main sources of income and compensation shift away from work, and you begin to fund your lifestyle and other investing needs using your various retirement accounts.

For example, you have Social Security, possibly rental income, and possibly a pension. And, you might own stock options from companies you worked for that you decide to start cashing out.

One primary issue with all of these new sources of income that complicates your life is the taxes.

As an affluent investor and a client of an asset management company, one of your goals in retirement will be to minimize taxes. How much money you withdraw from pensions, 401ks, and IRAs, combined with these other sources of income, can lead to very different sized tax bills depending on how and when you withdraw from these financial assets. See 10 ultra-high net worth retirement mistakes to avoid.

Once you retire, your financial asset management company will map out a plan that keeps your taxes and other costs as low as possible, while still helping you fulfill your retirement lifestyle dreams.

Another part of asset management pertains to financial stability. Even for many high net worth investors, long term stability remains a key goal. The investing tools and products you can access through asset management companies enable you to sustain high levels of financial freedom and independence.

In the years before retirement, you are more focused on growing and protecting your ever-increasing wealth. You want your assets to grow during good times, and not watch all that growth wash down the river when a recession or market meltdown hits. You might have income from a business enterprise or multiple businesses that you one day plan to sell.

Financial asset management professionals enable you to achieve all your investing, financial, and lifestyle goals and dreams while not worrying about having to keep track of all the details, which is exhausting and emotionally draining. We’ll say more about protecting your assets a bit later.

In addition, asset management enables you to keep track of all your assets. You will know how much you have and where it is.

And, it helps you identify and manage risks that could threaten your wealth and the freedom it represents, such as unexpected medical costs, a lawsuit, or an early death in the family.

How Does Financial Asset Management Work?

Every financial asset management firm will have a different process, but many of them are similar in some core elements. Here’s a quick overview of how most firms run their operations:

Formulate Their Investment Mandate

The asset manager will develop their own process for selecting investments, balancing risk with performance, and serving the needs of their clients. Many asset management firms use a very similar process for all their clients, and differentiate their plans mostly based on a rudimentary self-assessment of risk. You have probably seen or experienced this before.

For example, each client will be asked to choose between categories like ‘aggressive,’ ‘moderately aggressive,’‘conservative,’ and probably a few other things. Based on your selection, the asset management specialists will then plug your investments into their pre-set asset allocation for that risk category.

At this point, many asset managers will simply set your investment plan on autopilot and check in with your progress and results now and then. We contend that high net worth clients deserve better than this minimal level of asset management service.

Incorporate Your Unique Needs

Better asset management companies will do more than just use cookie-cutter buckets like described above. They will take the time to understand your values, your personality, your short and long-term desires, and your family history as it relates to money. It is not unusual for an asset management company to work with the same family for more than one generation.

Each client also has unique income situations, unique tax scenarios, special risks to consider, and a certain amount of liquidity they expect to have so they can live out their desired lifestyle, free of worry or concern.

Our Approach

What too many asset management companies fail to recognize is that every one of these plans will fail and become obsolete long before the client has achieved many of their desired outcomes.

If you make a plan at age 40, based on a thoughtful discussion and analysis of your life and the way you hope it plays out, how close will your life at age 50 be to that plan from ten years back?

If you’re like most people, the resemblance will be murky. Things in life take unexpected turns for everyone, no matter how much money you have. What you thought mattered at one stage of life inevitably changes as time passes.

One of the key elements that makes our approach to financial asset management so unique is that our asset managers build this uncertainty about the future for each client into our asset management process. We don’t make a plan and then check in a few years later to see how well things are going. We continually update your plan, revisiting the core components every quarter – four times per year.

Another profound difference is in what your asset management portfolio gets built around. We do not build it around your perceived risk tolerance. We build it around thecertainty of achievement of all your more desired lifestyle outcomes.

With our asset management system, you won’t get a projection of the value of your assets in ten years. You’ll get a projection of how well you are on track to live the life you want.

This ‘user experience’ is radically different from most financial asset management companies. If you’d like to see this process applied to your portfolio, set up a quick introductory call. We’ll say more about how we develop strategic asset management plans for our clients toward the end of this page.

Benefits of Financial Asset Management

Asset management accounts give high and ultra-high net worth clients the ability to put all their assets in one financial institution. This allows investors to move their money between all their various accounts such as credit cards, checking, brokerage and investment accounts, and even margin loans.

