What do High-Net-Worth Investors Want From Wealth Managers?

Money management and wealth creation concerns are common for people of all income groups. Irrespective of your net worth, matters of money can seem complex in most cases. Moreover, the wealthier you get, the more intricacies seem to follow you. Large estates can require more legal attention, protection from litigation, and better overall handling. The stakes are also high with massive amounts of money. This is why hiring a professional is essential. While a financial advisor can be ideal for smaller estates, high-net-worth financial planning can require more detailed attention from a wealth manager.

According to the U.S. Securities and Exchange Commission (SEC), a high-net-worth individual should have at least $750,000 in investable assets or a total net worth of $1.5 million. However, most wealth management firms consider clients with a minimum liquid net worth of $1 million. The critical thing to remember here is that high-net-worth individuals must have liquid assets. So, if your house is valued at $1 million or more, you would not necessarily qualify as a high-net-worth client.

Wealth managers are professionals who overlook the estates of high-net-worth individuals. These professionals are qualified to manage services like debt, business succession, cash inflows and outflows, tax planning, retirement planning, investment planning, and much more. High-net-worth individuals can have virtual assets like cryptocurrencies, physical assets like real estate, collectibles, gold, and multiple investments in global and domestic markets, and more. As a result, these individuals are looking for a professional who can manage their money and ease the complications. In addition to this, high-net-worth individuals are also looking at capital preservation more than appreciation, so the approach required dramatically differs from an average investor. If you are a high-net-worth individual who requires help with their financial needs, consult with a wealth manager who can guide you on the same. 

Wealth management for high-net-worth individuals includes the following:

1. Estate planning: 

Estate planning can be a lengthy process for high-net-worth individuals. Most high-net-worth individuals have multiple assets and a lot of liquid cash. The distribution of these can be tricky. The bigger the estate, the higher the taxes. Estates are levied with federal and state taxes when passed on as inheritance. As of 2020, all estates over the value of $1,000,000 are subjected to state tax. However, the precise limit can differ for different states. In addition to this, estates valued at over $12.06 million incur federal tax. High-net-worth individuals are likely to have an estate over these limits. Therefore, they need high-net-worth wealth management services that can focus on tax reduction. High-net-worth financial planning typically focuses on strategies like gifting, charity, and using life insurance to lower taxes.

In addition to this, HNW wealth management also helps individuals set up a trust. Revocable living trusts and irrevocable trusts are the two most common types of trusts in estate planning. Trusts allow you to create control over how your assets are used and passed on to your heirs. Most people create college trusts or trusts that are passed on to the children once they are adults. A revocable trust offers the grantor, that is, the owner of the estate, all the rights and access to the trust and the ability to make decisions on how the trust money is used. So, you can decide how the beneficiary uses the money. For instance, a revocable trust can be solely created for the expansion of a business or buying a home. The beneficiary has no say in the matter in a revocable trust. On the other hand, irrevocable trusts offer the beneficiary the chance to make changes to it.

When creating a trust, it is also essential to pick a trustee. A trustee is someone who is legally in charge of managing your trust in your absence. You can choose one or multiple trustees for your estate. You can also appoint yourself.

2. High-net-worth asset management:

Wealth management for high-net-worth individuals can require customization and personalization. High-net-worth individuals have a broad portfolio of assets and investments. Each of these has different risk levels, investment horizons, and returns. High-net-worth individuals also invest in alternative investments like private equity, venture capital, commodities, currencies, hedge funds, collectibles, Non-Fungible Tokens (NFTs), cryptocurrencies, and other similar options. Further, as the estate grows, the more complex it gets. High volumes of cash inflows through business or investment returns can be perplexing to handle. The capital gains tax repercussions alone can make things confusing. A wealth manager can effectively navigate through these issues with comprehensive financial management strategies. Wealth managers conclusively manage your investments by keeping your personal goals in mind and balancing them with the prevailing market conditions and opportunities. The role of wealth managers is critical as the portfolio of high-net-worth clients can include highly volatile and risky investments. These investments do not generally attract the average retail investors and are therefore not as predictable as far as their risk and returns are concerned. They are also not as liquid as traditional options like stocks and bonds. Consequently, they can require a deeper understanding and, above all, relevant professional experience.

3. Succession planning:

Businesses require succession planning to ensure that the company does not suffer in the absence of the owner. Succession planning essentially involves measures to replace the current leadership with the new one in a manner that least affects the business. The smoother the transfer, the better it can be for the company. Succession planning can be particularly important for high-net-worth individuals, as businesses run by these individuals are more likely to run on a large-scale. Poor planning can affect not only the individuals and their families but also the many people who depend on the company for their livelihood. Succession planning is not as simple as it may seem. It is also not limited to the change in the primary leadership like the chairperson or chief executive officer alone. There are various permutations and combinations to this, and all c-suite executives, presidents, vice presidents, and directors can be impacted by it.  

