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What Is High Net Worth Financial Planning? Thumbnail

What Is High Net Worth Financial Planning?

CPA Financial Planning Insights Investing

When it comes to high net worth wealth management, high net worth individuals (HNWI) need a partner who properly understands the financial nuances and complexities associated with high net worth investors. A worthy financial partner has the ability to expand their knowledge base and deliver tailored net worth advice based on their HNWI client’s unique and often complex financial situations. As experienced advisors, we’ve compiled a brief guide to HNWI financial planning to outline the steps that should be taken to protect and grow your wealth.

Stage One: Evaluation 

Before outlining a comprehensive financial plan, you need to evaluate your net worth and identify all of your current financial assets like: 

  • Stocks and bonds
  • Real estate
  • Businesses 
  • Savings accounts

An important step in this evaluation process involves determining your total net worth value. This is critical to establish early on because all financial plans for HNWIs are unique and vary depending on how much wealth an individual has. For example, handling millionaire bank account interest rates vs. billionaire bank account interest rates are two very different circumstances. Put simply, the more assets an individual has the more planning and counseling is needed. 

Currently, there are three categories of high net worth individuals: 

  1. High net worth individuals (HNWIs)
  2. Sub-high net worth individuals (Sub-HNWIs)
  3. Ultra high net worth individuals (UHNWIs)

It’s worthwhile to note that you can be a high earner and not be considered a high net worth individual. The industry term for this is “High Earners, Not Rich Yet” or HENRYs, and refers to anyone with a high income but low net worth.

The standard high net worth individuals definition states that an individual must have at least $1 million in liquid financial assets to be considered an HNWI. Whereas investors who possess less than $1 million but more than $100,000 liquid assets are considered sub-HNWIs. So, we’ve discussed HNWI and sub-HNWIs, but what is considered ultra high net worth? Ultra-high net worth individuals (UHNWIs) have at least $30 million in liquid assets.

Whether you have a net worth of 20 million or more, it’s important to work with your advisor and determine which category you fit into before outlining your goals and establishing a plan that’s catered to your needs. Determining your total net worth allows you to take the next step in the evaluation process and review your entire financial ecosystem. This involves letting your financial advisor know: 

  • How your assets are titled.
  • Which accounts and trusts are being used.
  • How your investments are allocated.
  • How much insurance you hold.

Stage Two: Identify Your Ambitions

Now that you have outlined your worth, it’s time to establish your goals and objectives. Here, your financial planner will help you understand the ins and outs of what needs to be done if you are to proactively reach your established objectives. This means evaluating end goals like how much money you want to leave to your family, charity, business, and other sources. It also means determining where these funds should be pulled from. 

While outlining your objectives, your advisor will explain how allocating funds from certain accounts could result in tax implications. For example, when taking money out of an individual Roth IRA account and leaving it to a family member, those funds are often hit with a hefty income tax. Whereas deciding to donate the funds from your IRA to a charity has no associated income tax. Therefore, your advisor would likely suggest that the money you want to leave for your family should be pulled from another asset instead of your IRA. 

Stage 3: Create Your Plan 

After your overarching goals have been established, you can work with your advisor to officially outline your financial plan. This will include: 

Asset Protection Planning

Here your financial advisor will create an action plan designed to increase your total wealth over time. This involves watching financial trends closely to acquire and maintain various investments that are likely to grow in value.

Tax Planning

In this step, your advisor will determine the best plan of action for reducing your tax bills and optimizing your investment portfolio for tax efficiency. This also includes devising a strategy to limit the tax burden passed down to your beneficiaries. 

Investing Strategies

As a high net worth individual, you have the unique opportunity to invest aggressively regardless of market conditions. Here, your financial advisor will be able to identify which investments are worth potential risks and determine the perfect timing for acquiring and selling certain investments.

Generational Planning

In this case, it is your advisor's responsibility to ensure that your wealth is passed down to your family while minimizing tax and other financial implications. Generational planning is designed to help you maintain control of your assets for yourself and your family. 

Planning for Charitable Donations

Donating a portion of your financial assets to charity is a wonderful way to secure your legacy. For example, a charitable remainder annuity trust allows you to donate to one or more charities while paying a fixed income to designated non charitable beneficiaries in an annuity.

Make Financial Planning Simple With Delta Wealth

When you partner with Delta Wealth Advisors, we’ll help you grow your wealth and safeguard it for you and your family.  As a high net worth individual, you face complex financial challenges that need to be managed properly. Our financial planning professionals and CPAs collaborate to review your unique financial situation from all angles. Start simplifying your financial planning and schedule a call with us today. 

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