Investment Companies: Compare High Net Worth Wealth Management Firms

Searching for the top investment companies must begin by understanding yourself. Why? Because many of the ‘best’ investment companies are best in size only. They’re managing a lot of money, but their investors aren’t getting any advantages from that – especially their high net worth investors. For a much deeper look you can request your free copy of our book for investors with $5+ million liquid investable portfolios here.

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.

Go with the wrong company or advisor, and you could lose 70% of your wealth in the next market crash. We’ve seen losses even greater than that from clients who have come to us in desperation after their previous investment managers left their portfolios in shambles.

That’s why we wrote this guide, 7 Secrets to High Net Worth Investment Management, Estate, Tax and Financial Planning. For anyone with a net worth over $5 million, this book will reveal the path to what we call financial serenity – knowing your wealth is protected for life, and loving the fact that you are no longer on the hook for managing it yourself. You can request your copy free right here.

To find out the differences between big investment companies and wealth management firms, use the following list of topics or just keep reading.

At Pillar Wealth Management (rights reserved), we offer our wealth management expertise to clients with $5 million to $500 million in liquid assets. If you need a wealth manager to help you manage your assets, click here to arrange a free consultation with us.

If you want to ensure you achieve all your desired lifestyle and investing outcomes, we would like to speak with you. Click below to have a quick introductory call.

 

Talk to a Private Wealth Management Firm

Schedule a Call with CEO and Co-Founder Hutch Ashoo

For a much more in-depth exploration into how to choose the best investment advisor for your situation, get our free authoritative guide, The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $5 Million to $500 Million in Liquid Assets.

What Does an Investment company Do?

The simplest example to understand what U.S. investment companies do is to think of a pool. Investment companies tend to be large because their business model is to pool money from many investors into a select group of centralized investment vehicles.

Common types of investments and securities include mutual funds, stocks, bond funds, money market funds, index funds, interval funds, exchange-traded funds (ETFs), closed-end fund shares, open-end funds, real estate investment trusts, and unit investment trusts (UITs). Investment companies use money from their customers and invest it in securities such as bonds, stocks, and other investment options.

Most investment firms specialize in self-directed brokerage accounts. In a brokerage account, customers can choose from a great variety of investment options such as mutual funds (closed-end fund shares), bond funds, and even futures and options. The big brokerage firms also allow for self-directed retirement accounts such as a Roth IRA.

In addition to all the same securities and mutual fund options as brokerage accounts, self-directed IRA accounts let you invest in real estate, private equity, and things like gold, farmland, cryptocurrencies, and various other types of investments.

The catch with self-directed accounts is, your investment decisions are up to you. It’s your time, and it’s your money. You can make money or lose money, and you’ll have no one to blame or congratulate other than yourself.

Discover the single most important factor in investment management(and no, it’s not your advisor)

And to be clear, a self-directed IRA is different from a 401 k. Most 401 k accounts only offer a handful of investments to choose from. But a self-directed account will offer hundreds if not thousands of investment options and a greater variety of asset classes.

Whichever type of investment account you use in your portfolio, as the investments grow, the investment firm/investment company takes a cut of the profits. It passes on the remainder to their customers. Each bond and mutual fund charges different fees, and there is no legal requirement. Some mutual funds (closed-end) have very low fees, even under 0.1%. These are typically index funds. Others charge over 2%. When directly trading stocks at an investment firm/investment company like E-Trade, you’ll be charged a commission for each trade you make.

According to the Securities and Exchange Commission, each type of fund has different features. Mutual funds (closed-end), bonds, and unit investment trusts, for example, can be redeemed at any time by investors by selling them back to the fund or the trust, directly or via a broker. The approximate sale price will be known based on the value of the shares that day. Closed-end funds cannot be redeemed in this manner. Instead, they have to be sold to other investors on the secondary market, and the prices are not known until the sale is made.

To be considered an investment firm/investment company and not a private investment opportunity, the available funds must have more than 100 investors.

investment companiesTypes of investors

There are mainly three categories of investors: the pre-investors, passive investors, and active investors. No doubt, they all want to make money and close the gap between their profits and losses, but they do it differently.

The pre-investors don’t invest at all. In fact, they have little or no information regarding investments. The passive investor is what most people are. Own a house, save some money, and spend some wisely—no major thought about profits and losses. The active investor is what you are (the one that this article is for).

