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Wealth Management Services Every High-Net-Worth Individual Should Consider

Financial advisors are an indispensable cog in a successful financial plan. They can help investors achieve their goals in the most suitable way. They can help with tax planning, retirement planning, debt management, and more, as well as streamline an individual's finances to avoid any lapses. Most people can benefit from hiring a financial advisor, irrespective of income or age. However, the need for a professional manager increases in the case of a high-net-worth individual.

High-net-worth individuals can be categorized as those who have a minimum of $1 million worth of liquid assets. People who own $30 million or more are further called ultra-high net worth individuals. The U.S. has the highest number of billionaires in the world. Forbes reported over 735 billionaires in the country based on stock prices and exchange rates from March 11, 2022. These 735 individuals have a collective net worth of $4.7 trillion. Although not all high-net-worth individuals are billionaires, the value of their estates is still considerably large. In addition to this, most of these wealthy investors have complex portfolios of international stocks, venture capital, cryptocurrencies, non-fungible tokens (NFTs), real estate, collectibles, and more. High-net-worth individuals may also have philanthropic undertakings like charities. Moreover, planning their estate can be a complex process. These people are also amongst the highest tax payers in the country, which can end up impacting their overall finances. 

High-net-worth wealth management becomes a necessity to ensure that high-net-worth individuals are able to preserve their wealth. Given the size of their estates and the livelihoods that may depend on them, it becomes essential to hire a professional wealth manager who can navigate through concerns like high tax brackets, high-risk investments, market volatility, cyber security threats, legal liabilities, and more, and devise a solid financial plan that can stand the test of time and ensure a lifetime of financial security. Professional high-net-worth services can also help save time and effort that can otherwise be spent on earning more money, enjoying the earned wealth, and attending to personal and professional commitments. 

If you are wondering what services ultra-high-net-worth clients can benefit from, here are some of their concerns and ways in which suitable advisor an help. 

1. Tax planning:

One of the first ultra-high-net-worth services that most wealthy individuals can benefit from is tax planning. The highest income tax rate in the U.S is 37%. In addition to this, high-net-worth individuals can have multiple investments that can qualify for different tax treatments. For instance, capital gains tax, estate tax, state tax, and more. Having a combination of different assets can complicate taxes and evidently increase the tax output. Individuals with a high-net-worth may also invest in different markets globally, leading to multiple taxes. This can be hard to manage. Tax laws are constantly changing, and it can be challenging to keep track of the latest tax policies to lower taxes. 

Tax planning is one of the most essential high-net-worth services at present and is likely to be in the future because of the proposed Budget 23 by the Biden administration. The present government's Treasury Greenbook proposes to increase the top tax rate to 39.6%. Additionally, the government has also proposed introducing a minimum tax for wealthy individuals. Some types of capital gain could be taxed at ordinary income tax rates. If these tax rules are changed, the need for high-net-worth wealth management will considerably rise more. 

A professional wealth manager can help high-net-worth individuals reduce their taxes with strategies like tax-loss harvesting. Gifting can be another way to save money spent on tax, especially when passing on your estate to your beneficiaries. In 2022, the lifetime gift tax exemption is $11.7 million. So, you can give cash and assets worth $11.7 million in your life without owing tax on it. The limit for married couples is further increased to $23.4 million. High-net-worth advisory firms can also suggest qualified charitable distributions (QCD) from an Individual Retirement Account (IRA) to individuals over the age of 70.5. QCDs are paid to a chosen charity directly from the IRA. This can be paid to the church or any other charitable organization. Since many high-net-worth individuals like to hold a positive social image through charities, this can be an excellent way to save on tax. 

2. Risk management:

High-net-worth individuals are exposed to high risks, including lawsuits, investment risks, theft, and more. These individuals may invest in high-risk investments that can add a significant amount of volatility and instability to the portfolio. Ultra-high-net-worth services can help them lower some of this risk by creating a well-diversified portfolio. Diversification is necessary for every investor, even the wealthy ones. Spreading money across investments of different market capitalizations, themes, sectors, markets, etc., can lower risk and, at the same time, increase the chances of earning better returns. High-net-worth wealth management can help wealthy investors devise the right asset allocation strategy to negate investment risk considerably. 

Loss of life, poor health, theft, and more can also be causes of concern for high-net-worth individuals. One way to deal with this can be through insurance. Homeowner's insurance, life insurance, health insurance, insurance for jewelry, cars, and other collectibles, etc., can all be highly crucial for high-net-worth individuals. Theft, damage, or even neglect can lead to diverse situations that can result in losses and shortage of money. Insurance can help mitigate this risk. 

Lastly, high-net-worth individuals can struggle with legal liabilities, the threat of creditors, and litigation from businesses. High-net-worth advisory firms can provide comprehensive wealth management services that include legal advice to ensure financial protection against such legal hassles. 

