Having a great deal of wealth to preserve might seem straightforward. However, the number of assets and their value create unique circumstances for each investor. There are numerous wealth-preservation and investment principles applicable to everybody—for instance, establishing a tax policy, assessing a portfolio’s risk exposure, and more. However, there are critical and specific concerns that arise when you have more money and more valuable assets to preserve.
Being too Risk-Averse
When it comes to preserving a great amount of wealth, your instinct might be to err on the side of safety. While safety will likely be a mainstay of your strategy, being “too safe” is also a risk. For example, if you leave your assets in a low-rate savings account, you’re leaving your money to erode from inflation. Even during a low-inflation period, 2% of 1,000,000 per year is $20,000 down the drain annually!
Collectibles in Your Estate Plan
Investing in collectibles, such as rare or historic items or artwork, has historically provided good returns. A common mistake among the affluent is keeping current appraisals on record. Estate liquidity and taxes may be adversely affected by neglecting to take this important step.
Having All Your Eggs in One Basket
It is common for senior-level employees and corporate executives to accumulate large stock positions in their firms over time. This creates a unique risk that puts a lot of wealth at the whim of the company’s performance in the stock markets. We recommend speaking with a financial advisor to determine how to diversify your equity in a tax-efficient manner to mitigate this risk.
Doing Too Much on Your Own
Intelligence, hard work, and self-confidence are among the most important qualities of many successful people. Managing a successful company may be considered similar to managing a lot of money. However, managing finances requires a variety of specific knowledge and experience. A financial professional may relieve you of the burden of handling large amounts of money and assets while providing insight and expertise on how to optimize those assets.
No Cohesive Plan for All of Your Assets
Wealthy people often distribute their money across different financial firms or advisors, believing that they will get higher returns by diversifying their trust across institutions and by placing it in the hands of more attentive managers. However, key needs like risk management and tax efficiency are lost in larger portfolios because there is no unified vision and strategy that can guide them in the right direction. Independent professionals who operate autonomously and with the best intentions may not produce the greatest results. A single institution that handles all your assets according to a coordinated, collective strategy can benefit you.
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. Let us show you how you can “Live a Richer Life”.
Securities and advisory services offered through Royal Alliance Associates, Inc. (RAA), member FINRA/ SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA. RAA is not affiliated with Lone Beacon
Neither the named representative nor the named Broker/Dealer or Investment Advisor gives tax or legal advice.
Fixed index annuities are designed to meet long-term needs for retirement income. Early withdrawals may result in loss of principal and credited interest due to surrender charges. Distributions may be subject to ordinary income tax and, if taken prior to age 59 ½, an additional 10% federal tax. An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal Benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional cost. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities. All contract gains beyond the CAP rate are surrendered to the insurance company to pay for the expense of the product.
The views expressed are not necessarily the opinion of Royal Alliance Associates Inc, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss.