Accumulating wealth is not easy. It requires a lifetime of hard work and smart financial decisions. Once you have built a high net worth portfolio of a few million dollars (or a few hundred), your aim is to not only grow that wealth steadily, but also protect it during downturns.
Managing wealth is a full-time job. Even if there are DIY options and robo advisories, ultra-high net worth portfolios require a customized approach that only a dedicated wealth management firm can offer.
Knowing when to invest in stocks, bonds, commodities, and other asset classes requires having a deep insight into what markets are doing and how economic cycles are progressing.
Additionally, managing a portfolio isn’t just about the annual rate of return. There are many other aspects that need to be carefully evaluated.Pillar Wealth Management, for example, offers a white-glove level of attention to the complex financial needs of those who have $5 million to $500 million in investible assets.
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You could, in fact, perform fabulously on your investments and yet end up with a less-than-satisfactory net amount.
In this article, we will explore how to understand your investment goals, why choose an investment firm, the pros and cons of investment firm, and what qualities make the best wealth management and investment companies.
Why choose an investment management firm?
Making investments has become really easy with the growth of technology and fintech. Anyone can now invest money by simply tapping the mobile phone screen a few times. In the current times, the investment world is literally in the palm of your hands.
However, investing isn’t just about selecting which stocks or mutual funds to park your money into. Investing has to be done with a purpose. Growing your wealth through investments is a vehicle to achieve your financial and life goals.
It is how we, at Pillar Wealth Management, measure our success when helping clients with $5 million to $500 million in liquid assets.
Your investment decisions are also deeply impacted by your own life. Understanding your lifestyle, your motivations, and your current financial situation is a pre-requisite to any investment action.
For example, if your primary life goal is a few decades away, then you know that you have plenty of time on your side. Therefore, your portfolio can withstand higher risks in order to pursue higher returns. For someone who is approaching retirement within the next three years, the age dynamic is very different.
Similarly, retiring at a dream property in a warm-weather location could be the primary life goal. For someone else, the goal could be to start a business, buy a yacht, and send the kids to an Ivy League school. The financial plans for both these individuals are very different. The cash flow requirements and the timelines of those cash flows are also very different.
Accordingly, the investment decisions for both these portfolios will also be different. We haven’t even talked about the taxation scenarios for all of these financial goals. You can read about improving portfolio performance and measuring that performance in this complimentary book.
An educated person can be well-informed about the markets or about tax laws. However, every few people are good at handling multiple financial aspects.
Very few people can have a grip on the markets, have the ability to learn about someone’s goals and motivations, optimize tax outflows, and be able to connect financial goals to investment decisions. That is where an investment firm comes in.
Why choose an investment firm? Firstly, they are experienced in professionally and holistically handling all aspects of a portfolio. Secondly, the stakes are higher with larger portfolios. One wrong decision can cost you thousands of dollars if not more.
When we talk about an investment firmwe don’t just mean a hedge fund or a portfolio management service. We mean someone who can provide a holistic suite of solutions that can cater to all the aspects of a high net worth individual’s financial life. Consider getting in touch with Hutch or Chris at Pillar Wealth management to know what customized investment advice entails.
How to understand your investment goals?
How to understand your investment goals is something you will have to figure out before you even begin the process of finding an investment firm. After all, fulfilling your life goals is the reason why you are investing in the first place. A good investment goal is one that is specific, measurable, and in alignment with your long-term objectives.
One of the best ways to begin crafting your investment goals is to make a list of all the things that you want to accomplish in the short, medium, and long-term. The short-term could include an emergency fund or purchasing insurance policies to manage risk.
The medium-term items could include getting married, starting a business, buying a home, etc. The long-term goals could be retirement, purchasing a retirement property, going on a world tour, and philanthropy.
You can differentiate your goals as per the time when you want to fulfill them. Anything that needs to be accomplished within 1 year can go into the short-term bucket. Goals that could take 2 to 5 years are medium-term while anything that will take 5, 10, or 20 years can be long term.
Once you know your goals, you then try and work out how much money you need for each of those goals.This book on finding the best investment advisor for investors who have $5 million to $500 million talks about the importance of defining the timing of future distributions.
Some longer-term goals like retirement may require a higher amount while short terms goals like an emergency fund may require a smaller amount. Putting an amount to each goal is very important because it makes the goal measurable.
The next step is to think about how much of your wealth you want to spend and how much of it you want to pass on to the next generation. If you plan to leave behind a legacy, then quantify the amount that you want to allocate towards inheritance.