3. Estate planning:

Most individuals intend to create an estate plan to leave their assets and money behind to their loved ones and beneficiaries. Estate planning can include a will that states the basics of how a person's wealth has to be distributed. The will is a conclusive legal document that contains the names of beneficiaries, the percentage of assets or wealth designated to each beneficiary, and more. In addition to this, an estate plan includes trusts. Trusts are legal entities that establish rules of how and when the concerned wealth can be used. It is most commonly used for minors. For instance, a trust can contain rules like the age the beneficiary can withdraw their inheritance or the purpose for which the trust money can be used. Estate plans also include information on legal guardians for minors or disabled beneficiaries. They can contain power attorneys and health directives, too, in case the estate owner suffers from a mental or physical disability and is not able to make decisions anymore.

Since high-net-worth individuals can have large estates, having an estate plan is critical. Moreover, estate planning can go beyond finances and include legalities, too. Therefore, it is vital to get a professional perspective to ensure that the will and the rest of the estate plan provisions are not contested in court. Having an estate plan is also essential to make sure the will does not go through a probate that can be costly and time-consuming for the family members.

Estates also incur taxes at the federal and state levels. At present, an estate valued below $1,000,000 does not qualify for state tax. However, high-net-worth individuals with assets valued higher than this limit could be subjected to state tax, depending on the state they reside in. For example, Washington charges state tax on an estate worth $2,193,000 or more. On the other hand, Connecticut charges state tax on an estate valued at $7,100,000 or more. As far as federal tax is concerned, an estate valued at more than $12.06 million can be taxed. The beneficiaries, including the spouse, may also have to pay an inheritance tax. High-net-worth advisory firms can help devise ways to reduce these taxes. One such way to do this is by using the gift tax exemption that allows an individual an exemption of $16,000. This limit is applicable to one person. So, couples can use this to split their assets among their children by claiming a combined limit of $32,000. 

4. Real estate:

Real estate investment can be costly and risky. The investment amounts can be gigantic, depending on the location and purpose of investment. Most high-net-worth individuals have real estate investments in multiple cities and countries around the world for business and personal reasons. However, the management of their assets can be challenging. High-net-worth wealth management includes real estate advisory that can help investors make better investment decisions. This can involve finding the right investment opportunities, knowing when to sell to make a profit, and leasing to earn money. Real estate investment differs from other kinds of investments as it can be income-generating in multiple ways. Real estate can also be a family asset with joint ownership that can be passed down to generations. Wealth managers can help with all of this and enable investors to make lucrative decisions to maximize their profits and lower the risks. 

5. Retirement planning:

Retirement planning is common for all individuals, but things can be a bit more intricate for high-net-worth individuals. Many wealthy people are able to reach their financial goals early in life, which may push them towards early retirement. It can be very complex on paper, as attractive as this may seem. Early retirement for a high-net-worth individual includes high savings and ensuring multiple streams of income for a long time to ensure the same standard of living for the rest of their lives. Retirement planning for these clients consists of continued investments that can generate returns to support their lavish lifestyles. It also comprises adequate insurance to cover health expenses. Business life insurance can also be crucial as it can protect the business of the individual. 

A wealth manager can understand the unique demands and goals of wealthy clients and include stable retirement investments that can offer an assured standard of living post-retirement. This can consist of IRAs, Health Savings Accounts (HSAs), stocks, real estate, and more. Wealth managers create retirement planning strategies for the individual's unique investment horizon, expected retirement age, and goals. They can contribute to foolproof planning that protects their long term goals from market volatility, creditors, business highs and lows, and more.

6. Accountancy services:

Another area where ultra-high-net-worth services can be helpful is with personal and business accounting. Cash inflows and outflows can be tedious to follow up with, both on an individual and business level. Tracking expenses, incomes, taxes, etc., can be time-consuming and confusing. Wealth managers can effectively offer accounting services to keep track of such heads. They can oversee the payment of salaries to a company's employees or the individual's personal staff, create a budget, keep an eye on the family's cumulative expenses, manage debt from credit cards, and more by creating ledgers and maintaining books. Accounting can be fundamental to ensuring that a person's finances are on track and the outflows do not go beyond the inflows. If this happens, the wealth manager can point it out and recommend suitable ways to get things back on the right track as soon as possible.

To summarize

What do ultra-high-net-worth clients want? The answer to this can include many things depending on the person in question. High-net-worth wealth management is dynamic and versatile in more ways than one. There are several assets, processes, and people involved. The monetary values are also high, and there is a lot more at stake. Moreover, time can be of constraint as high-net-worth individuals can have multiple businesses and engagements to keep them busy. Therefore, hiring high-net-worth advisory firms can be essential to make sure that the financial plan is not impacted negatively due to any lapses or ignorance. High-net-worth management also includes legal assistance that can be critical to tackling creditors and litigation that is a common threat for wealthy and famous businesspersons and investors. 

Wealth managers can help with all of these things and more. So, go ahead and hire a suitable wealth management firm in your area for better financial assistance and guidance for long-term wealth preservation. Use the free advisor match service and get matched with 1-3 vetted wealth managers that can help you with your unique financial needs and goals. 

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.