Wealthy people need a “real” professional financial advisor

By Jay Jung

Undeniable advantages come with wealth, but there is also a disadvantage. Greater financial assets mean greater financial headaches. The National Financial Education Council says a lack of personal financial knowledge costs the average American $1,200 a year. Just imagine what is at stake for you as a not so average high net worth individual (HNWI). The more money you have, the more you risk losing. Let’s see how a highly experienced financial advisor can protect your investments, maximize your returns, and most importantly, give you peace of mind so you can relax and enjoy the money you’ve earned.

HNWIs have access to expanded benefits through financial advisors

Money has a knack for opening doors. You will find that you also enjoy benefits as an HNWI in the financial area. After all, your assets put you in high demand. HNWI status warrants a personalized touch in investment management, estate planning, and tax planning, and that individualized touch comes with benefits.

If you have at least $1 million in liquid assets, you generally meet the standard of an HNWI, but the definition varies among banks and financial institutions. HNWIs enjoy more benefits at banks than the average customer. Your status most likely qualifies you for services with reduced fees, discounts, special rates and access to exclusive investment opportunities.

Financial advisors know how to maximize investment benefits for HNWIs

Qualifying as an HNWI allows you to access separately managed investment accounts instead of being bundled into regular mutual funds. Why is it beneficial? The vast majority of investors only benefit from professional money management when they pool their assets with hundreds of others in mutual funds. As an HNWI, you can take advantage of personalized portfolios personally managed by the same experts who manage large mutual funds.

Additionally, as an HNWI, you have the ability to invest in private equity funds, hedge funds, and real estate investment trusts. These alternative investments may be riskier than typical mutual funds offered to the public, but they can offer above-market returns or protect against losses under the right circumstances. Be warned; these funds are risky investments. Before going through them on your own, get help from a highly qualified professional financial advisor.

Professional financial advisors from top companies can also help you take advantage of initial public offerings (IPOs). In a nutshell, an IPO is when a private company offers shares to the public for the first time. Not everyone has the opportunity to participate in a new stock issue, and a professional financial advisor will guide you through the process.

Often we hear of the “IPO pop,” which is the jump in stock price when newly offered stocks first trade on the public market. Access to these shares at the IPO price allows investors to benefit from this first day share price increase. IPO shares are usually allocated to institutions, but some top-tier wealth management advisors will be able to provide access to IPO shares to HNWIs.

Another great benefit of a wealth management account is a revolving line of credit. Often wealth management companies offer a low interest line of credit for up to 65-75% of the value of assets under management. This provides additional flexibility in the financial maneuvering of HNWIs. For example, when purchasing an investment property, an HNWI can make a cash offer using the revolving line of credit and then later refinance it with a mortgage. An all-cash bid allows the bidder to be more competitive and potentially win at a lower price.

The more money you have, the more perks are available. A professional financial advisor will allow you to coordinate the personalized services of expert investors, top lawyers, savvy property managers and top philanthropy directors. Why turn down extra perks like that?

Professional financial advisors offer tax optimization to HNWIs

Unfortunately, there is no benefit that will allow you to avoid paying taxes. However, with expert financial advice, you can minimize the amount you pay.

As an HNWI, you attach great importance to optimizing your tax planning. Opening Turbo Tax on the night of April 14 won’t be enough, but strategic planning throughout the year can ensure you pay as little as possible. Key considerations include the precise timing of income, purchases, and expenses. Your investments, retirement plan, tax status and deductions must all work together to create the best possible outcome.

Tax optimization is where you might appreciate your professional financial advisor the most. Attention to detail generates significant value, but do you want to be the one solving those complex financial problems? Benefiting from the comprehensive planning of a professional financial advisor in your investment management, tax optimization and estate services is like having a financial director at home.

Professional financial advisors can help HNWIs avoid adverse tax issues

Also, as an HNWI, you are much more likely to find yourself in adverse situations that could cost you dearly when taxes are due. Have you received stock options from your company? Did you get shares of the company when you retired? Are you considering selling your business or real estate investment?

Mishandled, each of these situations could generate capital gains that would propel you into the next tax bracket. Your financial advisor will allow you to reduce capital gains in your investment portfolio, write stock options in a tax-efficient way, and transfer highly valued securities to trusts where they can be sold without accumulating tax. capital gains tax.

The more money you have, the more work it takes to maintain and preserve your assets. Managing your investments, tax optimization and financial planning are complicated enough to warrant specialized skills and expertise. Hiring a financial advisor lets you leave the heavy lifting to the professionals.

— Jay Jung, a small business thought leader, Jay is the Founder and Managing Partner at Embarc Advisors and has nearly 20 years of strategic finance experience. Jay is the former Vice President of Goldman Sachs Investment Banking and McKinsey & Company Engagement Manager. He currently works with startups as a fractional CFO or advises them as a consultant.

This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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