A net worth of more than $500,000* but less than $1MM is considered Mass Affluent. Over $1MM puts one into the High Net Worth category while it takes $30MM in wealth for classification as an Ultra High Net Worth Individual. You immediately know where you fall within these wealth categories, but do you know how the advice you receive from your Financial Advisor (FA) should be different if you are a High Net Worth or Ultra HNW Individual? Here are a few key differentiators.
- Your FA should have expertise as a Financial Planner. There is a stark difference between an advisor who has the capability and resources to develop and maintain a living and breathing financial plan vs. one who simply gathers assets.
- You should own no Mutual Funds and few (if any) ETFs. Both have tax inefficiencies and internal costs that can amount to large sums if you have a sizable portfolio.
- You should own individual bonds over bond funds. Bond funds do not have a maturity date, and thus, you will always own them at market value. When owned bonds mature, you receive a return of your principle regardless of market value.
- Bond Laddering is for amateurs. Tactical management of your bond portfolio may afford you with incredible opportunities to benefit from market volatility in fixed income securities.
- Your CPA and your Attorney should be part of your team, along with your FA, who may recommend specific tax or legal strategies, which should be confirmed by the other members of your team before implementing.
- Responsibility for Asset Management is only a part of the role of your FA. Data aggregation is required for your FA to make recommendations. Your tax and legal advisors should benefit from the resources used by your FA to compile and track your important data and your FA should have the ability to securely share your information (with your permission) with other members of your team.
- Estate planning is more than avoiding Federal and State Estate Taxes. Your FA should have knowledge, experience, and access to advanced strategies to help you benefit from the ever-changing legislative environment.
- Your FA should meet with you quarterly to review the past quarter, current market conditions, your portfolio, and expectations based on leading financial indicators.
- You should have access to mortgages and lines of credit as well as other bank-related services, even if your FA is not affiliated with a bank.
- You should have the option to pay your FA on a fee basis rather than a percent of assets managed or commissions.
- If you own a business, your FA should provide resources to help you and your family in the establishment of a succession plan.
- Trusts can provide you with a measure of control beyond the grave or excellent tax benefits during your lifetime. Your advisor should be capable and knowledgeable in this area.
If you are a High Net Worth or Ultra High Net Worth Investor and your Financial Advisor does not demonstrate the attributes and skills noted above, click HERE to view my calendar to set up an introductory meeting or call. It begins with the realization that you may not be receiving the level of service that you deserve.
Roger Walker is a Financial Advisor and founder of Walker Wealth Management, LLC / Centaurus Financial, Inc.
* Some definitions of Mass Affluent begin at $100,000.