Asset Management To High Net Worth Families
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 site 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 business 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 asset management for you, get our free guide by clicking here. To talk to one of our expert asset managers today, schedule a free consultation with one of our co-founders.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
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, institutions and corporations, and other institutions such as insurance institutions, 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.
Definition of Asset Management
Financial asset management refers to the processes, services, and functions used as navigation to guide 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, institutions 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 asset classes:
– Fixed income
– 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 in the United States
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 your life cycles or 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 institutions 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 wealthy investors, long term stability remains a key goal. The investing tools and products you can access through asset management institutions 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.
An asset manager enables you to achieve all your investment, 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.
How Does Financial Asset Management Work?
Every financial asset management firm will have different principles, 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 investment services, balancing risk with performance, and serving the needs of their clients. 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 others. Based on your preferences, the asset manager 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 wealthy clients deserve better than this minimal level of asset management service.
Incorporate Your Unique Preferences
Better asset management institutions 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.
What too many asset management institutions 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.
One of the key elements that make 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 some 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 the certainty of achievement of all your more desired lifestyle outcomes.
With our asset management system, you won’t get a projection of the press of your assets in ten years. You’ll get a projection of how well you are on track to living the life you want.
This ‘user experience’ is radically different from most financial asset management institutions. 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-wealthy 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.
Corporations, large organizations, and institutions using asset management firms, also benefit from improved efficiency of money navigation 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 wealthy 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 manager will be playing the most instrumental role in delivering the lifestyle that your wealth is supposed to make possible.
As a wealthy individual or family, we strongly recommend that you do NOT choose a company based solely on any of the following reasons:
– Your friend or family member recommended them
– They have one of the highest amounts of AUM (assets under management)
– They are a nationally known asset management firm
– 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 firms on their own.
It’s worth it.
To help with this aim, our founding asset experts 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. 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.
Protecting Your Assets – 4 Things Anyone Can Do
Asset management companies can do a number of procedures to protect your assets. But as a person with wealth, 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 are the owner of 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
– 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 procedures 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 from third party insurance providers.
3. Maximize your retirement accounts
Asset management companies can do far more than 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 something 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 trust 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, J.P 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 aspects such as:
1. Long term value investing
2. The long term passive investing
3. Individual accounts for high and ultra-high net worth clients
4. Hedge funds
5. Enterprise-level customers
6. Mutual funds launching and investment
7. Retirement plans such as pension funds
8. 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 service 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 wealthy investors want and expect. If you really want a 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 the 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, not as easy as using cookies to attract the babies.
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 wealthy 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 focus 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 wealthy 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 upfront 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.
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