How to Find The Best Financial Advisors for High-Net-Worth Clients

Financial advisors assist investors in managing finances and achieving their financial objectives. From investment management to budgeting advice to estate preparation, an advisor can help with all aspects of financial planning. How one picks a financial advisor depends on their financial status and objectives. It is highly recommended that high-net-worth individuals hire a financial advisor who is suited to meet their unique financial requirements.

Some advisors focus on specific areas of practice – customer categories, income levels, investing methods, and products; some deal with clients from all across the country, while others concentrate on local clientele. Some assist with taxes, insurance, and investment planning, while others may concentrate on estate planning and legacy planning. Some advisors specialize in servicing younger clients who are aggressive investors, while few prefer working with retirees.

Before we get into the details of advisors and services, let’s look at who are high-net-worth individuals and what they expect from the advisors.

Who is a high-net-worth individual?

A person with liquid assets of $1 million or more is known as a high-net-worth individual. Financial advisors and wealth managers often provide additional services to high-net-worth families due to their considerable holdings and investment corpus. Investment management, tax guidance, assistance with corporations/ family business/ estates are among the financial services available to high-net-worth individuals.

High-net-worth individuals generally seek out competent financial advisors who work in a fiduciary capacity and are able to provide comprehensive services in the form of private wealth management.

What is private wealth management?

The administration of assets of high-net-worth individuals is referred to as private wealth management. Private wealth managers comprehend the financial needs of their high-net-worth clients and assist them in constructing a portfolio that meets their financial objectives. Estate planning, asset protection, mortgage planning, portfolio management, and tax management are the most common services offered by private wealth managers.

Large enterprises, organizations, independent financial planners, as well as some investment advisors provide private wealth management services. They create investment plans and recommendations based on the client’s financial objectives and risk aptitude to preserve wealth as well as devise ways to grow the corpus. Most high-net-worth investors have their wealth managers collaborate with lawyers, accountants, and insurance agents for an effective and clean financial roadmap.

Financial services involved in private wealth management

1. Establishing additional sources of income: For the HNWIs, the risk to regular income is generally larger as it is mostly linked to business income that may or may not be a fixed payout. It is, therefore, imperative for them to establish additional sources of income that can supplement their income from the business.  Private wealth managers play a significant role to help HNWIs achieve this through various investments across asset classes with low correlation to each other. This is done so that the portfolio remains uninfluenced by the peaks and troughs in individual asset classes.   

2. Focusing on capital protection and alpha: The private wealth manager’s primary tasks are capital protection and wealth appreciation. With their extensive knowledge about financial products and government policies, wealth managers employ various strategies to not just create wealth but also efficiently manage it. Asset allocation is one such strategy that wealth managers use to diversify the risks in a portfolio while capturing the opportunities for capital appreciation from the open market. They strive to generate alpha – make the client’s portfolio beat market returns.

3. Managing taxes: Tax planning is an ongoing, dynamic process that is, of late, becoming imperative to the wealthy in America. The recent policy changes target the wealthy, through hiking the top tax applicable to various elements such as gift tax and estate taxes that are generally the resort of high-net-worth individuals. Tax planning can be cumbersome, especially for HNWIs owing to their large corpus. Without a thoughtful tax strategy,  an investor could miss out on key tax benefits and be paying more in taxes. Most financial advisors and private wealth managers serving HNWIs are well equipped with the knowledge and expertise on handling tax matters specific to HNWIs.

4. Estate planning and legacy planning: HWNIs proactively need to plan for their legacy and estate. The legal pass over or bequeathing of family wealth and business is not easy and could lead to prolonged legal disputes if not planned for or implemented carefully. This is one aspect of financial planning for HNWIs that requires intensive reading and putting on paper the fine print, which also has legal implications. There is a taxation angle as well to estate and legacy planning to ensure the heirs and beneficiaries are not left with a large tax bill upon inheritance. Most wealth planners keep in mind the investor’s goal for their estate management and the legacy (thoughts, ideas, values, and morals) they wish to pass down.

Professional financial advisors involved in private wealth management

1. Wealth and investment managers: These financial experts are mostly in charge of the wealth of high-net individuals. They plan investments for their clients and allocate resources to various asset classes according to the risk tolerance levels of the investor and the size of the investment corpus. Wealth managers employ multiple strategies for creating a balance between capital protection and wealth appreciation and explore the suitability of out-of-the-box alternatives ranging from investing in a hedge fund to private equity or taking exposure to cryptocurrencies based on clients’ preferences.

2. Tax Consultants: Services of wealth management firms encompass the role of dedicated accountants and CAs who specialize in taxation for individuals as well as for families and businesses. They make sure that the investors receive the best possible tax treatment, not only towards capital gains taxes on investments but also with inheritance taxes, gift taxes, and estate tax, and also with business-related taxation.

3. Lawyers: A high-net-worth individual may need legal counsel on a wide range of issues like real estate investment deal assessment and establishing Trusts, among others. Wealth management firms must ensure that every action it takes is in the client’s best interests. This cannot be accomplished without the assistance of highly competent legal counsel.

What do high-net-worth individuals seek from financial advisors?

