Let’s face it: high net worth clients already know how to earn money. Their advisors need to deal with other issues that can be more challenging than generating income.
For the average person, a financial advisor who knows how to generate good returns on their investments is pretty much all they need. However, for professionals whose practices focus on high-net worth clients, wealth management is just one part of the job, according to Motley Fool’s recent article, “High-Net-Worth Wealth Management: 5 Tough Issues Most Advisors Can't Handle.” These advisors have to be able to handle far more complex issues than those who work with ‘regular’ clients.
Insurance. Once a person has enough money, the greatest challenge is managing the risks that threaten to take it away. Traditional insurance products can only help high-net-worth individuals to a certain extent. That’s because the high policy limits required for true protection, often require customized underwriting from insurance companies. In addition, special kinds of insurance are necessary to provide full protection against the wide variety of risks that high-net-worth individuals can face.
Asset Protection. High-net-worth clients, like all of us, want to protect their assets from potential creditors and other claims. However, for high-net-worth wealth management, there’s no need to make risky investments. Therefore, threats such as litigation, theft, and damage are even more significant. This is particularly true for those in risky professions, like medical professionals. Creating creditor-protection trusts and understanding the protection bankruptcy and debtor-rights laws grant to high-net-worth individuals, can ensure that they retain their wealth.
Estate Planning. With the estate tax exemption at about $5.5 million, the threat of estate taxation isn’t an issue for many wealthy individuals. However, high-net-worth individuals still face the potential for estate tax rates of up to 40% on the federal level, plus some state estate and inheritance taxes. That’s where access to a qualified estate planning attorney comes into play.
Family Interpersonal Relationships. High-net-worth can create opportunities for discord and misbehavior that can threaten family relationships. Consulting with trained professionals allows wealth management advisors to play a deeper role in working with high-net-worth families. It enables them to become a type of family counselor to help create a unified vision of the strategic goals and what's necessary from each member of the family to make that vision a reality in the future.
An estate planning attorney who routinely works with high-net worth clients will be knowledgeable about tax planning, transferring wealth across generations, charitable giving and the use of complex trusts for multi-generation asset management.
Reference: Motley Fool (September 8, 2017) “High-Net-Worth Wealth Management: 5 Tough Issues Most Advisors Can't Handle”