It may be true that life gets easier once you’ve attained a certain amount of wealth, but the thought that your work is done is misled. Maintaining and growing wealth is just as important as acquiring it in the first place, and it can be tricky. As with anything financial, it’s a good idea to make a priority of taking on the challenges of managing wealth.
Wealth management is crucial to achieving lasting prosperity. It’s the manner in which you can grow your wealth for generations to come, it’s how you’ll provide for your loved ones now and in the future, and it’s how you’ll meet your financial goals.
The right investment decisions, portfolio construction, asset management, retirement planning, and estate planning are just a few of the things that require intelligent wealth management. That’s a lot of ground to cover, and it’s daunting to take on alone. Luckily, the wealth management industry specializes in helping clients with just these things.
While it’s often best to seek out an expert you can trust to help you make the best decisions, it’s also always beneficial to be as educated as possible. In this post, we’ll address some of the challenges that come with managing wealth and highlight some tips to steer you in the right direction.
Approaching Your Unique Portfolio
If you’ve tried to some research on wealth management before, you’ve probably realized that your situation is unique. This is especially true for high net worth (HNW) and ultra-high net worth (UHNW) individuals alike.
Unfortunately, there isn’t going to be a guide on the internet or in a book for how you can best handle your finances. Your scenario is almost definitely just too specialized. Your financial goals, for example, won’t be the same as someone else’s. You have to factor in the cost of your lifestyle, your family relationships and how you want to provide for them, as well as your retirement goals.
In addition to your personal goals, you’ve got to factor in your level of wealth and the different assets that make up your portfolio. These pieces of information all play a crucial role in determining the best financial moves for you to make.
The only way to arrive at a truly well-informed plan for managing your unique portfolio is to hire an expert portfolio manager. Experienced wealth managers have the benefit of years of exposure. They’ve seen all sorts of unique financial situations, and this makes them the best-equipped people to take on your portfolio.
Making the Right Investment Decisions
Investing your wealth is a necessary part of wealth management. Most people are aware of the fact that letting your money sit in a bank account isn’t really a viable option. Especially for those with significant amounts of wealth, there are serious gains to be had by investing intelligently.
One of the biggest mistakes uneducated investors make is listening to their impulses. It’s easy for investors to make quick decisions based on emotion rather than insight and foresight. It’s understandable — the stock market is notoriously unstable, and sudden changes for the worse can be frightening. Experts know, however, that a disciplined, steadfast approach to investing is what leads to long term successes. The trick is making the right investment decisions in the first place.
There are some basic principles to remember when constructing your portfolio, and you’ll do yourself a great favor by making an attempt to get familiar with them.
First of all, acknowledging the inherent risk associated with any kind of investing is essential. There is no reward without risk, and the idea of the risk-return tradeoff dictates that the greatest rewards are tied to the greatest risks. Understanding your personal risk tolerance is a fundamental part of making sound investment decisions.
After considering your goals, risk tolerance, and time horizons, you’ll need to decide which types of assets to invest in. The golden rule here is to diversify. A portfolio composed of a diverse set of assets is the most likely to perform well despite any unpredictably negative performance.
Managing Assets
In the interest of creating a strong, diversified portfolio, how you allocate your assets is paramount. Just like every other aspect of wealth management, there isn’t a one-size-fits-all asset allocation that will work for everyone. Again it’s necessary to take into account the features of your unique situation, your goals, risk tolerance, and time horizons.
There are three main types of assets it’s important to become familiar with: stocks, bonds, and cash and cash equivalents.
Stocks are probably the flashiest investment class. They’re associated with both the highest risks and the highest rewards. Knowing which stocks to invest in can be difficult. For example, you’ll need an understanding of the past and projected performance of relevant industries. Fortunately, this is something that experienced financial advisors are trained to help you with.
The volatility that stocks are known for makes them better investments for investors with longer time horizons. Those willing to take on short-term losses in order to earn bigger gains in the future can achieve a lot with stocks.
Unlike stocks, bonds are usually better for investors with shorter time horizons. This is because they are much less risky. Of course, this means that they’re also usually less lucrative. This type of asset will probably make up a larger portion of the investment portfolio than stocks for someone that is fairly conservative.
Cash and cash equivalents are the asset class with the least amount of risk and reward. These assets are valuable for how secure they are. Many of them are even backed by the federal government. The biggest risk associated with many of them is inflation risk.
While your portfolio should be tuned to your specific requirements, remember that diversity is still king. Whatever the specific allocation of your assets, you’ll want a mix of them all.
Adapting to Being Wealthy
For those who didn’t grow up wealthy, adjusting to the lifestyle later in life can be difficult. A sudden windfall can sometimes cause the recipient to fall into a spending-spree trap. As we’ve already mentioned, having substantial wealth doesn’t mean your work is over. It takes continued practice and effort to manage wealth well.
Adapting to wealth means more than resisting the urge to spend all of your money. It also means you’ll have to make extra considerations regarding taxes and investment decisions.
It can be uncomfortable having to deal with large amounts of wealth if it isn’t something you’re used to. Finding a trusted advisor to help guide you in these situations can give you a major advantage. There are a lot of wealth management firms out there, and it’s important to find one that you can develop a close relationship with.
Choosing the Right Wealth Manager
There’s no shortage of options when it comes to financial services. Also, just because there are plenty to choose from doesn’t mean it’s something to be taken lightly. After all, the financial advisor or wealth management team you choose will have a large impact on your life.
There are several important criteria you should remember to consider when searching for someone to help you manage your wealth.
Value vs. Price
It can be easy to fixate on the cost of wealth management services and base your decision on it. Of course, you shouldn’t ever pay more than you can afford or are comfortable with, but remember that the right wealth manager can actually make your wealth grow. Instead of price, try to focus on value. The right wealth manager will make your life exponentially easier by providing you with peace of mind as well as a bigger bank account.
Credentials
This is important. First of all, be sure you get a chance to communicate with the advisor that will actually be handling your account. Then, don’t be shy about asking what qualifications they have, the best ones are always ready to meet client expectations. Any financial advisor worth your time will be adequately certified and educated.
Relevant Experience
Credentials and qualifications are necessary but don’t overlook the value of experience. There’s only so much you can learn from study, and the most experienced wealth managers are the most skilled. They’ve likely seen a wide range of financial situations and have learned a thing or two about handling them.
Also, look for advisors with experience dealing with clients in similar situations as yours. While your financial situation is unique, chances are you’ll be able to find an experienced advisor who’s seen a lot of the same challenges you’ll face and will know how to approach them.
We Can Help
There are few things that affect as many areas of your life as your wealth. Treat it with the attention it deserves and it will repay the favor. Whether you’re thinking about retirement or estate planning or want to use your wealth to provide for younger generations, proper wealth management is what will make it happen.
At Saddock Wealth, we bring years of wealth management experience to the table and can guide you toward financial prosperity. Make sure your wealth is in the right hands and ready to grow in 2020. Schedule a meeting here, and we’ll discuss your best options.