There are many organizations and individuals out there who offer financial services. But how do you know who to trust your wealth with as someone with a high net-worth? Sure, you could have different advisors for the range of your financial needs. These fragmented relationships with an accountant, a banker, a tax professional, and several other people on your financial management team might not lead to one coherent financial strategy, however. The solution might seem simple when it is laid out for you, and for that, we need to explain what is private wealth management and discuss why private wealth management might be the best financial planning service available for you.
Are you searching for a private wealth manager? Our book The Ultimate Guide to Choosing the Best Financial Advisor for Investors with $5 Million to $500 Million in Liquid Assets will help you find an advisor that meets your needs.
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What is private wealth management?
Accountants, insurance agents, stockbrokers, and financial planners all adopt the name “financial advisor.” Yet it is only wealth managers that offer a comprehensive set of services specifically for high net-worth and ultra-high net-worth individuals. So what is private wealth management exactly? A wealth management advisory manages your investments and helps you follow a holistic financial plan. The role that your private wealth advisor plays will span several different financial services, from banking to estate planning. And their goal is to ensure that you plan for and achieve your financial goals using a variety of investment strategies. Think of them as the quarterback for your financial team.
As a wealthy individual, you have diverse needs and therefore require different services than the average person. Managing your own wealth takes not only a great amount of knowledge, but extensive time as well. Specializing in investment strategies, tax liability, insurance options, estate planning, and other financial services is not possible for one person alone. Yet, with a private wealth management firm, you have access to professionals that understand the best ways to grow, protect, and pass on your wealth to future generations.
When you have anywhere from $5 million to $200 million in liquid financial assets, it is important that you have specialists managing your wealth. Your average financial advisor that does not focus specifically on high net-worth individuals simply does not have the required skills to actively manage your investment portfolio. They also cannot establish a complex financial plan that meets your unique needs. An account this large commands more time, work, and expertise that is possible for someone that’s not a specialist. Therefore, it is best to turn to private wealth management that can provide the services you need.
With that in mind, there are some similarities between financial planning and private wealth management. Are you curious about how private wealth management works? Let’s take an inside look at what you can expect from a private wealth manager.
Before learning more about wealth management, get your copy of Improving Portfolio Performance: The Shifts Multi-Millionaires Must Make To Achieve Financial Security and Serenity from our team here at Pillar Wealth Management, LLC.
Here’s how private wealth management works
Like most financial services, private wealth management starts with a plan. First, your advisor helps you take your goals for the future and uses these goals to create a comprehensive a wealth management plan. Of course, it is more complex than that, especially when it comes to managing wealth of high net-worth individuals. That is because this plan involves several factors. First, you have goals that you would like to achieve within a specific period. Some examples of goals you are focusing on may include planning for retirement, transferring wealth to loved ones, or building your wealth for a major purchase like a vacation home, boat, or otherwise. These are the goals that you are aware of, which your wealth manager can help turn into a tangible goal.
However, those are not the only financial goals that arise within someone’s lifetime. There are also goals that we do not think about and cannot plan. For example, at some point you or a loved one might have surprise expenses, such as significant medical bills. In addition to considering your known goals, a wealth manager will also help you plan for unforeseen troubles in your life. Having a plan in place that covers unforeseeable life events will keep the rest of your finances safe. Because of the possibility of unplanned goals, your wealth manager must account for future goal changes throughout your relationship.
To help you reach your wealth management goals, wealth managers typically go through a questionnaire with you. This questionnaire will detail your entire financial situation, touch on your goals, and uncover your risk profile and investment objectives. Your risk profile essentially helps your manager determine how to invest your assets to meet your goals. The risk profile your wealth manager matches you with depends a lot on the stage in life you are in, as well as how you think about and accept risk. Here is an example of how private wealth management works for people at different stages in their lives.
Let’s say you have two people, Tim and Suzy. Tim is nearing retirement age and he wants to ensure that he has the same standard of living once he is finished working. He has done extremely well for himself and has a sizable net worth. However, Tim understands that Americans are living longer these days, and he does not know whether his investments can last for twenty-five to thirty years. He sometimes even worries about incurring medical expenses and needing to rely on his children. Why is this important to Tim? Because his primary goal is to preserve his wealth and pass it on to his children, and maybe even his grandchildren. Yet, even with this goal, Tim does not want to give up the conveniences he is used to.
Then you have Suzy. Suzy and her husband just upgraded their home, as they are expecting their second child. She has an excellent job and has saved a bit for retirement, has a retirement fund, and little consumer debt. The most important thing for her is making sure that her children have enough in their college funds to go to a great private school. After her monthly expenses, there is a little left over to add to the fund. But she is concerned that in the future when her children are ready to go to college, there won’t be enough in their education fund.
