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A wealth management strategy can provide the right foundation for affluent investors to live the life they want without a single worry about their money. These strategies are currently in use by various investors around the globe, but not all of them are particularly successful. That’s because not every advisor understands how to create the right wealth management strategy for wealthy individuals. If you read our guide for investors with $10 million+, you’ll find out exactly why some advisors are unable to provide the strategy their clients need.
When it comes to seasoned firms like Pillar Wealth Management, clients with $5 million to $500 million can find skilled and experienced professionals who’ve done this before for hundreds of other investors. We realize how difficult this process is, and we know how to go about it effectively. If you’re looking to create a wealth management strategy to achieve your personal goals, schedule a chat with us, and we’ll tell you how we can help.
Still a bit confused about wealth management strategies? Keep reading. The topics we’ll explore in this article include:
- What is a wealth management strategy?
- The best wealth management strategy, what is it?
- Paradigm shifts required for a good wealth management strategy
- Requirements of a high net worth wealth management strategy
Table of Contents
What is A Wealth Management Strategy?
Seasoned wealth advisors or managers typically develop a wealth management strategy in an attempt to holistically manage a person’s assets, investments and other finances. Wealth management strategies can be developed for anyone, but the effort required often doesn’t present value for the average investor.
A wealth management strategy is usually best made for high net-worth and ultra-high-net-worth investors who have at least $1 million in investable assets. When you’ve accumulated a large amount of wealth, it becomes very hard to manage every aspect of it efficiently. There are many factors here that require more time and attention than you can spare to give.
For example, affluent investors belong to the highest tax bracket. They have to time their income, balance gains and losses, and deploy other such tactics to avoid being slapped with exuberant taxes. Similarly, they also have to use smart asset allocations to make sure that their investments are protected against market volatility.
None of this is easy. That’s why a high net worth wealth management strategy usually requires the help of a professional wealth manager or advisor like Pillar Wealth Management. For more information on why the needs of affluent investors are different, read this guide for individuals with $10 million-plus in liquid assets.
Note that a wealth management strategy can never be pre-set. If someone tries to offer you pre-set plans for wealth management, it would be better for you to avoid them. This is because the financial situation, future goals, and current priorities will be different for each investor. A pre-set plan can almost never give you the exact result you’re looking for.
The Best Wealth Management Strategy, What is It?
Finding the top wealth management strategies is no easy task because there is no easy answer. The truth is that a particular wealth management strategy may work exceptionally well for one person but be unsatisfactory for another. As we said earlier, it’s all about personalization.
That said, shouldn’t there be some way to find out what’s the best wealth management strategy for you? In fact, there are a few criteria that you should look out for when searching for the top wealth management strategies. There are also a few shifts in assumptions you will need to make inside your mind to get into the right zone for creating the best wealth management strategy.
Firstly, let’s discuss some of the changes in thinking we need to make to create a successful wealth management strategy.
Changes in Expectations You Need to Make For A Good Wealth Management Strategy
Before you can find what’s the best wealth management strategy for you, you need to make certain changes in assumptions to make sure that your thinking aligns with that of a smart investor. These changes in thinking will allow you to think about balancing your risks and returns carefully. They will help you protect your wealth. If you want complete information on the critical shifts for maximizing portfolio growth strategies, you can access our full guide on it here.
Do You Want Investment Performance or Something Else?
While most investors blindly chase the highest portfolio performance possible, we recommend that you stop and think for a moment. The top wealth management strategies are very often not geared around chasing the highest returns.
Think about this: is it maximum performance you want or just financial security? Most of the time, affluent investors are looking for nothing more than financial security. Having financial security means that you have enough income and money to sustainably and comfortably address your priorities and live the way you want. More than that, what most investors truly crave is financial serenity – a situation where you don’t have to think/worry about your money or wealth. This is born from having confidence in your portfolio and wealth management strategy to provide optimum investment performance.
How do you determine what level of performance you need to get financial security? You can determine your optimum performance level by studying your:
– Lifestyle goals
– Current financial situation.
The wealth management strategy developed by your advisor should be centered around these factors.
Change Your Priorities
As a continuation of our last point, evaluate whether money is really the most important thing in your life right now. With just a bit of introspection, affluent investors often discover that the freedom to do what they want, their legacy, their achievements, and their lifestyle are far more important to them than earning a certain level of return.
Ask yourself: what do I want my wealth management strategy to accomplish? There are so many factors to consider before you can even establish your goals. This includes:
– Values about time and money
– Dreams you want to pursue
– Family situation
– Health and the health of your family
– Maintaining a certain lifestyle
– Pending/unresolved deals or disputes
– Sources of present and future income
– Estate and generational planning
– Retirement dreams
– And much more
If you’re an ultra-high net worth family, you may need more help in this regard. The hardcover book on “The Art of Protecting Ultra-High Net-worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million” provided by Pillar Wealth Management can provide better insight for you.
Rigorously Test Your Strategy and Portfolio
More often than not, investors don’t realize how much risk they’re actually carrying. This can be devastating for any investor, much less an affluent one with millions to lose.
