The Complete Guide to What We Do
Wealth preservation is important for everyone. Nobody wants to lose what they have, and this is especially true for affluent individuals. When you’ve accumulated that much wealth, you’re always scared to lose it and rightly so. Pillar Wealth Management’s guide for investors with $10 million+ in liquid assets reports why the wealth of high net worth and ultra-high net worth investors are more vulnerable to losses. When you’re an affluent investor, preserving your wealth allows you to create the right foundations for future growth.
If you already have enough knowledge about wealth preservation and are looking for fiduciary wealth managers to help you out, book a complimentary chat with us, and we’ll explain how we can help. Pillar Wealth management is known for its vast experience and can help affluent individuals live a life of financial serenity.
For investors looking to gain knowledge about preserving their wealth, keep reading!
Table of Contents
Why Is Preserving Your Wealth Important?
Wealth preservation and wealth management are two things that go hand-in-hand. You can’t set your investment and asset portfolio up for growth without first making sure that you can preserve it in the first place against market fluctuations.
The market is volatile –it will go up and down due to more factors than you could ever consider. Therefore, you must have solid strategies for preserving your wealth and a way to properly implement them. Once your portfolio has some protection against market volatility, it can form a solid base to build on.
You live stress-free knowing that you won’t incur any major losses. This is more significant than you. At Pillar Wealth Management, we’re visited by many clients who are constantly stressed out about the risky investments made by their old advisors – they’re worried about losing their money!
We’re also frequently visited by investors who’ve lost millions because their advisors did not establish any solid protocols for protecting their wealth.Our ultimate guide on financial advisors provides more insights on why you need to avoid certain kinds of investors if you’re concerned about preserving your wealth.
Your wealth is your potential source of income after retirement, a source of financial security for your heirs, and the culmination of your years of hard work. By not working actively to protect your wealth, you’re doing yourself a big disservice.
That said, let’s discuss what you can do to preserve your wealth starting today.
What You Can Do to Preserve Your Wealth
When you read our guide for individuals who have over $10 million, you’ll realize that preserving your wealth as an affluent investor is a big and complicated task. There are various nuances and factors you must deal with. While we recommend that you visit professional fiduciary wealth managers for the job, there are things you need to know to recognize whether your wealth manager is doing the right things for you.
Here are a few things Pillar Wealth Management experts have found to be important in preserving wealth.
You Need to Have The “Right” Goals
Too often, we see advisors and investors describe their portfolio performance goals in terms of an arbitrary return rate or by describing their risk tolerance.
Our experts have found that questions like “what is your risk tolerance?” are not only redundant in many circumstances but also add more confusion to the mix for investors. That’s because your priorities are always changing. Your risk tolerance and performance appetite will keep changing according to your environment. Plus, nobody wants to put their wealth under unnecessary risk. An advisor should realize that no matter what the risk appetite of a person is, their first priority will always be to preserve their wealth.
Risk tolerance is all about what you want to achieve with your money, not about an abstract sense of how much risk you’re willing to take to get some arbitrary return.
The right goal isn’t a number. Rather, the right goals are all about describing the lifestyle you wish to live, the legacy you want to build, and the achievements you’re looking to prioritize. In fact, they can be about anything you care for. Pulling a number out of thin air to describe your goals is damaging to you and your portfolio. So, what question should be asked?
What do you want your wealth to really accomplish for you?
This is the core of your strategy. It’s the first step in successfully growing and preserving your wealth. You require a customized planning process that will account for:
-Values regarding time and money
-Pursuits you care about
-Your and your family’s health
-Pending/unresolved disputes or deals
-Sources of current and future income now
-And even more…
Pillar Wealth Management’s hardcover book, The Art of Protecting Ultra-High Net-worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million, gives more insight on the factors influencing the goals of ultra-high net worth individuals.
Once you describe what you want from your life, your portfolio will prioritize preserving your wealth to achieve those goals. Want to talk to a wealth manager who understands your priorities? Book a complimentary meeting with us today.
You Need to Look for Financial Security
Again, growing and preserving your wealth is all about helping you live the lifestyle you want. The paradigm shift you need to make in your mind is that optimum performance is about a balance of risk and return. Chasing pure performance hardly ever has any fruitful results in the long run and puts you under a lot of stress. Our guide on portfolio performance optimization has more information on similar philosophy changes that investors need to make.
When investors say they want their portfolio to perform well, what they really mean is that they want financial security without too much risk. For example, an affluent investor who is now retired will usually ask something like, “Can I receive $35,000 every month and be sure that my wealth won’t run out?”.
No one wants performance that puts their wealth under undue risk. They just want balance. Firms like Pillar Wealth Management apply a portfolio analysis process to effectively balance your risk against your definition of security.
Financial security refers to you having enough money in your pockets to comfortably live the life you want. This is all about the lifestyle you want to live and the dreams you want to achieve.
You Need a Financial Plan
Risk tolerance can never equate to financial security until you have a financial plan in place to bring them together. If you don’t, you might as well be shooting in the dark.