In the United States, some of these asset management accounts will be FDIC insured. Some are protected by the lesser-known SIPC – the Securities Investor Protection Corporation. It serves a similar purpose as the FDIC, but instead protects certain brokerage accounts up to $500,000.

For corporations, large organizations, and companies using an asset management company, they also benefit from improved efficiency and cost savings as they acquire and use physical assets.

But these same efficiencies exist in purely financial asset management for individuals too.

All you have to do is deposit and withdraw your money from the same place every time, but your asset manager will be able to direct and steward those funds to all your various investment accounts.

You’ll know where your money is, how much you have in each investment, and if you work with Pillar Wealth Management, how well you’re on track to achieve the purposes you’ve planned for your capital and other assets.

For a deeper dive into how our company delivers exceptional performance for high net worth investor clients, get our free asset management guide, Outstanding Portfolio Performance: The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity

Individual & Family Financial Asset Management

Choosing to work with an asset management company is a major life decision. We believe it is the third most important relationship in your entire life, right below your spouse and children. Why? Because this advisor will manage your assets and financial resources for many years.Your asset management specialist will be playing the most instrumental role in delivering the lifestyle that your wealth is supposed to make possible.

As a high net worth individual or family, we strongly recommend that you do NOT choose an asset management company based solely on any of the following reasons:

  • Your friend our family member recommended them
  • They have one of the highest amounts of AUM (assets under management)
  • They are a nationally known asset management company
  • You saw their company on a top ten list
  • They have funny commercials
  • A website or finance magazine article recommended them for HNWI (high net worth investors)

The best asset management companies know how to incorporate your unique needs, desires, and preferences into their management process. What works for your friend might not work for you.

That’s why we strongly encourage all affluent investors to do some deep thinking and investigation into potential asset management companies on their own.

It’s worth it.

To help with this aim, our founding asset managers created a resource unlike anything else you can find, and recommend it to everyone who finds us – regardless of whether they want to work with us. It’s called The Ultimate Guide to Choosing the Best Financial Advisor. In one section, you will discover why trusting big national asset management firms that use Wall Street’s investment methods will always leave you feeling short of your goal, uncertain if you’re ‘doing’ your investments right, and anxious about protecting your wealth and other assets.

Wall Street’s methods have failed repeatedly, for people across the world. Whenever a meltdown happens, wealthy investors watch their investments plummet in value, often losing 30%, 40%, and 50% of their portfolio value. We’ve had people come to us for help after going through a crisis with another asset management company, who have lost over 80% of their liquid net worth!

Things like this happen because people let asset management companies who use Wall Street’s methods manage their assets. That free guide will reveal what those methods are and why they fail. And that’s just one of seven paradigm-shifting things you’ll learn about. Again – highly recommended reading, regardless of whether you want to work with Pillar’s asset managers or not.

For another of our many free resources that’s much shorter, but a great place to start, look at the 5 Critical Shifts for Maximizing Portfolio Growth Strategies. Here, our 30-year asset management advisors reveal how to shift your investment success into a realm of certainty and security. Both these content guides were written for families and individual investors who have $5 million to $500 million in liquid assets.

Asset Management

 

Protecting Your Assets – 4 Things Anyone Can Do

Asset management companies can do a number of things to protect your assets. But as a person with high net worth, you may face certain risks that average people do not. One of the greatest threats to your assets comes from lawsuits, and this risk is heightened even more if you own a business or multiple businesses. But there are many other ways to lose assets you thought were secure.

Threats to your assets – or your business assets – can arise from many places, such as:

  • Sexual harassment lawsuits
  • Discrimination lawsuits and accusations
  • Malpractice claims
  • Employee accidents and injuries
  • Divorce – Bezos lost billions in financial assets from his
  • Personal injury lawsuits, such as auto accidents
  • Debt
  • Medical issues

There are many more threats to your assets than these. You can see those and 8 ways to protect your assets here. Here are four things you can do, on your own or with the help of asset management companies.

1. Set up a proper business entity, such as an LLC

This protects some of your assets from loss through lawsuits against your business.

2. Get properly insured

Insurance protects assets from all sorts of damages and losses, including lawsuits. Commercial liability insurance, for example, protects your business from lawsuits if someone gets hurt on the premises or because of an employee. Look into life insurance for additional asset protection.

