Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years
Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years
Everyone aspires to grow their assets and wealth and become financially stable to attain success as well as peace of mind. Unfortunately, growing wealth isn’t as simple as it sounds and requires a comprehensive financial strategy. You have to regularly review it and have a precise understanding of where you’re going. The creation of an effective financial plan can be based on a few key strategies in financial management, one of which is the preservation of wealth. You can read this ultimate guide for investors with $10 million and more to get an in-depth understanding of how you can preserve and grow your wealth.
Given the rapid changes taking place around us and the economic, social, and political instability that accompany them, the preservation of wealth has become crucial for successful wealth planning and asset management. Once you begin to preserve your wealth, you get yourself on the road to growing your wealth by making suitable investments and sticking to a well-devised financial plan. At Pillar Wealth Management, our team specializes in creating comprehensive financial plans for investors who have liquid investable assets worth $5 million to $500 million.Click here to schedule a free consultation session with us today.
Table of Contents
What is Preservation of Wealth?
Preservation of wealth is primarily a strategy that ensures that your assets continue to grow and allows you to leave a significant and meaningful legacy behind for your family. There are several investment and wealth management plans that are all aimed at preserving and securing your wealth for the long-term.
In a nutshell, the preservation of wealth is essential for high net worth and ultra-high net worth investors as it leads to a wealth management plan’s success. Before we move forward, we would recommend you to read The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies for Families worth $25 Million to $500 Million. This is our recent hardcover book that you can read to develop a deeper understanding of the importance of preserving your wealth to maintain your high net worth status.
Preservation of Wealth Gold
While a large percentage of people hold the view that fiat currencies are solely worth the paper they’re printed on, gold and silver, and other precious metals have long been held in high regard. History has stood by precious metals and a way to preserve wealth and tangible assets that can be easily liquidated and transferred. To put things into perspective, let’s look at the following example –
During the early 1970s, you could buy one ounce of gold at $35. Let’s assume that at that time, you had the option to simply keep the $35 or purchase and hold an ounce of gold. Both these options would allow you to purchase the same things, such as a fancy bicycle or a designer business suit. However, if you owned an ounce of gold today and converted it for present rates, you would still be able to purchase a fancy bicycle or a designer business suit, but the same cant be said for the $35.
In simple words, you would have lost a significant percentage of your wealth if you had chosen to keep the $35 instead of purchasing an ounce of gold. This is because gold’s value has gone up, whereas the dollar’s value has weakened due to inflation.
List of Wealth Preservation Prices Strategies
By now, you will have a fair idea of what is the preservation of wealth and its importance. So, more than anything, you should focus on preserving your wealth for the long-run. Here is a list of wealth preservation strategies that you can adopt to protect and grow your wealth.
1. Choose the Right Financial Advisor
As a high net worth or ultra-high net worth individual, you should always work with an independent and fiduciary financial advisor instead of brokerage houses or large banks. A financial advisor who has the relevant experience will allow you to make the right investment decisions and create holistic financial plans that you can follow to preserve your wealth. To help find and choose the right financial advisor, make sure to read, The Ultimate Guide for Choosing the Best Financial Advisor for Investors with $10 Million – $500 Million in Liquid Assets.
2. Aim to Minimize Your Costs
A crucial aspect of preserving your wealth is minimizing your costs. In fact, you should be obsessed with keeping your costs to a bare minimum as they can total up to millions of dollars in the long run. By lowering your tax obligation, removing the most actively managed investments in your portfolio, steering clear of large investment firms, and choosing not to work with non-fiduciary financial advisors, you can effectively preserve your wealth.
Keep in mind that a significant chunk of the wealth you create can get lost to such costs. Thus, if you really want to preserve your wealth to leave a legacy behind, you need to avoid all such costs. Read our special guide, Improving Portfolio Performance – The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity, and learn why avoiding costs is essential for preserving wealth.
3. Avoid Private Equity and Hedge Funds
Both private equity and hedge funds are non-liquid and high-risk investment options. Once you have invested your money, you can’t get it back, sometimes for as long as a decade. You might expect to receive a higher return with such a structure than what you could get if you opted for more conventional investment options.
However, if you take a look at the data on private equity and hedge funds, you’ll discover that they seldom outperform the common market indexes. In fact, the returns in hedge funds are more fluctuating than the returns of mutual funds and those of market indexes.
Since private equity and hedge funds are more volatile, frequently underperform, and carry a higher risk, you can end up losing your wealth.
