How Do You Approach Creating a Financial Plan for High-Net-Worth Clients?
When it comes to crafting financial plans for high-net-worth clients, the expertise of financial planners and CEOs is invaluable. From identifying key financial opportunities to incorporating tailored tax planning, we've gathered four insightful strategies from top financial professionals. These seasoned experts also share their success stories, offering a glimpse into the personalized and strategic approaches that lead to their clients' satisfaction.
- Identify Key Financial Opportunities
- Personal Approach to Financial Goals
- Align Strategies with Personal Aspirations
- Incorporate Tailored Tax Planning
Identify Key Financial Opportunities
Creating a financial plan is similar to getting a full health screen. It takes a little bit of effort on the client's end, but the benefits are priceless. By going through your financials with a professional, you may find one small thing, such as an out-of-place beneficiary, a tax strategy you aren't pursuing, or poor investment options currently in your portfolio, that right now are not impacting your life. But, if corrected for the future, can and will have immense positive impacts on you and your loved ones.
I recently had someone in my office who was being sold a trust and an expensive whole life insurance policy. However, they wanted a fiduciary financial planner's perspective on whether these were good options for them. It turns out they had no need for life insurance as their estate was under $10 million, and they wouldn't owe any estate taxes, and the majority of their net worth was held in investment accounts, a primary home, and one investment property. A few Transfer on Death (TOD) ordinances were sufficient to help their real estate, bank accounts, and brokerage accounts avoid probate, and all other beneficiaries were titled appropriately. Overall, the savings to them was hundreds of thousands of dollars by avoiding annually recurring fees, premiums, and headaches.
Personal Approach to Financial Goals
As the founder of Leverage, I’ve found that working with high-net-worth individuals on financial planning requires a personal and straightforward approach. Here’s how I do it:
First, I focus on building a strong relationship with the client. It’s important to understand their goals, values, and concerns. I spend time talking with them to get a clear picture of what they want to achieve. For instance, I had a client who was very focused on preserving their wealth for their children and supporting charitable causes.
After understanding their goals, I gather all the necessary financial information. This includes their assets, liabilities, income, expenses, investments, insurance, and estate plans. Having all this information helps me create a tailored financial plan.
One success story that comes to mind is a client who wanted to retire early and travel while ensuring their family was financially secure. By diversifying their investments, setting up trusts, and implementing tax strategies, we created a plan that gave them peace of mind. They are now enjoying their retirement, knowing their financial future is secure.
Align Strategies with Personal Aspirations
In working with high-net-worth individuals, I’ve discovered they usually share two major desires: they want more personal time, and they aim to minimize their tax obligations. These priorities guided my approach with a seasoned executive client who, after decades of relentless career focus, had overlooked the significant wealth they had amassed.
Our comprehensive financial review revealed a prime opportunity to not only enhance their lifestyle but also to achieve better tax efficiency. We explored various strategies, and one in particular resonated with their goals and risk comfort.
Once they thoroughly researched and expressed confidence in this approach, I guided them through the detailed process of setting up a tax-efficient income stream. This strategy was tailored to optimize both their immediate financial needs and their long-term tax situation, ultimately freeing up more of their personal time.
The transformation was significant. Within a year, the client was enjoying a more fulfilling lifestyle and has become one of my most enthusiastic referral sources. They frequently share how strategic financial planning helped them shift from a high-intensity executive life to one with more freedom and control. This experience highlights the profound impact that aligning financial strategies with personal aspirations can have, and it’s a story that resonates deeply in the work we do.
Incorporate Tailored Tax Planning
As a finance and taxation expert, my tip is to incorporate income-tax planning for high-net-worth individuals (HNWIs). Financial advisors can address the challenges associated with their clients in higher income brackets, which typically come with increased tax liabilities. They must offer strategies that help these clients legally minimize their taxes, ensuring they pay only what is required by law and not a penny more. This approach not only complies with legal standards but also maximizes the funds available for their current expenses or future estate planning.
Financial consultants must start by thoroughly assessing each client's current financial profile. From there, I suggest tailored strategies to reduce their tax contributions. For example, they might look at mitigating investment expenses or converting traditional IRAs into Roth IRAs, depending on what fits their situation best. Each recommendation should be customized to reflect the unique circumstances of the client, ensuring that the tax plan is as effective and personalized as possible. This personalized approach not only helps in immediate tax saving but also enhances the client's overall financial well-being, allowing them to allocate more resources to their beneficiaries or other financial goals.
