Ultra-high Net Worth Investment Strategies — PillarWM

As an ultra-high net worth individual, you may face unique obstacles when investing, irrespective of whether your assets are liquid (such as bonds and stocks) or non-liquid (such as commercial or residential real estate). As a result, you need the best ultra-high net worth investment strategies to protect your assets and grow your wealth sustainably. Such investment strategies take a big picture approach to financial planning — including insurance, estate, and tax planning, and asset protection. If you plan to invest liquid assets of $5 million or more, you should get a free copy of our recently published book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.

At Pillar Wealth Management, we provide investment management services to high net worth and ultra-high net worth individuals who have liquid assets worth $5 million to $500 million. Our investment services entail portfolio design, research, due diligence, tax-loss cultivation, asset allocation, and analysis. To get more information about the investment management services we offer, book a free video consultation with one of our wealth managers.

What’s Considered Ultra-High Net Worth?

The term ultra-high net worth individual is used by the financial industry to designate their most affluent clients for exclusive services.

It is commonly accepted that an ultra-high net worth individual is a person who has liquid assets worth $30 million or above. There is no legal or official definition of an ultra-high net worth individual, and the threshold for ultra-high net worth is typically understood to include only liquid assets — money kept in brokerage accounts or banks — excluding assets such as durable goods, a primary residence, or collectibles.

Financial experts typically classify wealth in the following three ways:

• High net worth individuals — Families or individuals who own liquid assets ranging in value from $1 million to $5 million.

• Very high net worth individuals —Families or individuals who have liquid assets valued at $5 million to $30 million.

• Ultra-high net worth individuals — Families or individuals who have liquid wealth that is worth over $30 million.

Given their enormous wealth, ultra-high net worth families and individuals need additional services from wealth advisors and financial managers. Financial services for ultra-high net worth individuals include investment management and tax advice, along with assistance with estates and trusts, and access to private equity firms and hedge funds.

Determining Net Worth

Determining your net worth to see in which category you fall means simply subtracting your liabilities from the total value of your assets. The result is your net worth.

Net Worth = Assets – Liabilities

Note that when determining your net worth, you should only take into account liquid assets. If your calculations reveal that your net worth is over $5 million, the first thing you need to do is get a copy of 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning. This book was written to help wealthy individuals get a detailed insight into the world of financial planning.

Ultra-high Net Worth Investment Strategies

Ultra-high net worth individuals tend to have a policy of privacy regarding securing their assets. Nevertheless, many of them don’t want to risk managing their assets themselves, so they hire a financial advisor. To successfully invest your wealth, you need to apply the following strategies:

1. Have a Comprehensive Financial Plan

A financial plan helps individuals understand their risk tolerance and how it can change as they move forward in life. Sticking to a logical and sound plan can prevent ultra-high net worth individuals from looking at the market on the basis of their emotions. It keeps them disciplined, which is incredibly important if investing for the long run.

2. Start Investing Early

The longer money stays invested, the more it has the potential to increase. As ultra-high net worth individuals start investing early, they are able to capitalize on compounding effects and create opportunities to purchase at an average cost. A person who starts contributing money to a retirement account from the age of 20 will surely have the edge over someone who starts doing it at 30.

By the time these individuals reach the age of 65, the one who began earlier has a much higher chance of having a financially sound retirement, which also depends on the amount and consistency of their contributions to their retirement accounts. If you are an investor with $10 million or more in investable assets, you can find out some of the top investment strategies by reading our book.

3. Invest in What they Understand

Keep away from investment strategies that are too complex, obscure, or out of your wheelhouse to keep up with. Make sure you have knowledge about the company, the industry, and the sector if you are going to invest in a specific stock.

Some investors are attracted to companies that manufacture products they like and use. However, they may confuse a good product with a good investment opportunity. If you’re planning to invest in a product or restaurant chain that’s swiftly gaining popularity, find out if the company has a sustainable business model and has suitable pricing.

In contrast, some investors don’t have the expertise or time to comprehend the intricacies of what makes particular stocks in specific sectors good investments. Keep in mind that the most important thing is to comprehend the investment approach as it provides clarity to every investment.

What Do the Ultra Wealthy Invest In?

A common question people have on their minds is, “What do the ultra wealthy invest in?” To answer this question, here are some of the most commonly used financial and investment products that the ultra-wealthy invest in.

1. Commercial and Residential Real Estate

It’s widely known that ultra-high net worth individuals look at real estate as a perfect investment option. Real estate is categorized into two types — commercial and residential.