3. Maximize your retirement accounts

Asset management companies can do far more that just grow your financial assets. They can also create protective barriers in case of lawsuits. Qualified retirement plans are protected from lawsuits up to $1 million in assets through federal law. The right asset management company will not neglect things like this.

4. Transfer assets to heirs early

You don’t have to wait until you die to set up a trust fund for your heirs. This is a surefire way to protect some of your financial assets, because you won’t own them anymore. There are other ways besides trusts to accomplish the same goal. Asset management companies like Pillar take special pride in helping high and ultra-high net worth families and individuals protect their assets using strategies like these.

The Role of Asset Management Companies

Big asset management companies like Merrill Lynch, JP Morgan, and Vanguard often work with smaller investors en masse. Vanguard, for example, has an average account size of around $22,000. Investors with these amounts of money do not need specialized asset management services like the kind we’ve been discussing.

A more important consideration than mere size is specialization.

Some asset management companies specialize in particular areas of financial asset management. For instance, you can find asset management companies that focus on things such as:

  • Long term value investing
  • Long term passive investing
  • Individual accounts for high and ultra-high net worth clients
  • Hedge funds
  • Enterprise level customers
  • Mutual fund launching and investment
  • Retirement plans such as pension funds
  • Insurance company asset management

Some of these (hedge funds in particular) are not wise asset management strategies if you’re looking for a secure, anxiety-free life and retirement that protects your assets for generations.

So when you’re considering your various financial services options, pay attention to the focused specialty at each company. Our firm, for example, works exclusively with individual and family clients who have $5 million to $500 million in liquid investable assets. Our asset managers also use a strategic asset management process that optimizes your performance by balancing your risk against your desired lifestyle outcomes. If it sounds like we might be a good fit, schedule a quick first call and find out.

How Financial Asset Management Firms Operate

As mentioned earlier, some asset management accounts are designed to be all-in-one accounts that combine checking, savings, credit cards, and brokerage services. You can buy securities, set up IRAs, invest in bonds and equities, while also writing checks and having money market accounts for cash reserves – all in the same account.

Some of the financial services companies that offer these types of accounts charge higher fees, but they are doing so knowing that the convenience of this sort of account is worth paying something extra to have. Asset management account fees for accounts like these can run from 1% to as high as 2.75% depending on your balances.

Other asset management firms only work with large institutions like corporations, big nonprofits, and associations.

This matters for you because the more complex the company you’re working with, the easier it will be for you to get ‘lost’ in the mix.

When you call your asset managers, you want someone to answer. And because you’re providing such a large amount of revenue to that company compared to most of their smaller customers, you have a right to expect extra special service. But at the large asset management firms, they can only go so far.

Pillar Wealth Management and other private, independent companies have designed their businesses to be what high net worth investors want and expect. If you really want boutique, personalized, expert asset management service where you get the expert working on your account and not a 25-year old fresh grad, or worse, an intern, then you go to the private independent asset management firms.

Why Does Financial Asset Management Matter?

No one ever stops wondering about the future.

Financial asset management attempts to prepare for the unknown future in the wisest ways possible. There is a life you want to live now, and a desired lifestyle you hope to live in the coming decades and in retirement.

But, you also face the same unexpected life developments as everyone. History is full of billionaires and millionaires who have lost huge percentages of their assets, just as it is full of new ones who have built up their fortunes from scratch through hard work and good timing.

So many things in life remain out of your control. A medical diagnosis of a chronic, costly illness. A sudden health problem. A debilitating lawsuit. A natural disaster. A business failure. The sudden loss of a loved one. An economic collapse. A failed return on investment. Worse yet, a combination of two or more of these things can happen within proximity of each other.

Besides all that, people can just fail to properly manage their wealth and assets. They overspend, take on too much debt, give too much to irresponsible people, listen to bad financial advice, make risky investments like hedge funds and venture capital, and behave as if the money will always be there.

The sad reality is, as studies on this topic have found, about 80% of wealthy families fail to remain wealthy beyond the third generation, with poor asset management being a primary cause. That means, if your generation was the first in your family to attain high net worth status, your grandchildren have an 80% chance of not sustaining the benefits from what you’ve built throughout their lives and beyond.

Think about that.

If your parents were wealthy, then it’s your kids who are at great risk. But, there is also that 20% who found and utilized an effective asset management system and have managed to preserve and protect their wealth beyond the third generation.