As you can tell, these two simple profiles highlight two quite different life stages. Whereas Tim likely wants to find a way to preserve his wealth, without incurring risk, Suzy will likely want a more aggressive investment plan to meet her financial goals. While Tim’s perception of how much risk is involved in specific assets might stop him from searching for volatile investments with potential upside, Suzy might feel the need to be more of an aggressive investor to secure her children’s education. A wealth manager’s questionnaire will uncover diverse needs, which will help while establishing individual investment plans.
Determining whether your goals are realistic
After understanding their client’s needs, a wealth manager will determine whether your goals are realistic. Your advisor might use tools like a capital needs analysis to see whether you can accumulate the money needed to reach your goals. To do this, they’ll look at your budget and how you spend money, the assets and liabilities you have, and determine the cost of meeting your goals. Your advisor will be honest with you about what is possible and draft a plan for you to achieve the financial goals you have set.
From there, you will likely receive an investment policy statement or another investment plan from your advisor. This document helps you understand exactly how your wealth manager will make investments with your assets that help you reach the goals you have set. It is the investment plan for the short- and long-term, which guides your wealth management strategy. Investment policy statements usually include information about your ideal asset allocation, outlines the level of risk your investments might assume, lists all the service partners that will help you achieve your financial goals, and more. Although this document does change along with your financial situation and goals, it is there to act as a guide. It will also serve to keep you from requesting a reactionary change to your long-term wealth management strategy in the case of a market correction or economic recession, with the pullback and rally from 2020 providing an important example and reminder.
Managing your investments
Once you have approved your investment plan, your wealth manager builds your investment portfolio. As time goes on, it is your private wealth manager’s job to keep you informed on investment performance. You will have a quarterly or annual review together to discuss changes made to your investment portfolio or your strategy to achieve your goals. This is often done over the phone, using video conferencing tools, or in person.
Now that you understand the process of private wealth management, let’s discuss the different types of private wealth managers available to select from.
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Types of private wealth managers
There are not different types of private wealth managers much as there are various private wealth management firm structures. For the most part, wealth managers participate in the same activities, like creating an investment plan for their clients and managing investment portfolios. However, it is the organization and support structure of the private wealth management firm that makes all the difference. This does not mean that a small firm cannot be as or more effective than a larger one.
There are a wide variety of private wealth management firms out there. Some consist of smaller departments from larger banks or investment firms. Others are made of independent wealth management groups. In addition to smaller private wealth management firms, there are also firms that work with one family, or several select families. However, firms that focus on the needs of one family’s wealth are not as commonplace as they once were.
Why would someone consider a smaller private wealth management firm instead of selecting a well-known wealth management brokerage house? The independent firms can be more discerning with their clientele. They might do this to ensure that any high net-worth individuals they work with align with the firm’s focus. This allows them to offer services with a specific type of client in mind, which the wealth managers are specialists in. Some independent private wealth management firms also limit the number of clients they accept to provide the highest quality service possible.
Learn more about private wealth management from professionals in the business. If you’re a high net-worth individual with $5 million to $500 million, schedule your consultation call with Pillar Wealth Management, LLC.’s co-founders Hutch Ashoo and Chris Snyder today.
Here’s why you should hire the best private wealth manager
Are you looking for a wealth manager for your family? Here are several reasons why you should hire the best private wealth manager.
Firstly, the right private wealth manager is going to learn about your goals and produce an investment strategy to get there. Whenever someone is investing for you, especially if you have a multi-million-dollar portfolio, there needs to be trust and understanding in your relationship. It is vital that you find someone you can trust that will do what’s in your best interest.
Secondly, wealth managers understand investing strategies and know how to grow or preserve your wealth, depending on your needs. They will take into account your preferred investing strategy, your risk tolerance, and several other factors, to create a portfolio that works well for you.
Finally, a great wealth manager understands taxes. They should place your investments in the right accounts to minimize your tax liability. Wealth managers also know a variety of techniques for ensuring that you keep more of your cash, while legally paying the least amount of taxes, throughout your investing career and even through your eventual estate. This will help you in every aspect of financial management from planning for retirement to passing on your generational wealth.
If you want to know why you should hire the best private wealth manager as a high net-worth individual with $5 million to $500 million, make sure you speak to our team at Pillar Wealth Management, LLC. Schedule a no-obligations consultation call with co-founders Hutch Ashoo and Chris Snyder today.
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