There is More to Wealth Management with a Financial Advisor

Written by: Peter Tollin
07/11/2019

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Many people spend a significant amount of their life trying to build wealth and once they do gain it, certainly do not want to lose it. Others fall into some great financial windfall due to an inheritance or large bonus and want to learn best how to manage this newfound wealth in order to avoid squandering it. The best way to accomplish this is with wealth management.

Wealth management can be challenging to grasp and requires a balanced view towards many different asset classes among which you should allocate your assets between. Here are some of the key factors to consider to understand wealth management and things to consider as you manage your wealth.

Don’t Just Rely in a Financial Advisor

If you have wealth and don’t want to manage it yourself, than a Financial Advisor May be a great hire. However, you shouldn’t just hire a financial investment advisor and shut off your mind to your wealth. Doing so puts you at risk for financial loss from your advisor and prevents you from learning about the value of the money that you have. Be sure to educate yourself on key financial matters and keep a balanced view of the financial world, even if you aren’t all that passionate about it.

Allocation Between Different Asset Classes

It’s important to not tie up your wealth in only one investment class. It is best to maintain a wide range of investments including stock equities, bonds, precious metals such as gold and silver, real estate, and of course cash. Diversifying into several different investment classes can help to protect your overall level of assets and allow you to more effectively re-balance when there is a significant market increase or decline.

Allocation within an Asset Class

It is also important to allocate investments within a specific investment class. After all you can have investments in both stocks and bonds and feel that you are diversified, but if you were to have a little limited investment in only one or two industries in the stock market then these equities are at risk for an overall depletion of your principal if they were to decline in value due to the industry declining overall.

As a result you should make sure that you diversify investments into varying unrelated industries, different sized companies, as well as companies that are geographically varied and in different currencies around the world. If you have the wealth to do so, diversification can better improve on your overall return with limited risk.

Keeping an Eye on Your Budget

Many people who achieve wealth often believe that they no longer need to budget. This is simply not true and budgeting is important for virtually everybody. Keep an eye on the inflows and outflows of cash that you have and be sure to stick to spending less than what you are earning.

If you have wealth, you may not need to increase your fortune, but you should maintain it and avoid spending down your money when possible. Budgeting is a great tool for hope you do too so but requires that you have a firm understanding of the money that you will be pulling in From your investments as well as what you need to spend to maintain your lifestyle.

Financial stability consists of efficiently managing your financial needs and financial capacity and a budget can be an effective tool to help you do so.

Keeping an Eye on Taxes

Taxes are one of the realities of life and require care to address. If you are looking to manage wealth you should consider tax management and reduction processes such as taking advantage of many of the options out there for reducing your overall tax burden.

Often this involves using some of the tax vehicles offered by the IRS and State Tax boards such as retirement plans (401ks, IRAs), using revocable trusts to transfer assets to future generations tax free, medical health tax vehicles, and college savings accounts for your children. With these various tax vehicles you may be able to reduce current and future income and transfer taxes to a more manageable overall figure and allow yourself to retain a greater portion of your overall wealth.

Some investment classes have varying tax benefits associated with them. Some investments allow you to avoid taxes until you sell them or deplete your basis, such as Master Limited Partnerships (MLPs), while others offer tax advantages on the distributions such as limited partnerships. Some investments are best housed in retirement accounts such as Real Estate Investment Trusts (REITs), while others are best held outside of these tax vehicles, such as foreign investments where you may lose a foreign tax credit if you don’t invest your funds in the right way.

Hire a tax professional in order to make sure that you make the best of your investments. This can help you to better retain your wealth and to comply with local laws. Taxes should be a factor that you consider as part of your overall wealth management, but it is not as critical as your total overall investment return.

Maintain a Long Term Focus

It is important to keep a long-term focus on your financial goals and to not be too swept up by sudden movements in the stock market. Wealth management is best thought of in decades can you ship position yourself to over perform over the long term by making sound investments you can bear a temporary lesson. Avoid The stock or investment of the day for more balanced approach in order to maintain your wealth and to help her for over the long-term. Keep a portion of your investments in cash so that you could take advantage of market drops, but avoid being too conservative.

Managing your overall wealth can be challenging and certainly requires diligence and expertise. It is a bad idea to rely solely on an advisor and you should focus on developing an overall solid understanding of your investment strategy as well as the factors which will dictate your overall wealth.


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