In the case of family-run businesses, the next chosen leadership is mainly from the family, such as the next of kin like the spouse, child, or grandchild. Sometimes, the reins of the business can also be given to an outsider, especially if the family members are not interested or capable of handling the responsibilities of the business. In this case, things may get a bit more complicated. In most cases, someone from within the company is promoted. However, it is not entirely uncommon for businesses to hire externally.

Irrespective of who makes it, there are several procedures to follow. Shareholders, investors, and the board of directors have a say in the appointment of the new leadership. These matters are usually discussed at the Annual General Meeting (AGM) of the company. Wealth management for high-net-worth individuals can help business owners in the process of succession planning and ensure that all legal and business procedures are duly finished and the company gets a worthy leadership.

4. Tax planning:

Needless to say, taxes are one of the main concerns of high-net-worth individuals. The higher the income, the greater is the tax bill. Moreover, tax is not limited to income. It also extends to capital gains and estates. Therefore, finding a way to lower the tax liability of high-net-worth individuals is one of the main agendas for HNW wealth management services. Having global assets like real estate, international funds, etc., also complicate tax procedures as several external policies come into play. Moreover, with changing governments, tax laws are continually being altered, further muddling matters. High-net-worth financial planning services can help individuals lower taxes by employing a number of strategies. The lifetime gift tax exemption is one way to approach this. As of 2022, the government offers a lifetime gift tax exemption of $11.7 million. So, only assets over this limit are taxed. The limit for married couples is increased to double, i.e., $23.4 million. In addition to this, life insurance is a great way to leave behind a sizable legacy with tax repercussions. Life insurance payouts are exempt from any tax. So, high-net-worth individuals can use it to transfer high amounts of money while also lowering their taxes.

What do high-net-worth investors want from wealth managers?

The above section broadly classifies the service that high-net-worth individuals are looking for. However, wealth managers must also be equipped to deliver on the following:

 1. Regular and clear communication:

High-net-worth individuals may be busy people juggling various professional and personal commitments. Therefore, having a professional who can clearly and regularly communicate is essential. High-net-worth individuals want wealth managers to simplify their finances for them. This can happen with continued communication and clear agendas for each meeting. Wealth managers must be up to date with the needs of the client at all times and be able to address their concerns in their weekly or monthly meetings. The more transparent things are, the better it can be for both parties and enable them to adjust their expectations accordingly.

2. Latest tools and software programs:

With a host of investments and assets, wealth management for high-net-worth individuals can require the latest technology. Fintech wealth management firms that are leading the way with new-age technology and smart tools can have the edge over others as they are able to offer better advice to their clients. In times when technology is taking over every aspect of life, its role in the world of finance cannot be ignored. Algorithms and smart tools can track the market and help investors cash in on significant opportunities. Moreover, post the pandemic, most things have shifted online. People no longer have the time, patience, or liking for traditional ways. Different technological services can be a unique selling point for the wealth manager and a powerful attraction for the high-net-worth individual.

3. Risk management and aversion:

Risk is part and parcel of a high-net-worth individual’s life. The fear of theft, litigation, creditors, lawsuits, market risk, etc., can be worrying. Therefore, one of the things that high-net-worth individuals look for is risk mitigation. Wealth managers should be able to lower the risk for their clients through diversification strategies, legal measures, insurance, and more. The ultimate goal of the wealth manager should be to eliminate any and every financial risk and focus on capital preservation for the client.

4. Quality over quantity:

Unlike the average investor, where the primary goal is capital appreciation, high-net-worth individuals are not as concerned about enhancing their wealth as they are about protecting it. High-net-worth individuals are more interested in quality advice that can help simplify the intricacies of their estate. More than the number of stocks or investment instruments, it is the quality and scope of a single alternative investment, such as investing in a startup, that matters more.

5. Value-added services:

Hiring a wealth manager can be costly, given the vast array of services they offer. Hence, clients expect wealth managers to go above and beyond in their services. Transparency, communication, and flexibility are the stables, but high-net-worth individuals also want value-added services like legal advice, auditing services, zero-fee accounts, and others. Value-added service can also instill a sense of loyalty in the investor, making it more likely to have a long, continued professional association with the firm.

To summarize

High-net-worth financial planning is not only helpful but also almost mandatory for most people. A professional outlook can never hurt. Moreover, when you have so much at stake, hiring an experienced wealth manager can take off the load on your back and offer peace of mind. However, it is vital to research the market and employ respected and reputable HNW wealth management services only. This ensures that your money is in safe hands.

If you are looking for professional wealth management near you that can offer quality financial assistance and guidance for long-term wealth preservation, use the free advisor match service. Get matched with 1-3 vetted wealth managers that can help you with your unique financial needs and goals.