You can schedule your free consultation with Pillar Wealth Management, an investment firm that has 60+ years of combined experience in handling such issues for ultra-high net worth individuals.
Figuring out your investment goals as early as you can in your life will work to your advantage. It will give you the room to plan and fine-tune your strategy. If you wait too long, then your investment planning then becomes relatively more complicated.
The more time you have, the greater will be the number of options at your disposal to fulfill your investment goals. The less time you have, the shorter the list of those options. Some challenges may be impossible to overcome. So start evaluating your investment goals as soon as you can.
As an investor, it is always a good idea to evaluate the pros and cons of investment firm. It will allow you to decide whether you want to work with an investment firm. You will also gain greater clarity on how to shortlist the best investment firm from a list of promising candidates.
The biggest pro of working with a good investment firm is that you get a dedicated advisor. You do not have to call multiple people for multiple things. You work with one wealth advisor who knows your family and your goals, who updates you periodically, and who is there to answer any question that you have.
Trust and relationship are really important when dealing with large portfolios and that is what a dedicated advisor gives you.
The other big advantage of working with a reputed investment firm is the high quality of investment decisions. Professionals who advise clients on investment decisions are quite knowledgeable and experienced. They have been doing it for plenty of years and their track record shows their ability.
Wealth advisors know where to invest and how much to invest in each asset class. They know when to switch from one asset class to another and how to keep costs down. The cost part is often overlooked but a very significant part of any portfolio management activity. Schedule your free consultation to discuss how Pillar Wealth Management makes a commitment to save you money by controlling investment costs.
There are some pitfalls which you should avoid when selecting an investment firm to work with. Firstly, you should get clarity on what the fee-structure of the firm is. Two popular models are fee-only and fee-based. Fee-only means that advisors only get paid a fee and there are no product commissions.
A fee-based model can involve fees and/or product commissions. The big difference is that product commissions incentivize advisors to recommend specific products like mutual funds or insurance policies to the client which may not really be necessary. You might not get the bias-free advice that you are looking for.
Secondly, find out if the investment firm has an independent custodian. A custodian is an institution or party (other than the investment firm) that actually holds your investment. The custodian could be a brokerage or an asset management firm.
An independent custodian minimizes any potential conflict of interest as you do not want your wealth advisor to directly hold your funds.
In order to find an investment firm with the right ratio of pros vs cons, we encourage you to download our guide: The Ultimate Guide to Choosing the Best Financial Advisor: For Investors With $5 Million to $500 Million in Liquid Assets.
Best wealth management and investment firms
The best wealth management and investment companies are the ones that allow their clients to fulfill their financial goals. The firm could be a big brand name or a highly-personalized local service. In fact, the brand and scale make little difference because some big names tend to use cookie-cutter approaches.
They may have too many accounts to manage and may, therefore, invest every client’s money into the same 3 or 4 funds regardless of the client’s goals and requirements.Pillar Wealth Management focuses on quality over quantity and, in fact, signed up only 17 clients last year.
In order to explore if this exclusive wealth management service is right for your needs, schedule your free consultation.
Some firms also tend to shift funds and stocks way too frequently. They do not realize that the short-term capital gains tax will wipeout whatever extra return they are attempting to squeeze out by switching. A good investment firm is one that understands all the implications (including costs) of each investment decision.
The best investment companies also constantly monitor the progress of their client portfolios. Investing is not a click-and-forget activity. It requires constant monitoring of the investments and also of the client’s financial situation.
Regular stress-tests need to be performed to confirm that the client will meet his/her life goals.
Regular feedback needs to be given to the client to keep them up-to-speed with their portfolios. A personal touch is needed to gain the confidence and trust of the client. In this complimentary book on finding the best wealth management advisor for high net worth individuals with $10 million or more in liquid assets, we talk about the 5 non-negotiables that you should seek in an investment advisor.
Lastly, the best investment firms listen to their clients. They genuinely spend time and resources to get to know the motivations, the goals, the lifestyles, and the personalities of their clients. It is only when they know their clients can they craft a customized strategy for each one of them. They tend to focus on depth more than volume.
Hutch Ashoo and Christopher Snyder are the expert founders of independent, fee-only, and fiduciary wealth management firm Pillar Wealth Management.
If you would like to speak with them or simply ask any questions about how custom and trusted wealth management advice is offered to highnet worth individuals with $5 million to $500 million in investible assets, then feel free to start a conversation.
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