What High-Net-Worth Investors Want from Financial Advisors?

High-net-worth investors, with their wide array of assets and lengthy tax bills, need more personalization, time, and attention when it comes to financial planning. Wealth managers and financial advisors can help these clients achieve their specific needs, preserve their wealth, and aim for bigger and better returns. However, for this collaboration to work, it is important for high-net-worth individuals to set clear expectations and for financial advisors to understand them.

Hiring a financial advisor can help with financial planning for high-net-worth individuals and preserve their wealth. This article will discuss what wealthy investors do and want from advisors.

What do investors want from their advisors?

Here are four things high-net-worth investors look for when working with a financial advisor:  

1. Personalized approach to cater to their unique needs

High-net-worth portfolios are distinguished by their substantial size. Their portfolios typically surpass those of regular investors in size and variety. They also exhibit greater complexity with assets that extend beyond conventional options like stocks, bonds, mutual funds, and cash and cash equivalents. For high-net-worth individuals, investment opportunities may include traditional options as well as others like private equity, cryptocurrencies, hedge funds, venture capital, and various alternative assets. Given the diverse nature of these portfolios, financial advisors must adopt a more personalized approach to cater to the unique needs of such clients. Unlike the standardized, one-size-fits-all models often employed for average-income group investors, high-net-worth individuals require specific strategies that are tailored to their specific circumstances, goals, and risk tolerances. A deep understanding of their financial objectives, along with a nuanced grasp of the intricate investment opportunities, can ensure that financial advisors provide effective guidance to these clients.

To offer personalized advice, it is essential for financial advisors to educate themselves constantly and possess specialized knowledge and expertise in areas such as private equity, venture capital, and cryptocurrency markets. These investments may require an entirely different approach. For instance, the cryptocurrency market works very differently from the stock market. In order to help a client here, the professional needs to stay up-to-date on the latest events and how they might affect their client. Financial advisors for the wealthy must also possess the skills to help their clients understand the complexities of their investment choices. Educating the clients, as well as helping them understand the potential of their investments, can make a massive difference. They can also focus on the behavioral aspects of the client and help them understand their own biases, ultimately contributing to making more rational financial decisions and avoiding common investment pitfalls. 

Financial advisors must take a holistic approach to financial planning for high-net-worth individuals and consider all aspects of the client's financial life. They need to personalize the client’s experience by proactively collaborating with other professionals, such as attorneys and tax specialists, to develop comprehensive strategies that can benefit the client. Financial advisors can also provide customized financial reports and statements tailored to the client's specific needs and preferences to improve transparency and clarity. This allows clients to understand their financial situation better and make informed decisions. They can send regular market updates, economic insights, and investment opportunities tailored to each client's investment strategy and risk profile to help keep clients informed and engaged and enable them to seize timely opportunities and navigate market fluctuations effectively.

2. Guidance on investments and beyond

For high-net-worth individuals, the role of a financial advisor extends far beyond merely recommending investments. While investments are undoubtedly a significant aspect of wealth management, affluent clients often require comprehensive guidance on various financial matters beyond the scope of traditional investment advice.

High-net-worth individuals seek transparency and integrity in their interactions with financial advisors. They expect advisors to act in their best interests and prioritize their financial well-being above all else. This means providing honest and unbiased recommendations, even if it means putting their own interests on the side and even foregoing potentially lucrative opportunities that may not align with the client's goals or principles. Furthermore, high-net-worth clients value financial advisors who demonstrate a deep understanding of their unique investment principles and preferences. Financial advisors must take the time to thoroughly comprehend the client's risk tolerance, investment objectives, time horizon, and ethical considerations. For instance, a client may favor ESG investing. Tailoring investment strategies to align with such principles allows advisors to build trust and rapport with high-net-worth clients. This, in turn, fosters a long-term partnership that is based on mutual respect, faith, and understanding.

In addition to investment advice, high-net-worth individuals may also require guidance on a range of financial matters, including philanthropy and asset protection strategies. A holistic approach that considers all aspects of the client's financial situation is essential for providing comprehensive wealth management services. High-net-worth individuals may want to give back to society with charity, donations, and gifts. High-net-worth financial advisors can help them develop an effective philanthropic strategy. They can assist clients in developing charitable giving strategies, including charitable trusts or direct donations, which can help them support causes they care about while maximizing tax benefits. They can set charitable goals that align with the client’s personal principles. For example, some people may feel more strongly about some causes than others.

High-net-worth individuals may also seek guidance on protecting assets from potential creditors. This is often a significant concern for affluent clients. With more extensive and complex portfolios, high-net-worth individuals face unique risks, including asset volatility, legal liabilities, and more. Financial advisors should prioritize risk management and asset protection strategies to safeguard their clients' wealth and minimize potential losses. They can recommend strategies to protect the client’s assets from creditors' claims. They can suggest setting up trusts to shield the client’s estate while ensuring legal compliance. 

When it comes to value addition beyond the basics, there are a number of things financial advisors can do to assist clients. For example, they can help in developing business succession plans to ensure a smooth transfer of ownership and keep the value of the business intact for the successors. They can oversee estate planning. Wealth transfer to future generations requires careful planning and communication. Financial advisors can suggest instruments like trusts, based on the structure of the family, provide financial education to financially unaware family members and help establish a flow of communication to ensure the successful transition of wealth to the next generation.