You may have a company, hire people to take your company goals onward, and invest the extra income from your company in private investment or securities. You have enough information about how to make money and you make it work for you through open-end funds.

Examples of Investment Companies

You have probably heard of the top investment companies or online brokers. At these companies, any investor, regardless of how much money sits in their account balance (some do have a minimum investment requirement), can open an account, choose bonds, ETFs, closed-end, and other securities to invest in, and allocate their money as they see fit.

These companies and their services feel sort of like a bank to investors who use them, but with stocks and bonds instead of just standard interest or checking accounts. Most investment companies offer some of the same services as banks, such as credit cards and low-interest investment options like money market funds. You can easily transfer your investment capital in and out of your accounts and to different funds within the same account.

4 reasons high net worth investors should avoid large firms

The big investment companies are structured so that their customers can engage with the company at whatever level they desire. You can do everything yourself or access help from their investment advisors for more individualized service. These investment services are available online, and some investment management companies also have physical branches.

The Ideal Client for an Investment Company

A disturbing number of people have no plan for investing and very little money saved. They might have a 401 k, or other retirement planning option through their job or business, but they only participate because they have to. Some even forget they have it.

For newbies like this, investment company services offer a great opportunity to get serious about providing for your future. Even socking away a couple hundred dollars of cash each month in a self-directed Roth IRA will produce a better outcome down the road. The ease of working with investment companies and their variety of investing options make them a good first step.

Investment management companies are also a viable choice for anyone who has committed to make money through investing to build for their future. Such investors may even have several hundred thousand dollars of capital invested in a variety of mutual funds, ETFs, stocks, bonds, and other securities. Any good investment company will serve this sort of client well.

What to Look for in an Investment Company

Kiplingers ranks the top United States investment companies every year using a variety of criteria, including:

– Commissions and fees

– Range of investment choices

– Mobile app functionality

– Available tools

– Research ability

– Investment advisory services

– User experience

You can see from those criteria that the large investment companies are attempting to appeal to a variety of preferences, needs, and interests.

Which type of investment company is best? Investors who care most about personal service from an investing professional should explore the advisory services at each investment firm. An investor who wants to spend extra time doing it all themselves would seek a company with research information and tools that are easy to use.

More mutual fund options? Investing solutions for small businesses? Mutual funds with certain minimum investment requirements? Real estate investment trusts? You can find all this and more.

If you choose to start investing with a big investment company like Schwab or Fidelity Investments, think about what matters most to you about the investing experience, and find a company with those services.

Serving Their Supervisors’ Interest Before Yours

Big investment company advisors are not fiduciaries, and they will not always give investment advice that is in your best interests. It is business as usual. They are serving another master – their company’s bottom line. A big investment company will have quotas to meet and internally developed investment products to sell.

Do they think about the extra taxes investors will pay when they recommend trades that will incur short-term capital gains? Do they tell investors about that? Or are they just focused on the gross return? Net return is all that matters when it comes to investing.

8 ways non-fiduciary advisors can destroy high net worth portfolios

What good is 12% growth if you pay 40% of it in taxes? Do they have a plan for adapting your investment portfolio if your life situation changes? It’s not that your success doesn’t matter to them. Not at all. Again, these are good companies that offer many great financial services and a variety of mutual funds and bonds. But your interests are not their number one.

Weaker Investment Results

Most investors and their advisors operate based on Wall Street’s investing methods and Wall Street’s beliefs. It’s how they were trained, and it’s all they know. This produces a fixation on raw returns to exclude other factors that affect the value of their clients’ investments. Their advice doesn’t consider things like costs and fees, unexpected life events, or the need for personalization and customization.

See the only 2 things that matter in an investment company of any size

They won’t tell you about the failure of nearly every actively managed mutual fund to outperform or even keep pace with the market. If you ask, they will probably grudgingly admit it, but they’ll persist in sticking to their belief that with smart fund managers, good research, and good timing, many of their mutual funds and ETFs can outperform the market.

They can’t, and they won’t – especially over ten- and twenty-year periods. If you want some data for this, Kiplingers reported in 2018 that 84% of large-cap mutual funds underperformed against the S&P 500 over the previous five years. And those were good years – the heart of an 11-year bull market.

We have much more data on this and much more to say about it in our free guide, The Ultimate Guide to Choosing the Best Financial Advisor for Investors With $10 Million to $500 Million in Liquid Assets.