What do they do differently?

This is why financial asset management matters, in particular for affluent households. It’s why our founding asset managers wrote one of very few available hardcover books that focuses exclusively on the topic of wealth protection – because this is our passion. Get a complimentary copy of our book by simply requesting one: The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies for Families Worth $25 Million to $500 Million.

Asset management and protecting your assets all comes back to small decisions that get made during everyday life activities, such as:

  • How much money to spend
  • Where to stash your savings and investments, and for how long
  • How to adjust your investing decisions based on your stage of life
  • When to cash out stock options
  • Preparing in advance for tax minimization
  • Considering estate planning starting an at early age
  • Avoiding high risks

For instance, suppose you are in the second generation of wealth. One day, you will inherit whatever remains from your parents’ estate. What will you do with that money? How will you manage and distribute this capital across your own investments? Do you have a plan for using it and passing it on one day?

See a 7-step inheritance planning guide

Financial asset management matters because it’s the only way to do everything in your power to sustain and protect what you have and keep every option available, while also enjoying your life.

If you have high net worth asset managers handling all this on your behalf, you can go relax a bit and enjoy your life.

Costs of Financial Asset Management

Asset management companies will present you with a great variety of fee structures.

Some charge an upfront percentage cost or flat fee at the point of sale, followed by annual fees after that. Others charge nothing up front and fixed annual fees. Still others charge percentages of the assets under their management. Others use a sliding fee that adjusts the cost based on the size of your portfolio.

Of these, often the ones with the lower cost make up their revenue in other ways by charging commissions or transaction fees.

The simplest form of payment is a fee-only approach that eschews commissions, transaction fees, and hidden costs and just charges a simple, upfront, all-inclusive fee. That is the approach used by our firm. We sell no products and therefore charge no commissions. Our management fee covers any extra services that may be needed, such as tax planning, estate planning, help with family governance, and insurance planning.

The fee-only approach is the most trustworthy because the more money you make as a client, the more money your asset manager makes. This approach falls in line with the fiduciary standard that some asset managers pledge to uphold – only making decisions and recommendations that are in the best interests of their clients.

Most asset management firms will also require investment minimums. Some start in the low six figures. Our firm requires a minimum of $5 million in liquid assets.

Choose a firm that uses the fee structure you are most comfortable with. If you like Pillar’s simple, nothing-hidden asset management approach, give us a call and see more ways we are different.

Developing a Strategic Asset Management Plan

Here’s an approach to strategic asset management that can work for any high or ultra-high net worth household looking to fund their desired lifestyle while minimizing risks and maximizing the value and stability of their assets, as well as for physical asset management scenarios: 

  1. Complete an Inventory of Assets

Whether just your money or also including your property, collectibles, real estate, businesses, and other non-liquid assets, work with your asset manager to count up your total assets, determine where they are, and ascertain the value of each. Then, use this asset information to identify when the assets were acquired and how long they are projected to last – their life cycles.

For financial assets, the life cycles will most often be customized to your desired lifestyle outcomes as well as how long you expect to live.

  1. Compute Your Life Cycle Costs

The next step is to use your asset information to estimate the costs of the life cycle for each. For financial assets, this begins with performance modeling – something only certain asset management companies employ as part of their systems. But it also includes the costs of disposal, which means when you liquidate each asset. For example, with stock options, selling these assets incurs taxes, so you have to be careful how much and when you sell your stock options.

If you want to enjoy the actual money and not just be the owner of stocks, you probably don’t want to hold on to assets like this until you’re 90. The life cycle of your stock options thus begins when they were awarded to you, and ends when you sell off the last ones.

  1. Set Your Levels of Required Service

For financial asset management, what does it take to keep your assets performing at the most optimized level for as long as possible? That’s your asset manager’s job. What do you expect out of this person?

Do you want highly customized planning and service? Then look for an asset manager who provides that, and make them explain in detail how they customize their asset management system around your unique needs and desires.

Will you need estate planning help? Advice on family governance? Are you dealing with a divorce, for you or for a parent, sibling, or one of your children? Do you own a business that you’re planning to sell? Are you looking to start a foundation or nonprofit institution?

All of these and many more financial services are available to you from the right asset management company. Know what you want, and then you’ll know what to look for.

