You may think that as a high net worth individual, or even a millionaire next door, you may have an easy road ahead in maintaining your wealth. However, a greater amount of wealth introduces unique challenges that are specific to the size of the assets that need to be protected. Although many investing and wealth-preservation principles apply to anyone – such as developing a tax plan, assessing a portfolio’s risk exposure, and more – there are key risks that come about when you have more money and more valuable assets to protect.
A Do-It-Yourself Mentality
Among the most successful investors, intelligence, hard work, and self-confidence are three of the most crucial qualities. Those who are very successful naturally believe that managing a successful company is similar to managing a large amount of money. However, it requires a different array of knowledge and experience; and sometimes, it can simply be too much work to take on with so many large assets to take care of. A financial professional can take the burden off you while providing their expertise.
Undiversified Equity
Some senior-level employees and executives of companies accumulate large stock positions in the company that employs them over the years they work there. This creates a unique risk and can potentially be mitigated by talking to a financial advisor to figure out how best to diversify your equity.
Not Taking Inventory of Collectibles
The affluent tend to invest in their passions, and many collectibles, such as rare or historic items and artwork, have generated great returns on average over the years. However, one common mistake is not keeping up-to-date appraisals on record. Forgoing this important task may have adverse consequences regarding estate liquidity and taxes.[1]
Too Many Cooks in the Kitchen
Wealthy individuals often place their assets with separate financial advisors or firms, thinking that they’ll achieve better results through having a greater level of stewardship and by diversifying their trust to reduce the risk of ill-intentioned managers. However, many of the key needs for larger portfolios, such as risk management and tax efficiency, will suffer since there is no overarching vision and strategy that can steer their ship in a concerted direction. The independent actions by separate professionals acting on their own accord, likely with the best of intentions, may not produce the best results. Instead, you can benefit from a single institution whose financial managers communicate fluidly with each other so that they can manage all that you have to protect in a coordinated, concerted way.
With increased wealth comes even more unique challenges beyond those covered here. If you’re looking to optimize your wealth management strategy, talk to us today to get started.
Being Too Conservative
You may think that having a lot of money makes preserving it simple. However, protecting a large amount of wealth comes with unique challenges. A tax plan, a portfolio risk evaluation, and other investing and wealth-preservation principles are applicable to anyone. However, there are specific risks that come about when you have a large amount of money and greatly valuable assets to safeguard.
Advisory services offered through EGSI Investment Management, Inc., a Registered Investment Advisor with the State of Ohio. Insurance services offered through EGSI Financial, Inc. Guarantees offered with insurance products are based on the claims-paying ability of the issuing company. Investing may involve risk and may result in the loss of principal. Ohio Insurance License # 619337. Please contact EGSI Investment Management if there are any changes in your financial situation or investment objectives, or if you wish to impose, add, or modify any reasonable restrictions to the management of your account, EGSI Investment Management Form ADV Part 2A&B is available for your review upon request.