Many ultra-high net worth individuals purchase multiple residential properties that they either rent or use as vacation homes to create a source of income. Plus, commercial properties are high-income-creating and low-risk assets. Some of the commercial real estate options that ultra-high net worth individuals invest in include warehouses, office space, and shopping centers.

2. Tax-Free Municipal Bonds

Tax-free municipal bonds are another excellent pick for ultra-high net worth investors. Municipal bonds are fixed-income investments that are issued by cities, states, government agencies, and other entities like a housing authority or a port authority. Many projects, like hospitals, bridges, roads, and stadiums, are financed by issuing municipal bonds.

The benefit of municipal bonds is that they provide higher post-tax returns than other similar corporate or taxable government bonds. You can learn how to increase your after-tax returns in our guide, Improving Portfolio Performance. Also, the interest on municipal bonds is generally exempt from federal taxes and, sometimes, state and local taxes too.

3. Growth Stocks

Buying and keeping growth stocks is a passive investment technique that’s favored by many ultra-high net worth individuals. You can read our hardcover book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 Million to $500 Million, to learn more about the difference between active and passive investment techniques.

Growth stocks may or may not provide dividends. Nevertheless, they’re a lucrative investment opportunity as they offer returns via share price appreciation. In addition, there are plenty of benefits of investing in growth stocks. For example, if you invest in growth stocks, you will not have to pay taxes while you keep the stock. Moreover, if you hold the stock for over a year, your gains will be taxed as long-term capital gains. 

4. Unregistered Securities

Unregistered securities are also a great investment opportunity for ultra-high net worth individuals. These are shares of stocks that do not trade on financial markets and have not gone through the typical IPO process.

For unregistered securities, a few private offerings typically happen before an initial public offering where ultra-high net worth investors can buy a company’s shares. You can set up a video meeting with our team members to learn more about unregistered securities and find out if they are right for you.

As opposed to publicly traded firms, privately traded firms don’t need to prepare quarterly and annual reports. Many smaller businesses and companies work on a similar pattern.

What Do Rich People Buy?

Some ultra-rich individuals buy luxury items to impress their family and friends. Here are some of the things rich people purchase.

1. Private Islands and Land

Ultra-high net worth individuals love to purchase huge tracts of land. Often, the uber-wealthy purchase land — such as remote islands — for lavish estates and villas.

2. Yachts or Boats

Rich people love spending on yachts and boats.

Yachts are extremely expensive to maintain and require a full-time crew. Many affluent people splurge on these big-ticket items to impress others.

3. Trips to Outer Space

For ultra-high net worth individuals such as Elon Musk, Richard Branson, and Jeff Bezos, who have invested billions of dollars into personal space flight programs, the sight of a clear night sky isn’t good enough. Jeff Bezos, in particular, spent more than $5.5 billion for four minutes in suborbital space aboard his Blue Origin vessel.

4. Fossils

Many millionaires love spending money on fossils. In 2007, Nicolas Cage outbid Leonardo DiCaprio for a $276,000 Mongolian dinosaur skull. However, the skull turned out to be stolen. Thus, Cage later had to give it to US authorities.

At an auction that took place in France in 2018, an unknown buyer spent nearly $2.6 million on a dinosaur’s fossil believed to have come from the Allosaurus genus.

Why Should You Choose Pillar Wealth Management?

Ultra-high net worth individuals can benefit significantly from working with a wealth manager.

1.Experience

Experience is a crucial factor used to gauge the reliability of a financial firm. At Pillar Wealth Management, we have a combined experience of more than sixty years in helping ultra-high net worth clients meet their financial needs. This experience has helped us expand our knowledge and improve the quality of service we deliver.

2.Custom Financial Plans

We offer custom financial plans to our clients, which align with their investment portfolio and unique needs. This is quite different from the investment managers who follow the same investment approach for all their clients, regardless of their financial circumstances and needs.

We know the importance of assessing each client separately and offering customized solutions to help them achieve their goals.

3.Wide Range of Services

Unlike many other investment companies, we offer a vast array of financial services. This entails services related to legacy and estate planning, wealth transfer, balance sheet optimization, insurance planning, and more. All of these services play a crucial role in helping you move closer to your financial goals. You can schedule a video meeting with us to find out more about the services we offer.

A Few Last Words

Pillar Wealth Management is an experienced wealth management firm that provides investment services as well. We assisted our clients in maintaining financial stability during the 2008 financial crisis and are working to help them stay financially secure during the COVID-19 pandemic. To find out how we can help you, sign up for a free meeting with one of our competent financial experts today.

 

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