  1. Develop a Customized Long-Term Financial Plan

What does ‘customized planning’ mean, in relation to strategic financial asset management?

Almost every firm will say they provide it to every client. But few actually do, anywhere near the extent you would expect.

Here’s how our firm customizes our asset management system for all our clients:

  • Clarify and Specify Your Desired Lifestyle Outcomes

Our asset managers use this phrase – desired lifestyle outcomes – more often than ‘goals’ because it speaks to the reason you wanted to be wealthy in the first place. You didn’t build your wealth to set goals. You built your wealth to create a particular lifestyle for yourself and your family.

This will look very, very different for everyone.

For example, one client might want to start a foundation and give away scholarships to poor kids from their hometown. Another wants to travel for three months every year, in the United States and in other countries around the world. Another wants to purchase three homes in different climates, possibly in other countries around the world.

Another client wants to host parties every two weeks. Another wants to frequently experience fine dining. Another wants to – in the philosophy of the Office Space character – “do nothing” and just lounge around all day enjoying good interest rates.

We could go on with countless examples. And in fact – we do go on. When you get into the details of our asset management system – after your initial call– we will discuss at least 20 questions that seek to uncover what really matters to you and why.

This is so critically important to giving you the fullest potential value from our financial asset management services. Why? Because if you don’t know what you want your money to do for you, then you have no idea what kind of performance you want or need. What is your money for? Do you want perpetual stability? Maximized liquidity?

This is THE question that must be answered definitively before our asset managers create your actual plan. Because in our asset management system, your plan gets built in such a way that you will achieve whatever lifestyle outcomes you desire.

  • Compute Your Ideal Asset Allocation

With your desired lifestyle outcomes, your asset inventory, and your required financial services spelled out, we can calculate how much money and other assets you will need to achieve every goal and desire you want out of life.

Research has shown that asset allocation, more than any other factor – by far – determines the long-term performance success of an investment. For more details, here are 6 reasons why.

Based on your asset information, we customize a very specific asset allocation that combines cash, bonds, equities, and other investment options. Your asset management plan will include special funds and investments that none of our other clients may have in their portfolios, ones we have specifically chosen for you because they are right for you.

This is your starting asset allocation – using your investment minimums. This is where our asset managers start.

  • Test Your Allocation Against Historical Data

This is the really fun part! Our founding asset managers created an asset management system that relies on over 100 years of market performance data.

With that research and data, our professionals will run your portfolio to see how it would have held up against all the market gyrations of history. How would you have done during the Great Depression? Or World War 2? How about the inflation of the 1970s, or the dotcom bust when companies failed left and right?

The insights we gain from this give our asset managers a sense of how well your assets can withstand the future market meltdowns and bull markets that are sure to come. But it’s not enough.

So, what we’ve done is develop 1000 additional high-stress, hypothetical investing scenarios – based on the real historical data. These scenarios are worse in many cases than anything that has happened in history. We want to see how your portfolio can withstand an epic beating, and how it looks coming out the other side.

Are your desired lifestyle outcomes still intact? Or will you have to shortchange them and settle for something much less?

That’s what your portfolio manager wants to know.

If your portfolio still allows you to exceed all your desired objectives in 750 to 900 of these high stress scenarios, you are in what our asset managers call The Comfort Zone. That means you can relax – no matter what is happening around you – because the future you want remains secure.

If you fall outsize that Zone, your asset manager will simply make minor adjustments to your asset allocation or to other parts of your strategic plan. Then we rerun the stress tests. We keep making these improvements until your portfolio is restored back to the Comfort Zone, and your future is secure.

We call this feeling ‘financial serenity,’ and it’s a wonderful thing, something no other asset management companies offer, that we know of.

  • Rebalance and Adjust Every Quarter

As mentioned earlier, life will happen. No asset allocation should remain static forever. Improvement is a nonstop pursuit. We revisit each asset management plan for all our clients and adjust them four times per year. We rebalance your portfolio to get it back in alignment with your customized strategy. And we talk with you as needed to see what has changed in your life and with regard to your desired outcomes.

That is Pillar’s asset management system. It is – in all honesty – unlike anything you’ll experience anywhere else.

If that sounds like the customized experience you’re looking for (that you will NEVER find at a big national asset management company), then we encourage you to schedule a simple introductory call with one of our expert asset managers.

Now is the time to secure the life you have made possible.

Asset Management