4. Focus on Asset Allocation
Asset allocation is the single most important determinant of investment growth. It is essentially an investment strategy that aims to create an optimum balance between risks and returns.
Several financial experts will tell you that asset allocation is more critical than just diversification. Allocating your assets in cash, equities, and bonds can allow you to enjoy high returns during phases of economic boon and fare well in periods of economic slumps.
For high net worth and ultra-high net worth investors such as yourself, success means effective preservation of wealth. It means to grow wealth by making intelligent decisions, not lose it by making poor ones. And efficient asset allocation is a smart move!Read our ultimate guide for investors with $10 million and more to learn why smart investing is all about asset allocation driven by your financial goals.
There are several large banks and firms that will tell you to opt for a 60/40 or 70/30 equity to bond ratio or something along those lines. But these large banks and firms are wrong because such investment plans aren’t aligned with your financial goals.
At Pillar Wealth Management, we understand the value of effective asset allocation and were happy to discuss the intricate details with you. Click here to schedule a free consultation and see how we can develop the perfect asset allocation plan for you.
5. Build A Diversified Investment Portfolio
A diversified portfolio of investments is a portfolio that comprises various assets that earn the highest return for the lowest possible risk. A typical diversified investment portfolio consists of a mixture of fixed income, commodities, and stocks. Diversification is effective because these three categories of assets respond differently to the same economic event.
In a well-diversified portfolio, the assets do not correlate with one another. Thus, when the value of one asset increases, the value of the other decreases. This helps to minimize the cumulative risk because certain asset categories will increase in value regardless of what happens in the economy. A diversified portfolio helps to offset any losses in the other asset categories. Risk is also lowered because it’s unusual for a single economic event to wipe out your entire investment portfolio. All in all, a well-diversified portfolio is the best way to protect yourself from a financial crisis.
Keep in mind that portfolio diversification is quite different from asset allocation. For instance, if you wish to diversify your portfolio, you will have a mix of treasury bonds, municipal bonds, and bonds of different ratings. Diversifying is the opposite of entrusting 70 percent of your wealth to stock options in one company.
6. Focus More on Passive Investment Approaches
An active investment approach is when financial advisors engage in frequent buying and selling transactions and invest your wealth in hot buys and trending products. The active investment approach is excellent for creating short-term results.
However, the downside is that a high management fee usually accompanies active investment management. Moreover, since active investment creates short-term capital gains, it results in several taxable events. Such events are then taxed at the marginal tax rate, which is currently 37 percent.
On the other hand, passive investment management is a great approach to preserve your wealth in the long-run. It includes monitoring the indexes of financial markets and making use of data for investment decisions. Not only does passive investment management come at a lower fee, but it is also taxed at a rate of 20 percent. Because the passive investment approach results in less turnover, disruption, and a lower tax rate, it can allow you to cut back on several costs, which ultimately plays a significant role in the preservation of wealth. To know more about the differences between active and passive investment management, read our guide 5 Critical Shifts for Maximizing Portfolio Growth Strategies.
Our financial advisors at Pillar Wealth Management know how to create an optimum balance between active and passive investment management. This will allow you to preserve your wealth in the best possible way. To get started, click here, and speak to one of our financial advisors.
7. Plan in Advance for Unpredictable Life Events
Life can take an unexpected turn, and the life of a high net worth or an ultra-high net worth is no exception. Some of the turns can change your financial situation and cost you a significant amount of money. While other life events may not cost that much, they will change the direction of your life. Such events include:
– Looking after children with special needs or aging parents
– Medical problems for you or your loved ones
– Obtaining a substantial amount of inheritance
– Facing catastrophic national or global disasters or events
– Getting a divorce.
Life events such as these can happen with anyone, even affluent individuals. With intelligent planning and guidance from a fiduciary financial advisor, you can factor in such circumstances into your investment portfolio plan.
Start Your Wealth Preservation Planning Today!
At Pillar Wealth Management, we offer exclusive fiduciary services to those with significant wealth. Our team has over six decades of combined experience in devising customized financial plans for families and individuals with $5 million to $500 million in liquid investable assets.
Unlike the major Wall Street institutions and other massive financial firms who are more concerned about their assets under management and shareholders, we focus more on planning our client’s retirement and investing legacy. Our clients ask for more and truly deserve the completely tailored planning and investment advice that we offer. For this reason, we only work with a limited number of clients each year. In fact, this year, we took only 17 new clients so we could offer customized services and advice to all our esteemed clients.
Pillar Wealth Management is a financial partner that will stay with you for the rest of your life. To start working with our team, click here and book a free consultation session with our team.
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