Let’s take the dotcom crash as an example. We’ve had loads of clients come to us after losing millions in the dotcom crash. One client who had an estate worth $400 million at the dotcom market peak was only left with $70 million after the crash. Another client came to us when he was left with $5 million from his initial $33 million. You see similar stories everywhere.
We’re not saying that there is a perfect wealth management strategy that can prevent all losses. That would be impossible. However, using the right risk reduction and performance strategies can help you lose a lot less money during such economic crashes. Instead of being left with $5 million, the investor with $33 million may have around $20 million left with the right strategy.
This isn’t about guesswork or using your “instincts.” Getting the right wealth management strategy is all about continuously diagnosing its health and tracking its performance. We need to test it against historical and possible future events. At Pillar Wealth Management, we pit your portfolio against our 1000 Scenario Stress test that contains all these “what if” scenarios. If your strategy performs well against this rigorous test, it’s ready for the real world. For more info on our scenario testing and other components, consult with us via a free meeting.
Evaluate Your Investment Ideology
As mentioned in our guide for maximizing portfolio performance, this is one of the top factors that hold back your wealth management strategy. Most investors and advisors go through with active money management strategies with the belief that it is best for driving performance.
Active money management refers to an investment management technique where the manager or investor attempts to “beat” the market. They want to use the market indexes as benchmarks and beat the returns those indexes make. On the other hand, a passive manager rides the flow of the indexes. They’ll track a specific index, like the S&P 500 or FTSE 100, and follow their path. If the index goes up by 3%, so will your portfolio.
The truth is that active money management rarely manages to beat the market. It’s a technique where you or your advisor are “betting” on the market. It’s often like guesswork. Plus, active managers also charge higher fees from their clients because of all the extra effort that goes into trying to time the market. While active management may work in some circumstances, you have to decide whether the higher costs, taxes and fees are worth it.
Even a 0.8% difference in fees could potentially add up to millions saved in fees over a long period of time by going for passive management options. Many investors argue that the higher fees may justify the higher efforts and higher returns. However, the reality is that numerous studies have shown that active management typically fails to beat the market in the long run. Plus, it’s just extremely stressful because, as we said, it’s akin to betting. You never know what will happen.
So, What Should You Do?
To maximize performance, you can’t commit fully to either active or passive management. Leaving your investments untouched for years is not a great investment choice either. The best ideology you can have is to be prudent in your analysis of active and passive managers. Try to find the perfect balance of investments. Only an experienced fiduciary wealth manager can help you get this balance right. For tips on finding the right advisor, check out our guide here.
Requirements of a High Net Worth Wealth Management Strategy
As mentioned before, a wealth management strategy is complex and always personal. However, there are a few common traits you can find in the top wealth management strategies. Let’s discuss some of them here so you can make sure that your advisor is on the right track.
Centered Around Your Goals
Though we touched on this earlier, it’s imperative that this requirement is met. Without a set of goals to anchor it down, a wealth management strategy will never produce the results you want.
It’s important to note that only your goals are taken into account. Only a fiduciary manager can make sure that there are no conflicts of interest when forming your wealth management strategy. Fiduciary wealth managers are registered advisors who are obliged by the SEC to uphold the highest ethical standards.
While non-fiduciary managers also want to achieve your goals, they may have to contend with other interests too. Therefore, it’s best to go with a fiduciary advisor that centers the strategy around your goals. Schedule a chat with us, and let us tell you how we can help.
Cuts Down Unnecessary Costs and Taxes
Costs and taxes are the bane of every affluent investor’s existence. Though they look small individually, each extra cost can pile up and cost you a lot! A smart wealth management strategy will contain ways for you to cut down on unnecessary costs and tactics for you to avoid paying higher taxes.
For example, you can pay up to 80% less in taxes on your capital gains by making sure that they remain untouched for at least a year.
Other examples of costs you can avoid include:
– Bond sale spreads
– Margin interest costs
– Passive vs. active management fees
– Internal hidden costs
– And more…
As stated in our portfolio performance guide, reducing these costs can help you achieve financial security much more easily.
This is extremely important. Protecting your portfolio against market volatility goes beyond simple diversification. It requires a sustainable and efficient asset allocation strategy. Experienced firms like Pillar Wealth Management recognize that having a healthy balance of investment in cash, equities, and bonds will be very effective in safeguarding your portfolio against adverse market volatility.
Though it won’t completely protect you from incurring a loss (nothing can), it will make sure that the loss is minimized in case of a bad circumstance.
A successful wealth management strategy has the power to take you to new heights and give you the freedom to live life without any financial worries. As someone who’s worked their entire life to get where they are, you deserve that at the very least. The tips in this article should allow you to separate effective wealth management strategies from ineffective ones.
If you’re part of a family with $5 million to $500 million and are looking for a fiduciary wealth manager to create a high net worth wealth management strategy, we may just have the answer. Pillar Wealth Management experts have successfully managed the wealth of affluent clients for decades. We understand your concerns and troubles. We’re here to solve them. Speak with us by booking a free meeting, and let’s start working towards your financial serenity.
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