You will be amazed by what you haven’t been told about the big investment companies and their mutual fund management failures in that guide. Strongly recommended reading for every investor.

They Make Commissions

Investment companies make a lot of money selling investment products or directing their clients to particular mutual funds with higher internal fees and commissions.

While the Securities Act of 1933 did establish standards that protect investors in the United States from fraud and abuse, why pay a commission fee when you can get better investing outcomes and services without it?

Get the full truth on what your financial advisor really costs you

Why Choose a Wealth Management Firm

An independent investment management firm that caters to wealthy clients is not for everyone, in contrast to big investment companies. It is designed specifically for affluent individuals because high net worth and ultra-high net worth investors and households have very different expectations from the businesses they work with. Here are a few of those expectations:

Personal, ‘White Glove’ Service

When you call, you need someone to answer. When you have a special circumstance come up, you need someone who can take the time to address it. Why?

Because when it comes to money and investments, the stakes get higher the more you have. High net worth individuals are in the highest tax bracket. For this, you’re both vilified and celebrated in media. But let’s be clear about a few things: You’ll pay the highest estate taxes and inheritance taxes.

3 tax minimization strategies for ultra high net worth estates.

You’ll lose the most when something goes wrong. This could be external like a business failure or a market downturn, or within your household, like a divorce or a child who publicly embarrasses themselves. Jeff Bezos lost $37 billion when he got divorced.

You’re as concerned with building wealth as you are with protecting it. You will face a variety of challenging situations regarding what happens to your money after you die.

14 ways to protect your wealth.

No one’s life will change forever in a household with only $100,000, all in mutual fund investments. But if you have $20 million, it’s a very, very different story, and you’ll need good retirement planning advice.

For example, if you have a business but don’t ever want to sell it, you might want to set up a business trust. Do you have any trusted advisors for things like this?

These reasons, and many others, are why we wrote The Art of Protecting Ultra-High Net Worth Portfolios and Estates, Strategies for Families worth $25 Million to $500 Million, the definitive work on what ultra-high net worth families and individuals need to know as they seek to maximize their lifestyles and influence. Private, independent, fiduciary wealth advisory companies like Pillar deliver ‘white-glove’ service at this level because we understand you and have structured our entire business to meet our clients’ expectations.

We take fewer clients and require a minimum investment of $5 million, so we can serve you better and be part of your trusted team of experts. As your assets grow, you’ll want access to other experts too in life insurance, accounting, estate law, and other specialties. Big investment companies simply don’t offer this level of service. It’s not their business model.

Customized Investment Planning

Wealth managers like Pillar don’t offer their clients an array of pre-defined investment options. We don’t just ask which level of risk “feels” right for you.

The difference between that type of investment service and the financial services we offer is like the difference between Little League baseball and the Major League All-Star Game. If that sounds boastful, it’s not meant to be. It is an accurate comparison.

How is our investing process so different from the big investment companies? The best way to find out is to talk to us and let us create a truly customized investment portfolio and then run it through our proprietary stress-testing process. What you’ll experience from our financial planning process will feel good. It will be what you have always hoped for from an investment company but never got. Click below to get started.

Talk to a Private Wealth Management Firm

Schedule a Call with CEO and Co-Founder Hutch Ashoo

Another way to explore our investing approach is simply to get our free guideImproving Portfolio Performance, the Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity,and use it to understand how our investment advisors can help you enjoy the life your wealth was supposed to provide without stressing or burning yourself out for the rest of your life.

Get a quicker glimpse of our process here

To learn more about why it matters to work with a wealth manager offering custom solutions, click here to read our guide on the 5 essential shifts that contribute to portfolio growth.

Optimized Investment Profits

As a high net-worth investor, you don’t want the highest performance possible because that comes with greater risks.

Investors who chase after that are the ones who lose 70% of their investment capital when the market collapses. We’ve seen it happen, far too many times, in families who have come to us after their previous advisors or investment companies left their portfolios in shambles. It’s painful to watch.

But you also don’t want to miss out on building up your assets and investment profits throughout your lifetime. What you’re looking for is an optimized investment strategy. This investing approach optimizes the balance between risk, security, and the value of your investments.

5 secrets your advisor won’t tell you about risk tolerance.

One other thing is that the profits and losses are shared by both the company and the client. Investors who want to minimize their losses will find this approach most helpful.

