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TL;DR: High-net-worth financial planning is about more than just investments; it’s a personalized strategy to preserve, grow, and transfer wealth.
Main points:
- Defines HNWIs ($1M+ liquid assets) and ultra-HNWIs
- No fixed net worth for hiring a planner—depends on goals/complexity
- Retirement planning balances income, growth, and estate needs
- Respectable net worth is personal, tied to lifestyle goals
- Investment options include traditional and alternative assets
- Key strategies: estate planning, customized investments, active management, tax efficiency, philanthropy
- Legacy planning requires regular reviews and expert guidance
Making your way through the financial landscape as a high-net-worth individual (HNWI) presents both challenges and opportunities. With substantial assets at your disposal, your chosen strategies can significantly impact your current financial status and legacy.
This guide explains the essentials of high-net-worth financial planning to help you make smart decisions that preserve and grow your wealth.
Financial planning for high-net-worth individuals is about more than just getting investment tips. It's a comprehensive strategy that includes high net worth investment management, tax efficiency, estate planning, philanthropy, and risk reduction.
As someone with significant wealth, your financial plan should be as distinct and individualized as your financial situation.
What Are High-Net-Worth Individuals (HNWIs)?
High-net-worth individuals (HNWIs) are people with $1 million or more in liquid assets. Now, when we say, "liquid assets," we mean assets that can be quickly and swiftly converted into cash. These liquid assets include cash, stocks, and bonds.
Ultra-high-net-worth individuals go even further, with tens of millions in assets. For both groups, financial planning for high net worth individuals ensures their wealth works. It builds toward goals, lifestyle needs, and long-term legacy.
At What Net Worth Should You Get a Financial Planner?
No magic number for your net worth signals it's time to hire a financial planner. It comes down to your personal circumstances, financial goals, and the complexity of your finances. Life events like marriage, starting a business, etc., can significantly impact financial planning. A financial planner can guide you through these changes and adjust your plan accordingly.
Suppose you want to buy a house, fund your children’s education, or prepare for retirement. In those cases, a financial planner can help you develop a strategy to achieve these goals.
This is also where high net worth retirement strategies come in. Retirement planning for HNWIs involves balancing long-term income needs with investment growth and estate considerations.
What Does High-Net-Worth Retirement Planning Include?
High-net-worth retirement planning goes beyond saving money. It involves creating a reliable income stream while preserving wealth for heirs.
Key approaches include:
- building a balanced portfolio that produces income and growth
- using annuities, bonds, and dividend-paying stocks as income sources
- planning for healthcare and long-term care needs
- integrating estate planning so wealth passes efficiently to beneficiaries
What Is a Respectable Net Worth?
The idea of what constitutes a "respectable" net worth is highly personal and can fluctuate based on your perspective. There are various factors to consider, such as age, location, profession, lifestyle aspirations, and your own financial objectives. What one person deems respectable or adequate might not be the same for someone else.
A respectable net worth aligns with your personal goals, needs, and lifestyle aspirations. For some, this may mean having enough to live comfortably and provide for their family without financial stress.
For others, it could mean reaching a level that allows for luxurious living, travel, or early retirement. The point is that your high net worth strategies should align with your vision of success. Respectable wealth is personal, not one-size-fits-all.
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What Is High-Net-Worth Investing?
High net worth financial planning strategies often accompany investment strategies that aim to maximize wealth. High-net-worth individuals typically enjoy the privilege of a wider array of investment options.
Their investment baskets may include:
- Conventional investments:
- stocks
- bonds
- mutual funds
- Alternative investments:
- private equity
- hedge funds
- real estate
The main goal of high-net-worth financial planning and investing is to diversify assets. You want to reduce risk and maximize returns. A diversified portfolio is often part of financial planning for ultra-high-net-worth individuals as well.
What Are Some High Net Worth Financial Planning Strategies?
Financial planning for high-net-worth individuals include strategies and a custom plan.
Estate and Legacy Planning
It is common for high-net-worth financial plans to strategically integrate investment decisions into their estate planning. High-net-worth planning aims to cut risk and boost returns through diversification. High-net-worth individuals use tools like trusts and foundations to meet these goals. These high net worth strategies protect your money and direct it to the people and causes you value most.
This protects your wealth and directs it to your heirs or causes you care about. The exact high net-worth financial planning strategies for this will depend on your unique financial situation and needs.
Customized Investment Strategies
High net worth investment management always has personalization. High-net-worth financial planning focuses on customizing strategies to match each person’s:
- risk tolerance
- time horizon
- liquidity needs
- financial goals
These tailored strategies aim to maximize returns while minimizing risks.
A diversified approach can become complex and often involves advanced financial instruments that require expert guidance.
Active Wealth Management
When it comes to high-net-worth financial planning, working with experienced wealth managers is often the go-to choice. They manage portfolios with a focus on growth and preserving wealth.
They know success comes from personalized advice tailored to each client’s goals and circumstances. Discretionary management keeps every decision in your best interest for long-term success
Tax Planning Efficiency
High net worth individual tax planning uses smart investments and timing to cut taxes and maximize after-tax returns. High-net-worth strategies like income spreading distributes income over multiple years. It keeps it out of higher tax brackets. You can make this happen by carefully planning the timing of bonuses, significant sales, or retirement payouts.
Tax-loss harvesting is another ultra-high-net-worth tax planning strategy. This method involves selling investments with losses to offset capital gains taxes on other investments. It is a standard method used to reduce taxes on investment income.
Switching from a traditional IRA to a Roth IRA can be a clever play. Roth conversions are common for high-net-worth individual financial planning. t works best if you expect higher taxes later or want to avoid required minimum distributions (RMDs).
Philanthropic Activities
As someone with a significant amount of assets, high-net-worth financial planning also includes philanthropic activities. In their investment strategies, they often prioritize making a social impact or incorporating ESG (Environmental, Social, and Governance) criteria.
Besides the inherent fulfillment of helping others, donating to charity can also offer some noteworthy financial advantages. For instance, it lets you benefit from significant tax deductions that you shouldn’t overlook.
To maximize these benefits even further, one can employ a few clever strategies. Examples include donating appreciated stock instead of cash or using a donor-advised fund for more flexible, controlled giving. Additionally, establishing a charitable remainder trust can provide long-term benefits while supporting philanthropic causes.
Prepare a Legacy with Experienced Financial Planners
Effective high-net-worth financial planning with Asset Preservation Wealth & Tax is essential for preserving and securing wealth. Regular reviews and adjustments keep your plan aligned with your needs now and in the future, helping you live with purpose and fulfillment.
Get a free portfolio review today!
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
Alternative/Private investments are often complex, speculative and illiquid investment vehicles that are not suitable for all investors and are typically only available to accredited investors who meet certain minimum financial requirements. Alternative Investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested. They are, therefore, intended for experienced and sophisticated long-term investors who also have the financial wherewithal to accept such risks.
Tax loss harvesting is a strategy that may help minimize the amount of current taxes you have to pay on your investments by choosing to sell an investment at a loss. It is only appropriate for certain taxpayers in certain scenarios. Please review your retirement savings, tax and legacy planning strategies with your legal/tax advisor before attempting a tax loss harvesting strategy.A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies.