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3. Effective tax planning to lower tax incidence

Tax planning is a vital component of financial planning for high-net-worth individuals. Income tax, property tax, capital gains tax, wealth tax, payroll tax, etc., are some taxes clients may be subject to. Needless to say, one of their primary concerns is their high tax output, and they are always looking for ways to legally lower it without causing compliance issues. When it comes to taxes, there are multiple strategies that can help. Financial advisors can play a critical role in educating clients about the options available. For instance, the use of Roth retirement accounts, tax-advantaged accounts like the Health Savings Account (HSA), 529 education account, etc., can help lower the tax cut. Additionally, clients can use tax credits and deductions to reduce their taxable income.  

High-net-worth individuals are categorized as those with liquid assets worth $1 million or more. High-net-worth clients typically have considerable incomes subject to taxation. They also enjoy substantial returns on their investments due to the size of their invested capital. Financial advisors may employ tax harvesting, a strategy where you deliberately sell your long-term appreciated investments to capitalize on current lower tax rates for long-term capital gains. This is done if you are preempting potential future tax rate hikes. Apart from tax harvesting, tax loss harvesting can also be effectively employed to lower taxes. Tax-loss harvesting involves selling investments at a loss to counterbalance gains earned on other assets, thereby reducing the total taxable profit you earn in a year. However, it is not a straightforward process. You cannot simply sell any investment that is in the red. It requires careful consideration of the future potential of investments before deciding which ones to sell and which ones to retain. A financial advisor can simplify this complex decision-making process and help clients make rational choices.

Financial advisors can also help high-net-worth clients use gifts to lower taxes. For instance, annual and lifetime gift tax exemptions can help transfer assets up to a specific limit without incurring tax. For the year 2024, the Internal Revenue Service (IRS) has set a lifetime limit of $13.61 million for individuals to gift assets or property throughout their lifetime or as part of their estate. Furthermore, there is an annual limit of $18,000 for gifts made in 2024. Financial advisors can also recommend setting up trusts to lower taxes. For instance, an Intentionally Defective Grantor Trust (IDGT) and a Grantor Retained Annuity Trust (GRAT) can reduce estate taxes. An IDGT is a trust established by a grantor, which is regarded as distinct from the grantor for federal estate and gift tax purposes. An IDGT freezes specific assets of an individual by excluding them from income tax considerations. On the other hand, a GRAT serves as a financial tool within estate planning for reducing taxes on substantial monetary gifts given to family members.

4. Communication at regular intervals and timely guidance

Constant communication and ongoing guidance are crucial for high-net-worth clients to achieve their financial goals. These clients desire to feel valued and heard by their financial advisors and expect quick and seamless communication channels. This entails not only setting up meetings but also remaining open to their needs throughout the association. High-net-worth individuals seek accessibility through various means, such as calls, video calls, emails, and messages, so they can make prompt decisions and capitalize on financial opportunities. Moreover, many high-net-worth individuals, especially younger ones, prefer to stay connected and informed about financial matters. They are proactive in seeking out opportunities and are inclined to act swiftly. Therefore, financial advisors must adapt to these changing mindsets and deliver services promptly and efficiently to meet their clients' expectations.

Many financial advisors may find it challenging to meet this growing demand of clients, as it requires constant availability and responsiveness. Digitization plays a pivotal role in addressing these needs. Financial advisors need to embrace the digital revolution and implement practices that offer convenience to their clients and cut their work in half as well. This includes utilizing digital platforms for communication, providing access to real-time financial information, and offering digital tools for quick decision-making. This can help financial advisors enhance their services, improve client satisfaction, and meet the evolving expectations of high-net-worth individuals in today's fast-paced world. Financial advisors can use unified and synchronized communication channels, such as a Customer Relationship Management (CRM) system, to automate client support to some extent. This can help clients access information and assistance seamlessly, even outside of traditional business hours. Additionally, technology can enable financial advisors to implement proactive strategies for account management and reporting. This ensures that clients feel informed and engaged with their financial affairs, even without direct interaction with their advisor. 

Regarding communication, high-net-worth individuals also worry about cyber security. The frequency of cyber threats and attacks is steadily increasing and may particularly target the wealthy. Financial advisors must ensure that while they digitize their operations and offer enhanced communication systems, they also employ security measures like encrypted chats or emails, multi-factor authentication, and secure data storage to protect client information and ensure confidentiality at all times. 

To conclude

Financial advisors must adjust their game plan to meet the escalating expectations of their high-net-worth clientele. Neglecting to do so may result in a higher client attrition rate, with clients opting to seek out new advisors. This not only poses financial challenges for advisors due to client loss but also tarnishes their reputation, potentially leading to negative feedback. Therefore, it is crucial for financial advisors to remain attuned to their client's evolving needs and situations and understand what high-net-worth investors want to uphold client satisfaction and retention. 

Financial planning for high-net-worth individuals presents unique challenges, but the guidance of a skilled financial advisor can make a significant and positive difference. Use the free advisor match tool to get matched with vetted financial advisors who can help preserve your wealth and secure your finances. Answer some simple questions about your financial needs, and our match tool can match you find 2 to 3 advisors who can best fulfill your financial requirements.

For additional information on retirement planning strategies that can be tailored to your specific financial needs and goals, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.