Financial Planning
January 31, 2024

High Net Worth Financial Planning: A Quick Start Guide

Stewart Willis
PRESIDENT & HIGH NET WORTH ADVISOR

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 walks you through the essential aspects of high-net-worth financial planning so you can make informed decisions to preserve and grow your wealth effectively.

Financial planning for high-net-worth individuals is about more than just getting investment tips. It's a comprehensive strategy to handle your wealth, covering everything from managing investments, devising tax strategies, planning estates, mitigating risks, and even philanthropy.

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)?

When we talk about high-net-worth individuals (HNWIs), we refer to a group of individuals who have liquid assets of $1 million or more. 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.

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 really boils down to your personal circumstances, what financial milestones you're aiming for, and how complicated your finances are. 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 have specific financial goals, such as buying a house, funding your children's education, or preparing for a comfortable retirement. In that case, a financial planner can help you develop a strategy to achieve these goals.

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.

Closeup of a pile of hundred dollar bills

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.

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 can carry a blend of conventional investments, such as stocks, bonds, and mutual funds, along with alternative ones like private equity, hedge funds, real estate, and commodities. The primary goal with high net worth financial planning and investing is to spread out their assets to minimize risk while maximizing 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. This approach serves the dual purpose of protecting and preserving their wealth while also facilitating its smooth transfer to family members. To achieve these objectives, these individuals often utilize a range of legal structures such as trusts, charitable foundations, and other specialized entities.

By doing so, you can ensure that your hard-earned assets are safeguarded and properly managed for the benefit of your heirs and preferred causes. The exact high net-worth financial planning strategies for this will depend on your unique financial situation and needs.

Customized Investment Strategies

When it comes to high-net-worth financial planning strategies and investing, it's all about customizing strategies that perfectly align with the individual's unique risk tolerance, investment time horizon, liquidity needs, and overall financial goals. These tailor-made strategies are meticulously crafted to ensure maximum returns while minimizing potential risks.

A diversified approach can get quite sophisticated and may involve a wide range of complex financial instruments that require an in-depth understanding and 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. These skilled professionals not only actively manage portfolios but also place a strong emphasis on long-term growth and wealth preservation.

They understand that the key to success lies in personalized advice tailored specifically to each client's unique financial goals and circumstances. By managing investments on a discretionary basis, they ensure that every decision made aligns with your best interests, maximizing your potential for long-term financial success.

Tax Planning Efficiency

High net worth individual tax planning includes strategies to reduce tax liabilities using efficient investments and timing to maximize after-tax returns. Strategies like income spreading can distribute your income over multiple years to prevent it from falling into higher tax brackets in a single year. 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 in an effort to offset capital gains taxes on other investments. It is a standard method used to reduce taxes on investment income.

Also, switching from a traditional IRA to a Roth IRA can be a clever play for high-net-worth individual financial planning. This is particularly true if you anticipate moving into a higher tax bracket down the line or wish to dodge the bullet of required minimum distributions (RMDs).

Philanthropic Activities

As someone with a significant amount of assets, high-net-worth financial planning also includes philanthropic activities. And when it comes to 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 allows you to benefit from significant tax deductions, which shouldn't be overlooked.

To maximize these benefits even further, one can employ a few clever strategies. Some examples include donating appreciated stock instead of cash or utilizing a donor-advised fund for more flexibility and control over the giving process. Additionally, establishing a charitable remainder trust can provide long-term benefits while supporting philanthropic causes.

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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 ensure your plan meets your needs now and in the future, leading to a purposeful and fulfilling life.

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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.

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