The financial plan is integral. Customization is paramount in growing and preserving your wealth. While one individual’s goals might be more suited to being handled with a conservative portfolio, another investor may require a more balanced or moderate one to achieve their goals. This can be the case even when these two types of investors have the same wealth size.
Investment performance is only useful when your goals are in congruence with financial security. Investment performance is not useful when your hunger for returns takes priority over financial security.
Your current financial situation – combined with your values, lifestyle dreams, and priorities– is used to establish the level of performance needed for you to achieve financial security.
All that considered, let’s explore why, as a high net worth family, you need help preserving your wealth.
Why, as a High Net Worth Family, You Need Help Preserving Your Wealth
When you’re a high net worth or ultra-high net worth family, your wealth is not easy to manage. The size of your wealth means that you need someone who can give you the right personalized attention you deserve.
As we discussed earlier, preserving your wealth will require much more than just maximum investment returns. You need to achieve a balance of risk and returns. You need financial security. To do that, firms such as Pilar Wealth Management use advanced components and techniques to balance your investments.
We constantly monitor your portfolio to make sure that it’s on track to give you the financial security you need. You shouldn’t have to spend hours every day worrying about your next financial move and planning your investments.
You should be living life the way you want without any stress. You deserve it. That’s why, as a high net worth family, you need help preserving your wealth.
But what do you need for preserving your wealth? Keep reading to find out.
What Do You Need for Preserving Your Wealth?
Let’s discuss some of the vital factors that play the biggest roles in preserving your wealth. This includes both the things you need to do, and the paradigm shifts you need to make.
Find a Wealth Manager Who Can Help You to Preserve Your Wealth
This is one of the most essential parts of preserving your wealth. Finding the right advisor can transform your life. Wealth managers who know how to optimize your portfolio to provide financial security should be the ones you look for.
Advisors who use cookie-cutter techniques and pre-set investment plans will rarely give you the right platform to preserve and grow your wealth sustainably. Using the same investment plan for affluent investors and normal investors alike will rarely bode well. Your requirements are completely different.
As far as choosing a wealth manager goes, the wealth manager should:
- Have previously helped preserve the wealth of other affluent investors. They should have a track record of success.
- Anchor your portfolio to your goals and priorities
- Know how to form a consistent asset allocation strategy.
- Know how to rebalance your investments to get the best ratio of risk and return.
- Be a fiduciary who doesn’t entertain any conflicts of interest.
Identify Costs That Erode Performance Gains
Costs and taxes alike are some of the most common ways for affluent investors to unnecessarily lose money. Unidentified and unseen, these costs slowly chip away at your wealth and may sometimes leave you with less than what you started with in the long-term.
There at least six avoidable costs you should know of. You should ask your wealth manager about how they plan to tackle these costs and avoid any advisors who charge unnecessary fees or costs. The six costs are:
Performance-based fees are paid out to advisors when your investment attains a certain milestone. On the surface, this cost seems fairly harmless. However, it can hurt you in the long-run because it motivates your advisor to go for aggressive returns. When they’re chasing those returns, they can put your portfolio under a lot of risks. That’s the polar opposite of what you want when preserving your wealth.
Managers who can help you to preserve your wealth would rarely ever charge any performance-based fees.
Bond Spread Investment Costs
The difference between the sell and buy price of a bond is known as the spread. This is usually the way investors that charge “no fees and commissions” earn their money. Not only does this erode your returns, but it also encourages your manager to move your investments around more.
Margin Interest Costs
Margin interest is charged on the money clients borrow against their assets. Though this allows you to free up some capital, it also gets more money under the control of your manager. This does 2 things:
- You pay interest on the money you borrow.
- Your advisor’s fees increase because they are now managing more money.
These costs are very avoidable and a big hurdle in preserving your wealth. Be wary of them.
Internal Investment Costs
The issue with non-fiduciary advisors is that there is a lot hidden in the fine print. When you get extra services, you’re often charged exuberant fees that are only mentioned in the fine print. While the standard option may have a 1% annual fee, opting for extra services may multiply that cost.
Hence, you should always opt for fiduciary advisors who make all costs fully clear.
Active vs. Passive Management
Most money managers are active managers. These individuals will constantly tinker with your investments in an attempt to beat the market and earn a high return. On the other hand, passive managers don’t try to beat the market and only aim to make long-run returns.
The difference in costs is staggering because passively managed funds are only taxed 20% on gains, while actively managed funds are taxed 37%.
Looking at costs like these are an important paradigm shift for preserving your wealth. If you’re interested to learn more about these perception shifts, read our guide here.
Tax Loss Cultivation
Stock market returns can often be influenced by how well your manager balances gains and losses. A smart wealth manager uses the losses of some stocks to counterbalance part of the realized gains from other stocks.
What this does is reduce your tax burden. You can save a lot of money this way and not many advisors know how to do this properly. Furthermore, it takes time and effort to do so.
When it comes to priorities, preserving your wealth is often there around the very top. Your livelihood and your future depend on it. Using the advice in this article, you can successfully navigate the field of wealth management and identify managers that use the right techniques for wealth preservation.
Pillar Wealth Management could possibly be the right choice for affluent investors with $5 million to $500 million. Start looking after your family’s future by talking to us for free.
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