HNWIs seek quality and credibility from their financial advisors. At the end of the day, the need for able advisors comes down to the unique set of needs that high-net-worth clients have. Working with trustworthy financial advisors reign supreme when it comes to wealth planning and management.

With more at risk, HNWI clients seek advisors who have a firm game plan to mitigate risk and provide crisp advice. This is particularly relevant in today’s ever-changing financial and economic climate.

Investing as a high-net-worth-individual

The fundamentals of building a good investment portfolio don’t vary significantly with the investor’s net worth. However, the investment strategy employed and the choice of investment avenues and instruments vary vastly. As an HNWI, your financial objectives, risk tolerance, and time horizons shall be different, requiring different planning.

The following are the important parameters to keep in mind when investing as an HNWI and ensure your financial advisor is on the same page with you:

1. Financial objectives

With keeping your objectives in mind, your money should be well-tuned to assist you in achieving them. Individuals with a high net worth may have a diverse range of objectives and goals, which must effectively be communicated to your advisor.

2. Tolerance to risk

Investing in any capacity has a certain amount of risk. Owing to the huge corpus of HNWIs, the risk is potentially magnified. A qualified advisor will assess all potential risks and only then devise and discuss a strategy.

3. Diversification of  investments

Investing in real estate, the stock market, or other assets can help you build your wealth. However, investing a large sum of money necessitates thorough research. This is something that an able financial expert would guide you through. They can provide you with the necessary analysis to generate significant profits while minimizing risk.

4. Retirement planning

The retirement planning approach may be classified as both “investment” and “tax planning.” A sound advisor would guide through several tax-advantaged retirement plans that can help strengthen investing strategy and increase retirement savings. Retirement planning for HNWI also may involve legacy planning and estate planning so that transition of wealth is smooth for your heirs.

[See: How to Plan Your Taxes if You’re a High-Net-Worth-Individual]

How to decide on the best financial advisor for high-net-worth-individuals

The essential thing to do before choosing an advisor is to identify one’s financial objectives and goals. HNWIs, especially, would require varying services. Choosing the best financial advisor requires opting for an advisor based on your investment interest. Many high-net-worth customers will concentrate on the five most essential components of constructing a lucrative portfolio. These components include real estate, healthcare planning, income, investment, and tax preparation. Because high-net-worth individuals have significant assets, wealth managers must be equipped to manage them. Asset planning must also be updated in light of rising healthcare expenses, taxes, and other factors.

Qualities of a good financial advisor for high-net-worth-individuals

1. Good reputation: An advisor could play a crucial role in the health of your wealth. Should the advisor not have a good reputable and relatable experience in managing the wealth of peers, there is a high risk of implementation of strategies that may not be the right fit for you, resulting in eroding your wealth. Any investor could become the victim of fraud if they do not check the credentials of financial advisors, and the risk is multifold when the investor is a high-net-worth individual given the amount at stake.  An individual helping you manage your finances should not be blacklisted or unreputed; they should be clean, hold public records, and hold good reviews.

2. A proactive approach: Good financial advisors maintain open contact lines with you, keeping you informed about current financial challenges and possibilities. They aid in the comprehension of complex financial topics. A financial advisor who is passive sets aside facts or fails to explain suggestions can be detrimental to planning and capital protection.

HNWIs trust their financial advisor to be capable enough to individually handle financial matters, and sometimes even give wealth managers the right to make decisions on their behalf. Nonetheless, it is imperative that the advisor openly and actively communicates with you on potential portfolio changes and investment opportunities available in the market. Your advisor must stay in contact with you also to proactively assess your risk profile so that the strategies implemented are effective and functional towards achieving your financial goals.

3. Years of experience as a financial professional: A reputable financial advisor should have extensive expertise and a recognized professional qualification, apart from necessary certification. Professionals are expected to be up to date with all nitty-gritty of the financial world and are required to be well versed on all aspects of wealth management, taxes, economy, policies, etc.

4. Holistic views and a clear strategy: Your income level and the types of assets you invest in are not the only factors that go into good financial guidance. After learning about your financial position, a qualified financial counselor will investigate all your investments, credit needs, insurances, and banking. They will then formulate customized and comprehensive plans to maximize earnings and minimize outgo such as through taxes, without affecting your lifestyle. A competent financial advisor shall always analyze and inform which alternatives are ideal for your portfolio.

A financial advisor can only begin to build a relevant and accurate strategy after learning about your consumption pattern, debt responsibilities, and life objectives, among other things. Also, when it comes to sound investment plans that lead to long-term prosperity, there should be no rush.

Conclusion

Managing wealth and investments is no cakewalk. It requires meticulous planning, in-depth knowledge on all aspects of the field, and most importantly, able and competent advisors. This becomes more cumbersome and crucial for HNWIs, because of their enormous investible corpus and the inherent risks to wealth.

Also, because of the ambiguity in the industry, high-net-worth clients have to exercise caution to make sure they get the right financial advisor who meets their fiduciary and financial needs. With the right financial advisor, common investors and HNWIs can achieve their financial goals and plan for every event in their lives.

Use Paladin Registry’s free search tool and get matched with 1-3 qualified financial fiduciaries who may be able to help you with your specific queries and create a customized financial strategy for you.

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