Our investment company believes in consistently growing your assets and financial security, to the highest degree possible, without suffering the big losses that make everyone panic when markets collapse. We also strive to minimize your taxes and other costs and fees because any amount of money saved is money you get to keep as profits in your portfolio.

7 little known tax-saving strategies for high net worth investors.

Imagine two investment managers, both of whom earn you 10% in gross returns. But one does nothing to avoid taxes, fees, interest, commissions, and many other costs. Those can drag that 10% down to 5%. The other manager avoids or minimizes every cost imaginable and earns you a net growth of 8.5%.

This is the difference between elite-level investment management like what Pillar provides compared to a typical financial advisor and to big brokerage investment companies. For someone with a $20 million portfolio, that 3.5% annual difference is $700,000. How much farther ahead can you get over ten, twenty, forty years, doing it our way?

Drawbacks of Using a Wealth Management Firm

Just as there are drawbacks to every big investment company, even the best wealth advisory companies have their downsides. This is not for everyone.

For instance, wealth managers may offer more financial services than you need. Maybe you have no kids and don’t need estate planning or life insurance. Maybe you’ve had one job your whole life and have just one retirement account and are happy with it. Maybe you have a strong background in finance and investing, and you believe you can handle this. Maybe you even enjoy it. Most people don’t, but some do.

Also, you might not be that concerned with the long term value of your investments. Maybe you don’t want your portfolio adjusted and rebalanced every quarter. Maybe you’re content watching your mutual funds, ETFs, and other investments rise and fall with the market within your investment company account. Maybe you just want to stick all your cash investments in index funds.

Why index investing isn’t as simple as it sounds.

Some people really don’t care that much about earning 8%, 12%, or 6%, and are happy with CDs and simple mutual fund accounts. Some folks like to live simply.

If any of this describes you, then you probably don’t need a wealth manager. Another reason you might choose an investment company over a wealth manager is that you aren’t interested in talking about goals and dreams. You aren’t a planner and don’t want to get into all that structure.

How to Understand Your Investment Goals

Let’s talk about goals for a moment. Do you have any personal finance ambitions or life dreams about becoming an investor? Here are some questions to consider:

– Do you spend time doing what you really want to do?

– Do you travel whenever and wherever you want?

– Is there a cause in which you want to be involved?

– Do you have any unfulfilled dreams?

– When would you like to stop working or sell your business? Age, net worth?

– Are the balance in your portfolio and your investments able to protect you from inflation, deflation, and depression?

– If you become disabled – physically or mentally – will you be more than adequately provided for?

– How will future tax laws affect your plan and your answers to these other questions?

– How much of your estate do you want to pass on, to whom, and when – including while you’re still alive?

– Have you looked through any directory of investment companies/investment firms near you?

We have dozens of more questions like this that every investor or aspiring investor should seek to answer.

Big questions

For the investor who believes investment firms/investment management has no relationship to desired lifestyle outcomes, we would humbly suggest that such a person simply hasn’t thought about it enough.

Your answers to questions like the ones above are inextricable from your investments. Our company approaches our investing service with that mindset – that your financial plan should be tailored to meet your life goals, not just a context-free dollar amount or a percentage of growth.

If you want an investment plan that assures you the chance of experiencing the answers to those questions, then a big investment company is not the right path for you.

They simply don’t offer service at the level we do. In fact, this is all we do, and we love doing it because we love seeing our high net worth friends live out their desired lifestyles and have the influence and impact they want to have on the world and on the people they care about.

Hire a Professional Financial Advisor in Your Area

The truth is, it’s actually not that important to work with a wealth advisor in your area. With today’s technology, you can do off-site meetings just as easily (and more safely) than in-person meetings. Documents are easy to sign and transfer. Accounts can be opened and closed online. There’s almost nothing that has to be done in person anymore. For most investors, it’s about finding the best investment company or the best wealth manager, period.

Location is irrelevant. How many individuals who have money in top wealth management firms live near their headquarters or one of their branches? Hardly any. Private, independent wealth advisors are no different. So if what you’ve read here has clarified that your money and capital are best suited for a big investment company, then use the top 10 lists you can find online, and pick the one that seems best for you.

If what you’ve read has made it clear you need more personalized, customized, concierge-style investing service and financial planning and the most optimized investment management possible, then look for a top wealth management firm.

You can start by talking to us in a free consultation to see if we’re a good fit.

Talk to a Private Wealth Management Firm

Schedule a Call with CEO and Co-Founder Hutch Ashoo

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

More from authors.